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- 07584
Rydex Series Funds
(Exact name of registrant as specified in charter)
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Donald C. Cacciapaglia, President
Rydex Series Funds
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-301-296-5100
Date of fiscal year end: March 31
Date of reporting period: March 31, 2014
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.
3.31.2014
Rydex 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
| RSECF-ANN-2-0314x0315 | guggenheiminvestments.com |
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TABLE OF CONTENTS
| THE RYDEX FUNDS ANNUAL REPORT | 1 |
March 31, 2014
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 18 Rydex sector funds (“the Funds”). This report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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,
Donald C. Cacciapaglia
President
April 30, 2014
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.
Sector funds may not be suitable for all investors. Investing in sector funds is more volatile than investing in broadly diversified funds, as there is a greater risk due to the concentration of the fund’s holdings in issuers of the same or similar offerings. These funds are considered non-diversified and can invest a greater portion of their assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund.
| 2 | THE RYDEX FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
| THE RYDEX FUNDS ANNUAL REPORT | 3 |
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(continued) | March 31, 2014 |
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI U.S. REIT Index is a free float market capitalization weighted index that is comprised of equity real estate investment trust (“REIT”) securities that belong to the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. REIT Index includes only REIT securities that are of reasonable size in terms of full and free float-adjusted market capitalization to ensure that the performance of the equity REIT universe can be captured and replicated in actual institutional and retail portfolios of different sizes.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
S&P 500® Consumer Discretionary Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Consumer Discretionary index includes companies in the following industries: automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
S&P 500® Consumer Staples Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Consumer Staples index comprises companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products. It also includes food & drug retailing companies as well as hypermarkets and consumer super centers.
| 4 | THE RYDEX FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
S&P 500® Energy Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Energy index comprises companies whose businesses are dominated by either of the following activities: The construction or provision of oil rigs, drilling equipment and other energy-related equipment and services, including seismic data collection; companies engaged in the exploration, production, marketing, refining and/or transportation of oil and gas products, coal and other consumable fuels.
S&P 500® Financials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Financials index contains companies involved in activities such as banking, mortgage finance, consumer finance, specialized finance, investment banking and brokerage, asset management and custody, corporate lending, insurance, and financial investment, and real estate, including REITs.
S&P 500® Health Care Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Health Care index encompasses two main industry groups. The first includes companies who manufacture health care equipment and supplies or provide health care related services, including distributors of health care products, providers of basic health-care services, and owners and operators of health care facilities and organizations. The first group also includes companies operating in the health care technology industry. The second group includes companies primarily involved in the research, development, production and marketing of pharmaceuticals, biotechnology and life sciences products.
S&P 500® Industrials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Industrials index includes companies whose businesses are dominated by one of the following activities: the manufacture and distribution of capital goods, including aerospace & defense, construction, engineering & building products, electrical equipment and industrial machinery; the provision of commercial services and supplies, including printing, environmental, office and security services; the provision of professional services, including employment and research & consulting services; or the provision of transportation services, including airlines, couriers, marine, road & rail and transportation infrastructure.
S&P 500® Materials Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Materials index encompasses a wide range of commodity-related manufacturing industries. Included in this sector are companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products, and metals, minerals and mining companies, including producers of steel.
S&P 500® Information Technology Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Information Technology index covers the following general areas: Technology software & services, including companies that primarily develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that provide information technology consulting and services, as well as data processing and outsourced services; secondly, Technology Hardware & Equipment, including manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and related instruments; and thirdly, Semiconductors & Semiconductor Equipment Manufacturers.
S&P 500® Telecommunications Services Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Telecommunications Services index contains companies that provide communications services primarily through a fixed-line, cellular, wireless, high bandwidth and/or fiber optic cable network.
S&P 500® Utilities Index is a sub-index of the S&P 500® Index, a capitalization-weighted index covering 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE Euronext issues). The Utilities index encompasses those companies considered electric, gas or water utilities, or companies that operate as independent producers and/or distributors of power.
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, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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.
6 | THE RYDEX FUNDS ANNUAL REPORT
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| Banking Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 11.77 | % | $1,000.00 | $1,117.70 | $7.23 | |||||||||||||
| Advisor Class | 1.87 | % | 11.56 | % | 1,000.00 | 1,115.60 | 9.86 | |||||||||||||
| A-Class | 1.62 | % | 11.62 | % | 1,000.00 | 1,116.20 | 8.55 | |||||||||||||
| C-Class | 2.37 | % | 11.22 | % | 1,000.00 | 1,112.20 | 12.48 | |||||||||||||
| Basic Materials Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 9.39 | % | 1,000.00 | 1,093.90 | 7.15 | |||||||||||||
| Advisor Class | 1.87 | % | 9.11 | % | 1,000.00 | 1,091.10 | 9.75 | |||||||||||||
| A-Class | 1.62 | % | 9.26 | % | 1,000.00 | 1,092.60 | 8.45 | |||||||||||||
| C-Class | 2.37 | % | 8.85 | % | 1,000.00 | 1,088.50 | 12.34 | |||||||||||||
| Biotechnology Fund | ||||||||||||||||||||
| Investor Class | 1.36 | % | 10.15 | % | 1,000.00 | 1,101.50 | 7.13 | |||||||||||||
| Advisor Class | 1.86 | % | 9.87 | % | 1,000.00 | 1,098.70 | 9.73 | |||||||||||||
| A-Class | 1.61 | % | 10.01 | % | 1,000.00 | 1,100.10 | 8.43 | |||||||||||||
| C-Class | 2.36 | % | 9.59 | % | 1,000.00 | 1,095.90 | 12.33 | |||||||||||||
| Consumer Products Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 8.87 | % | 1,000.00 | 1,088.70 | 7.13 | |||||||||||||
| Advisor Class | 1.87 | % | 8.63 | % | 1,000.00 | 1,086.30 | 9.73 | |||||||||||||
| A-Class | 1.62 | % | 8.75 | % | 1,000.00 | 1,087.50 | 8.43 | |||||||||||||
| C-Class | 2.37 | % | 8.33 | % | 1,000.00 | 1,083.30 | 12.31 | |||||||||||||
| Electronics Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 19.79 | % | 1,000.00 | 1,197.90 | 7.51 | |||||||||||||
| Advisor Class | 1.87 | % | 19.45 | % | 1,000.00 | 1,194.50 | 10.23 | |||||||||||||
| A-Class | 1.62 | % | 19.62 | % | 1,000.00 | 1,196.20 | 8.87 | |||||||||||||
| C-Class | 2.37 | % | 19.12 | % | 1,000.00 | 1,191.20 | 12.95 | |||||||||||||
| Energy Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 8.04 | % | 1,000.00 | 1,080.40 | 7.11 | |||||||||||||
| Advisor Class | 1.87 | % | 7.70 | % | 1,000.00 | 1,077.00 | 9.68 | |||||||||||||
| A-Class | 1.62 | % | 7.88 | % | 1,000.00 | 1,078.80 | 8.40 | |||||||||||||
| C-Class | 2.37 | % | 7.46 | % | 1,000.00 | 1,074.60 | 12.26 | |||||||||||||
| Energy Services Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 6.81 | % | 1,000.00 | 1,068.10 | 7.06 | |||||||||||||
| Advisor Class | 1.87 | % | 6.57 | % | 1,000.00 | 1,065.70 | 9.63 | |||||||||||||
| A-Class | 1.62 | % | 6.69 | % | 1,000.00 | 1,066.90 | 8.35 | |||||||||||||
| C-Class | 2.37 | % | 6.27 | % | 1,000.00 | 1,062.70 | 12.19 | |||||||||||||
| Financial Services Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 11.72 | % | 1,000.00 | 1,117.20 | 7.23 | |||||||||||||
| Advisor Class | 1.87 | % | 11.47 | % | 1,000.00 | 1,114.70 | 9.86 | |||||||||||||
| A-Class | 1.62 | % | 11.61 | % | 1,000.00 | 1,116.10 | 8.55 | |||||||||||||
| C-Class | 2.37 | % | 11.23 | % | 1,000.00 | 1,112.30 | 12.48 | |||||||||||||
| Health Care Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 15.43 | % | 1,000.00 | 1,154.30 | 7.36 | |||||||||||||
| Advisor Class | 1.87 | % | 15.19 | % | 1,000.00 | 1,151.90 | 10.03 | |||||||||||||
| A-Class | 1.62 | % | 15.28 | % | 1,000.00 | 1,152.80 | 8.69 | |||||||||||||
| C-Class | 2.37 | % | 14.90 | % | 1,000.00 | 1,149.00 | 12.70 | |||||||||||||
THE RYDEX FUNDS ANNUAL REPORT | 7
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Internet Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 8.17 | % | $1,000.00 | $1,081.70 | $7.11 | |||||||||||||
| Advisor Class | 1.87 | % | 7.89 | % | 1,000.00 | 1,078.90 | 9.69 | |||||||||||||
| A-Class | 1.62 | % | 8.04 | % | 1,000.00 | 1,080.40 | 8.40 | |||||||||||||
| C-Class | 2.37 | % | 7.64 | % | 1,000.00 | 1,076.40 | 12.27 | |||||||||||||
| Leisure Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 9.74 | % | 1,000.00 | 1,097.40 | 7.16 | |||||||||||||
| Advisor Class | 1.87 | % | 9.43 | % | 1,000.00 | 1,094.30 | 9.76 | |||||||||||||
| A-Class | 1.62 | % | 9.59 | % | 1,000.00 | 1,095.90 | 8.47 | |||||||||||||
| C-Class | 2.37 | % | 9.20 | % | 1,000.00 | 1,092.00 | 12.36 | |||||||||||||
| Precious Metals Fund | ||||||||||||||||||||
| Investor Class | 1.27 | % | (0.98 | %) | 1,000.00 | 990.20 | 6.30 | |||||||||||||
| Advisor Class | 1.77 | % | (1.21 | %) | 1,000.00 | 987.90 | 8.77 | |||||||||||||
| A-Class | 1.52 | % | (1.10 | %) | 1,000.00 | 989.00 | 7.54 | |||||||||||||
| C-Class | 2.27 | % | (1.46 | %) | 1,000.00 | 985.40 | 11.24 | |||||||||||||
| Real Estate Fund | ||||||||||||||||||||
| A-Class | 1.60 | % | 7.95 | % | 1,000.00 | 1,079.50 | 8.30 | |||||||||||||
| C-Class | 2.35 | % | 7.53 | % | 1,000.00 | 1,075.30 | 12.16 | |||||||||||||
| H-Class | 1.60 | % | 7.89 | % | 1,000.00 | 1,078.90 | 8.29 | |||||||||||||
| Retailing Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.32 | % | 1,000.00 | 1,053.20 | 7.01 | |||||||||||||
| Advisor Class | 1.87 | % | 5.01 | % | 1,000.00 | 1,050.10 | 9.56 | |||||||||||||
| A-Class | 1.62 | % | 5.24 | % | 1,000.00 | 1,052.40 | 8.29 | |||||||||||||
| C-Class | 2.37 | % | 4.77 | % | 1,000.00 | 1,047.70 | 12.10 | |||||||||||||
| Technology Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 13.13 | % | 1,000.00 | 1,131.30 | 7.28 | |||||||||||||
| Advisor Class | 1.87 | % | 12.86 | % | 1,000.00 | 1,128.60 | 9.92 | |||||||||||||
| A-Class | 1.62 | % | 13.02 | % | 1,000.00 | 1,130.20 | 8.60 | |||||||||||||
| C-Class | 2.37 | % | 12.56 | % | 1,000.00 | 1,125.60 | 12.56 | |||||||||||||
| Telecommunications Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 8.57 | % | 1,000.00 | 1,085.70 | 7.12 | |||||||||||||
| Advisor Class | 1.87 | % | 8.31 | % | 1,000.00 | 1,083.10 | 9.71 | |||||||||||||
| A-Class | 1.62 | % | 8.32 | % | 1,000.00 | 1,083.20 | 8.41 | |||||||||||||
| C-Class | 2.37 | % | 8.17 | % | 1,000.00 | 1,081.70 | 12.30 | |||||||||||||
| Transportation Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 16.25 | % | 1,000.00 | 1,162.50 | 7.39 | |||||||||||||
| Advisor Class | 1.87 | % | 16.00 | % | 1,000.00 | 1,160.00 | 10.07 | |||||||||||||
| A-Class | 1.62 | % | 16.16 | % | 1,000.00 | 1,161.60 | 8.73 | |||||||||||||
| C-Class | 2.37 | % | 15.72 | % | 1,000.00 | 1,157.20 | 12.75 | |||||||||||||
| Utilities Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 11.51 | % | 1,000.00 | 1,115.10 | 7.22 | |||||||||||||
| Advisor Class | 1.87 | % | 11.20 | % | 1,000.00 | 1,112.00 | 9.85 | |||||||||||||
| A-Class | 1.62 | % | 11.41 | % | 1,000.00 | 1,114.10 | 8.54 | |||||||||||||
| C-Class | 2.37 | % | 11.01 | % | 1,000.00 | 1,110.10 | 12.47 | |||||||||||||
8 | THE RYDEX FUNDS ANNUAL REPORT
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 2. Based on hypothetical 5% return (before expenses) | ||||||||||||||||||||
| Banking Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | $1,000.00 | $1,018.10 | $6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Basic Materials Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Biotechnology Fund | ||||||||||||||||||||
| Investor Class | 1.36 | % | 5.00 | % | 1,000.00 | 1,018.15 | 6.84 | |||||||||||||
| Advisor Class | 1.86 | % | 5.00 | % | 1,000.00 | 1,015.66 | 9.35 | |||||||||||||
| A-Class | 1.61 | % | 5.00 | % | 1,000.00 | 1,016.90 | 8.10 | |||||||||||||
| C-Class | 2.36 | % | 5.00 | % | 1,000.00 | 1,013.16 | 11.85 | |||||||||||||
| Consumer Products Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Electronics Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Energy Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Energy Services Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Financial Services Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Health Care Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
THE RYDEX FUNDS ANNUAL REPORT | 9
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Internet Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | $1,000.00 | $1,018.10 | $6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Leisure Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Precious Metals Fund | ||||||||||||||||||||
| Investor Class | 1.27 | % | 5.00 | % | 1,000.00 | 1,018.60 | 6.39 | |||||||||||||
| Advisor Class | 1.77 | % | 5.00 | % | 1,000.00 | 1,016.11 | 8.90 | |||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| Real Estate Fund | ||||||||||||||||||||
| A-Class | 1.60 | % | 5.00 | % | 1,000.00 | 1,016.95 | 8.05 | |||||||||||||
| C-Class | 2.35 | % | 5.00 | % | 1,000.00 | 1,013.21 | 11.80 | |||||||||||||
| H-Class | 1.60 | % | 5.00 | % | 1,000.00 | 1,016.95 | 8.05 | |||||||||||||
| Retailing Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Technology Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Telecommunications Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Transportation Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| Utilities Fund | ||||||||||||||||||||
| Investor Class | 1.37 | % | 5.00 | % | 1,000.00 | 1,018.10 | 6.89 | |||||||||||||
| Advisor Class | 1.87 | % | 5.00 | % | 1,000.00 | 1,015.61 | 9.40 | |||||||||||||
| A-Class | 1.62 | % | 5.00 | % | 1,000.00 | 1,016.85 | 8.15 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,013.11 | 11.89 | |||||||||||||
| 1 | Annualized. |
| 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 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
10 | THE RYDEX FUNDS ANNUAL REPORT
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THE RYDEX FUNDS ANNUAL REPORT | 11
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Banking Fund Investor Class returned 22.17%, compared with the S&P 500 Financials Index, which returned 24.91%. The broader S&P 500 Index returned 21.86%.
The leading industry contributor was banks, followed by capital markets, and thrifts & mortgage finance. The consumer finance industry contributed least to Fund return. The commercial banks industry was the only detractor from return.
Among the best-performing holdings in the Fund for the period were Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. The worst-performing holdings for the period were Credicorp Ltd., Banco Bradesco S.A. ADR and Grupo Financiero Santander Mexico SAB de CV ADR.
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 Dates:
| Investor Class | April 1, 1998 | |
| Advisor Class | April 1, 1998 | |
| A-Class | September 1, 2004 | |
| C-Class | March 30, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||
| Wells Fargo & Co. | 4.0% | |
| JPMorgan Chase & Co. | 4.0% | |
| Bank of America Corp. | 3.8% | |
| Citigroup, Inc. | 3.7% | |
| U.S. Bancorp | 3.4% | |
| Capital One Financial Corp. | 2.6% | |
| PNC Financial Services Group, Inc. | 2.6% | |
| Bank of New York Mellon Corp. | 2.5% | |
| State Street Corp. | 2.2% | |
| BB&T Corp. | 2.1% | |
| Top Ten Total | 30.9% | |
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
12 | THE RYDEX FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 22.17% | 15.85% | -3.20% | |||||||||
| Advisor Class Shares | 21.64% | 15.30% | -3.70% | |||||||||
| C-Class Shares | 20.95% | 14.93% | -4.16% | |||||||||
| C-Class Shares with CDSC‡ | 19.95% | 14.93% | -4.16% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Financials Index | 24.91% | 22.39% | -0.47% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 21.84% | 15.59% | -3.86% | |||||||||
| A-Class Shares with sales charge† | 16.05% | 14.49% | -4.34% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Financials Index | 24.91% | 22.39% | -0.32% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. | |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. | |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
THE RYDEX FUNDS ANNUAL REPORT | 13
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| BANKING FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 100.0% | ||||||||
| REGIONAL BANKS - 44.1% | ||||||||
| PNC Financial Services Group, Inc. | 7,317 | $ | 636,578 | |||||
| BB&T Corp. | 12,486 | 501,562 | ||||||
| SunTrust Banks, Inc. | 10,742 | 427,424 | ||||||
| Fifth Third Bancorp | 17,766 | 407,730 | ||||||
| M&T Bank Corp. | 3,071 | 372,512 | ||||||
| Regions Financial Corp. | 32,270 | 358,520 | ||||||
| KeyCorp | 23,077 | 328,616 | ||||||
| CIT Group, Inc. | 5,837 | 286,130 | ||||||
| Huntington Bancshares, Inc. | 26,960 | 268,791 | ||||||
| Popular, Inc.* | 8,601 | 266,545 | ||||||
| First Republic Bank | 4,551 | 245,708 | ||||||
| Signature Bank* | 1,795 | 225,434 | ||||||
| SVB Financial Group* | 1,731 | 222,918 | ||||||
| Zions Bancorporation | 6,919 | 214,351 | ||||||
| East West Bancorp, Inc. | 5,730 | 209,145 | ||||||
| Cullen/Frost Bankers, Inc. | 2,640 | 204,679 | ||||||
| Commerce Bancshares, Inc. | 4,235 | 196,589 | ||||||
| Prosperity Bancshares, Inc. | 2,933 | 194,018 | ||||||
| City National Corp. | 2,435 | 191,683 | ||||||
| BankUnited, Inc. | 5,080 | 176,632 | ||||||
| First Niagara Financial Group, Inc. | 18,111 | 171,149 | ||||||
| FirstMerit Corp. | 8,168 | 170,139 | ||||||
| Hancock Holding Co. | 4,403 | 161,370 | ||||||
| Associated Banc-Corp. | 8,701 | 157,140 | ||||||
| First Horizon National Corp. | 12,713 | 156,878 | ||||||
| CapitalSource, Inc. | 10,734 | 156,609 | ||||||
| UMB Financial Corp. | 2,415 | 156,251 | ||||||
| Webster Financial Corp. | 5,013 | 155,704 | ||||||
| TCF Financial Corp. | 9,303 | 154,988 | ||||||
| Bank of Hawaii Corp. | 2,541 | 154,010 | ||||||
| Texas Capital Bancshares, Inc.* | 2,360 | 153,258 | ||||||
| Bank of the Ozarks, Inc. | 2,160 | 147,010 | ||||||
| PrivateBancorp, Inc. — Class A | 4,747 | 144,831 | ||||||
| Fulton Financial Corp. | 11,475 | 144,356 | ||||||
| BancorpSouth, Inc. | 5,667 | 141,448 | ||||||
| FNB Corp. | 10,312 | 138,181 | ||||||
| Home BancShares, Inc. | 3,940 | 135,615 | ||||||
| United Bankshares, Inc. | 4,420 | 135,340 | ||||||
| Susquehanna Bancshares, Inc. | 11,866 | 135,154 | ||||||
| Valley National Bancorp | 12,963 | 134,945 | ||||||
| Glacier Bancorp, Inc. | 4,630 | 134,594 | ||||||
| Western Alliance Bancorporation* | 5,460 | 134,316 | ||||||
| IBERIABANK Corp. | 1,914 | 134,267 | ||||||
| Umpqua Holdings Corp. | 7,110 | 132,530 | ||||||
| Cathay General Bancorp | 5,180 | 130,484 | ||||||
| First Financial Bankshares, Inc. | 2,070 | 127,905 | ||||||
| PacWest Bancorp1 | 2,960 | 127,310 | ||||||
| Trustmark Corp. | 4,790 | 121,427 | ||||||
| MB Financial, Inc. | 3,910 | 121,054 | ||||||
| CVB Financial Corp. | 7,500 | 119,250 | ||||||
| Old National Bancorp | 7,610 | 113,465 | ||||||
| Westamerica Bancorporation | 2,060 | 111,405 | ||||||
| Wintrust Financial Corp. | 2,218 | 107,928 | ||||||
| United Community Banks, Inc.* | 4,860 | 94,333 | ||||||
| National Penn Bancshares, Inc. | 8,606 | 89,933 | ||||||
| Total Regional Banks | 10,740,142 | |||||||
| DIVERSIFIED BANKS - 40.1% | ||||||||
| Wells Fargo & Co. | 19,555 | 972,666 | ||||||
| JPMorgan Chase & Co. | 15,945 | 968,021 | ||||||
| Bank of America Corp. | 53,500 | 920,200 | ||||||
| Citigroup, Inc. | 19,088 | 908,589 | ||||||
| U.S. Bancorp | 19,283 | 826,469 | ||||||
| Itau Unibanco Holding S.A. ADR | 23,618 | 350,963 | ||||||
| Banco Bradesco S.A. ADR | 24,621 | 336,569 | ||||||
| Credicorp Ltd. | 2,235 | 308,251 | ||||||
| ICICI Bank Ltd. ADR | 6,795 | 297,621 | ||||||
| HSBC Holdings plc ADR | 5,810 | 295,322 | ||||||
| HDFC Bank Ltd. ADR | 7,150 | 293,365 | ||||||
| Banco Santander Brasil S.A. ADR | 51,819 | 288,632 | ||||||
| Banco Santander S.A. ADR1 | 29,940 | 286,825 | ||||||
| Grupo Financiero Santander | ||||||||
| Mexico SAB de CV ADR | 23,300 | 286,357 | ||||||
| Comerica, Inc. | 5,434 | 281,481 | ||||||
| Royal Bank of Canada | 4,178 | 275,706 | ||||||
| Toronto-Dominion Bank | 5,870 | 275,597 | ||||||
| Bancolombia S.A. ADR1 | 4,875 | 275,340 | ||||||
| Bank of Montreal | 4,076 | 273,133 | ||||||
| Barclays plc ADR | 17,189 | 269,867 | ||||||
| Bank of Nova Scotia | 4,590 | 266,312 | ||||||
| Canadian Imperial Bank of Commerce | 3,005 | 259,001 | ||||||
| Banco Bilbao Vizcaya Argentaria S.A. ADR1 | 21,207 | 254,696 | ||||||
| Total Diversified Banks | 9,770,983 | |||||||
| ASSET MANAGEMENT & CUSTODY BANKS - 6.1% | ||||||||
| Bank of New York Mellon Corp. | 17,004 | 600,071 | ||||||
| State Street Corp. | 7,550 | 525,103 | ||||||
| Northern Trust Corp. | 5,700 | 373,692 | ||||||
| Total Asset Management & Custody Banks | 1,498,866 | |||||||
| DIVERSIFIED CAPITAL MARKETS - 3.4% | ||||||||
| Deutsche Bank AG | 6,198 | 277,856 | ||||||
| Credit Suisse Group AG ADR | 8,392 | 271,733 | ||||||
| UBS AG | 13,026 | 269,899 | ||||||
| Total Diversified Capital Markets | 819,488 | |||||||
| CONSUMER FINANCE - 2.6% | ||||||||
| Capital One Financial Corp. | 8,320 | 641,971 | ||||||
| OTHER DIVERSIFIED FINANCIAL SERVICES - 2.2% | ||||||||
| ING US, Inc. | 7,880 | 285,808 | ||||||
| ING Groep N.V. ADR* | 18,100 | 257,925 | ||||||
| Total Other Diversified Financial Services | 543,733 | |||||||
| THRIFTS & MORTGAGE FINANCE - 1.5% | ||||||||
| New York Community Bancorp, Inc. | 15,657 | 251,608 | ||||||
| Ocwen Financial Corp.* | 2,713 | 106,295 | ||||||
| Total Thrifts & Mortgage Finance | 357,903 | |||||||
| Total Common Stocks | ||||||||
| (Cost $18,863,488) | 24,373,086 |
| 14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| BANKING FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 0.0% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 424 | $ | 424 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $424) | 424 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 2.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 278,163 | 278,163 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 248,206 | 248,206 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 46,791 | 46,791 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $573,160) | 573,160 | |||||||
| Total Investments - 102.3% | ||||||||
| (Cost $19,437,072) | $ | 24,946,670 | ||||||
| Other Assets & Liabilities, net - (2.3)% | (553,381 | ) | ||||||
| Total Net Assets - 100.0% | $ | 24,393,289 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
| BANKING FUND |
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Investments, at value - including $564,476 | ||||
| of securities loaned | ||||
| (cost $18,863,488) | $ | 24,373,086 | ||
| Repurchase agreements, at value | ||||
| (cost $573,584) | 573,584 | |||
| Total investments | ||||
| (cost $19,437,072) | 24,946,670 | |||
| Receivables: | ||||
| Fund shares sold | 162,056 | |||
| Dividends | 35,165 | |||
| Securities lending income | 528 | |||
| Foreign taxes reclaim | 237 | |||
| Total assets | 25,144,656 | |||
| Liabilities: | ||||
| Overdraft due to custodian bank | 71,000 | |||
| Payable for: | ||||
| Upon return of securities loaned | 573,160 | |||
| Fund shares redeemed | 71,930 | |||
| Management fees | 13,728 | |||
| Distribution and service fees | 4,862 | |||
| Transfer agent and administrative fees | 4,037 | |||
| Portfolio accounting fees | 1,615 | |||
| Miscellaneous | 11,035 | |||
| Total liabilities | 751,367 | |||
| Net assets | $ | 24,393,289 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 43,034,220 | ||
| Undistributed net investment income | 104,722 | |||
| Accumulated net realized loss on investments | (24,255,251 | ) | ||
| Net unrealized appreciation on investments | 5,509,598 | |||
| Net assets | $ | 24,393,289 | ||
| Investor Class: | ||||
| Net assets | $ | 11,240,830 | ||
| Capital shares outstanding | 176,744 | |||
| Net asset value per share | $ | 63.60 | ||
| Advisor Class: | ||||
| Net assets | $ | 539,991 | ||
| Capital shares outstanding | 9,407 | |||
| Net asset value per share | $ | 57.40 | ||
| A-Class: | ||||
| Net assets | $ | 8,305,496 | ||
| Capital shares outstanding | 141,360 | |||
| Net asset value per share | $ | 58.75 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 61.68 | ||
| C-Class: | ||||
| Net assets | $ | 4,306,972 | ||
| Capital shares outstanding | 78,747 | |||
| Net asset value per share | $ | 54.69 |
STATEMENT OF
OPERATIONS
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $8,677) | $ | 399,158 | ||
| Income from securities lending, net | 3,503 | |||
| Interest | 10 | |||
| Total investment income | 402,671 | |||
| Expenses: | ||||
| Management fees | 149,043 | |||
| Transfer agent and administrative fees | 43,836 | |||
| Distribution and service fees: | ||||
| Advisor Class | 12,418 | |||
| A-Class | 8,880 | |||
| C-Class | 36,680 | |||
| Portfolio accounting fees | 17,534 | |||
| Custodian fees | 1,894 | |||
| Trustees’ fees* | 1,893 | |||
| Line of credit interest expense | 359 | |||
| Miscellaneous | 25,574 | |||
| Total expenses | 298,111 | |||
| Net investment income | 104,560 | |||
| Net Realized And Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 2,054,539 | |||
| Net realized gain | 2,054,539 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 456,330 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 456,330 | |||
| Net realized and unrealized gain | 2,510,869 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 2,615,429 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| BANKING FUND |
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 104,560 | $ | 162,457 | ||||
| Net realized gain (loss) on investments | 2,054,539 | (870,744 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 456,330 | 614,730 | ||||||
| Net increase (decrease) in net assets resulting from operations | 2,615,429 | (93,557 | ) | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (69,539 | ) | (34,316 | ) | ||||
| Advisor Class | (27,301 | ) | (35,517 | ) | ||||
| A-Class | (69,825 | ) | (2,491 | ) | ||||
| C-Class | (40,063 | ) | (10,552 | ) | ||||
| Total distributions to shareholders | (206,728 | ) | (82,876 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 55,738,638 | 48,557,653 | ||||||
| Advisor Class | 20,491,522 | 27,915,563 | ||||||
| A-Class | 21,112,841 | 7,960,541 | ||||||
| C-Class | 22,307,410 | 18,118,088 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 66,494 | 29,924 | ||||||
| Advisor Class | 27,265 | 35,505 | ||||||
| A-Class | 34,044 | 2,316 | ||||||
| C-Class | 37,004 | 9,324 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (54,691,263 | ) | (68,846,342 | ) | ||||
| Advisor Class | (24,496,009 | ) | (24,816,806 | ) | ||||
| A-Class | (15,248,615 | ) | (8,398,878 | ) | ||||
| C-Class | (22,684,146 | ) | (18,195,856 | ) | ||||
| Net increase (decrease) from capital share transactions | 2,695,185 | (17,628,968 | ) | |||||
| Net increase (decrease) in net assets | 5,103,886 | (17,805,401 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 19,289,403 | 37,094,804 | ||||||
| End of year | $ | 24,393,289 | $ | 19,289,403 | ||||
| Undistributed net investment income at end of year | $ | 104,722 | $ | 172,444 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 942,203 | 1,044,393 | ||||||
| Advisor Class | 383,290 | 649,106 | ||||||
| A-Class | 377,509 | 184,181 | ||||||
| C-Class | 443,798 | 437,246 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 1,089 | 642 | ||||||
| Advisor Class | 494 | 838 | ||||||
| A-Class | 603 | 54 | ||||||
| C-Class | 703 | 229 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (936,087 | ) | (1,497,165 | ) | ||||
| Advisor Class | (463,143 | ) | (587,096 | ) | ||||
| A-Class | (279,911 | ) | (212,144 | ) | ||||
| C-Class | (453,983 | ) | (442,727 | ) | ||||
| Net increase (decrease) in shares | 16,565 | (422,443 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
| 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 | ||||||||||||||||
| March 31, | March 28, | �� | March 31, | March 31, | March 31, | |||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 52.58 | $ | 46.75 | $ | 49.75 | $ | 50.73 | $ | 32.62 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .54 | .54 | .44 | .13 | .28 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.09 | 5.44 | (3.39 | ) | (.99 | ) | 20.05 | |||||||||||||
| Total from investment operations | 11.63 | 5.98 | (2.95 | ) | (.86 | ) | 20.33 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Total distributions | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Net asset value, end of period | $ | 63.60 | $ | 52.58 | $ | 46.75 | $ | 49.75 | $ | 50.73 | ||||||||||
| Total Returnb | 22.17 | % | 12.84 | % | (5.89 | %) | (1.66 | %) | 63.48 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 11,241 | $ | 8,915 | $ | 29,061 | $ | 8,711 | $ | 26,340 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.92 | % | 1.16 | % | 1.02 | % | 0.27 | % | 0.67 | % | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.34 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 481 | % | 382 | % | 544 | % | 1,130 | % | 986 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 47.71 | $ | 42.63 | $ | 45.63 | $ | 46.79 | $ | 30.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .23 | .17 | .12 | (.08 | ) | .06 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 10.07 | 5.06 | (3.07 | ) | (.96 | ) | 18.59 | |||||||||||||
| Total from investment operations | 10.30 | 5.23 | (2.95 | ) | (1.04 | ) | 18.65 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Total distributions | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Net asset value, end of period | $ | 57.40 | $ | 47.71 | $ | 42.63 | $ | 45.63 | $ | 46.79 | ||||||||||
| Total Returnb | 21.64 | % | 12.32 | % | (6.43 | %) | (2.19 | %) | 62.66 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 540 | $ | 4,235 | $ | 1,105 | $ | 629 | $ | 1,291 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.44 | % | 0.38 | % | 0.30 | % | (0.18 | %) | 0.17 | % | ||||||||||
| Total expenses | 1.87 | % | 1.86 | % | 1.83 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 481 | % | 382 | % | 544 | % | 1,130 | % | 986 | % | ||||||||||
| 18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| BANKING FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.74 | $ | 43.45 | $ | 46.38 | $ | 47.41 | $ | 30.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .39 | .36 | .30 | .04 | .02 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 10.23 | 5.08 | (3.18 | ) | (.95 | ) | 18.94 | |||||||||||||
| Total from investment operations | 10.62 | 5.44 | (2.88 | ) | (.91 | ) | 18.96 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Total distributions | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Net asset value, end of period | $ | 58.75 | $ | 48.74 | $ | 43.45 | $ | 46.38 | $ | 47.41 | ||||||||||
| Total Returnb | 21.84 | % | 12.60 | % | (6.19 | %) | (1.89 | %) | 63.04 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 8,305 | $ | 2,103 | $ | 3,088 | $ | 913 | $ | 6,381 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.71 | % | 0.88 | % | 0.73 | % | 0.09 | % | 0.06 | % | ||||||||||
| Total expenses | 1.62 | % | 1.59 | % | 1.61 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 481 | % | 382 | % | 544 | % | 1,130 | % | 986 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.74 | $ | 41.09 | $ | 44.20 | $ | 45.51 | $ | 29.90 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.05 | ) | .01 | (.01 | ) | (.29 | ) | (.16 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 9.61 | 4.79 | (3.05 | ) | (.90 | ) | 17.99 | |||||||||||||
| Total from investment operations | 9.56 | 4.80 | (3.06 | ) | (1.19 | ) | 17.83 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Total distributions | (.61 | ) | (.15 | ) | (.05 | ) | (.12 | ) | (2.22 | ) | ||||||||||
| Net asset value, end of period | $ | 54.69 | $ | 45.74 | $ | 41.09 | $ | 44.20 | $ | 45.51 | ||||||||||
| Total Returnb | 20.95 | % | 11.74 | % | (6.88 | %) | (2.58 | %) | 60.86 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,307 | $ | 4,036 | $ | 3,841 | $ | 2,844 | $ | 5,607 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.10 | %) | 0.02 | % | (0.03 | %) | (0.67 | %) | (0.42 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.35 | % | 2.38 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 481 | % | 382 | % | 544 | % | 1,130 | % | 986 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the period presented through April 20, 2009, have been restated to reflect a 1:10 reverse share split effec-tive April 20, 2009. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Basic Materials Fund Investor Class returned 5.84%, compared with 23.29% for the S&P 500 Materials Index. The broader S&P 500 Index returned 21.86%.
The Fund is composed largely of two industries — chemicals, and metals & mining. The chemicals industry was the largest contributor to performance, followed by containers & packaging. The largest detractor from return was the metals & mining industry.
The top-performing holdings were Dow Chemical Co., E.I. du Pont de Nemours & Co. and LyondellBasell Industries N.V. — Class A. The worst-performing holdings included Newmont Mining Corp., Barrick Gold Corp. and Goldfields Ltd. ADR.
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 Dates: | |
| Investor Class | April 1, 1998 |
| Advisor Class | April 14, 1998 |
| A-Class | September 1, 2004 |
| C-Class | May 3, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| EI du Pont de Nemours & Co. | 2.9 | % | ||
| Monsanto Co. | 2.9 | % | ||
| Dow Chemical Co. | 2.8 | % | ||
| LyondellBasell Industries N.V. — Class A | 2.6 | % | ||
| Praxair, Inc. | 2.3 | % | ||
| Freeport-McMoRan Copper & Gold, Inc. | 2.3 | % | ||
| Ecolab, Inc. | 2.1 | % | ||
| Southern Copper Corp. | 1.9 | % | ||
| PPG Industries, Inc. | 1.9 | % | ||
| Air Products & Chemicals, Inc. | 1.8 | % | ||
| Top Ten Total | 23.5 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 20 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 5.84% | 14.20% | 8.05% | |||||||||
| Advisor Class Shares | 5.31% | 13.63% | 7.51% | |||||||||
| C-Class Shares | 4.80% | 13.07% | 6.98% | |||||||||
| C-Class Shares with CDSC‡ | 3.80% | 13.07% | 6.98% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Materials Index | 23.29% | 19.97% | 8.75% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 5.58% | 13.92% | 7.72% | |||||||||
| A-Class Shares with sales charge† | 0.58% | 12.81% | 7.17% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Materials Index | 23.29% | 19.97% | 8.87% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 21 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| BASIC MATERIALS FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.2% | ||||||||
| SPECIALTY CHEMICALS - 17.9% | ||||||||
| Ecolab, Inc. | 10,594 | $ | 1,144,047 | |||||
| PPG Industries, Inc. | 5,400 | 1,044,685 | ||||||
| Sherwin-Williams Co. | 4,593 | 905,418 | ||||||
| Sigma-Aldrich Corp. | 7,241 | 676,165 | ||||||
| Celanese Corp. — Class A | 10,827 | 601,007 | ||||||
| International Flavors & Fragrances, Inc. | 6,011 | 575,072 | ||||||
| Ashland, Inc. | 5,717 | 568,727 | ||||||
| WR Grace & Co.* | 5,595 | 554,856 | ||||||
| Valspar Corp. | 6,895 | 497,267 | ||||||
| Albemarle Corp. | 7,201 | 478,290 | ||||||
| RPM International, Inc. | 11,401 | 477,018 | ||||||
| Rockwood Holdings, Inc. | 6,326 | 470,654 | ||||||
| NewMarket Corp. | 1,200 | 468,936 | ||||||
| Cytec Industries, Inc. | 3,898 | 380,484 | ||||||
| PolyOne Corp. | 10,080 | 369,533 | ||||||
| Sensient Technologies Corp. | 6,000 | 338,460 | ||||||
| Chemtura Corp.* | 12,360 | 312,584 | ||||||
| Total Specialty Chemicals | 9,863,203 | |||||||
| STEEL - 10.3% | ||||||||
| Vale S.A. ADR1 | 67,037 | 927,121 | ||||||
| Nucor Corp. | 16,202 | 818,849 | ||||||
| Reliance Steel & Aluminum Co. | 6,702 | 473,563 | ||||||
| ArcelorMittal | 28,874 | 466,315 | ||||||
| Allegheny Technologies, Inc. | 10,926 | 411,692 | ||||||
| Steel Dynamics, Inc. | 22,956 | 408,387 | ||||||
| United States Steel Corp. | 14,424 | 398,247 | ||||||
| Gerdau S.A. ADR | 60,340 | 386,779 | ||||||
| Cliff s Natural Resources, Inc.1 | 18,565 | 379,840 | ||||||
| Worthington Industries, Inc. | 8,300 | 317,475 | ||||||
| Commercial Metals Co. | 15,770 | 297,738 | ||||||
| AK Steel Holding Corp.*,1 | 27,753 | 200,377 | ||||||
| Walter Energy, Inc.1 | 21,293 | 160,975 | ||||||
| Total Steel | 5,647,358 | |||||||
| GOLD - 9.9% | ||||||||
| Barrick Gold Corp. | 45,309 | 807,860 | ||||||
| Newmont Mining Corp. | 29,846 | 699,590 | ||||||
| Goldcorp, Inc. | 27,242 | 666,884 | ||||||
| Agnico Eagle Mines Ltd. | 14,945 | 452,086 | ||||||
| Randgold Resources Ltd. ADR | 5,789 | 434,175 | ||||||
| Yamana Gold, Inc.1 | 48,384 | 424,812 | ||||||
| AngloGold Ashanti Ltd. ADR* | 24,490 | 418,289 | ||||||
| Franco-Nevada Corp. | 8,891 | 407,741 | ||||||
| Royal Gold, Inc. | 6,348 | 397,512 | ||||||
| Cia de Minas Buenaventura SAA ADR | 30,644 | 385,195 | ||||||
| Eldorado Gold Corp. | 60,782 | 339,164 | ||||||
| Total Gold | 5,433,308 | |||||||
| DIVERSIFIED METALS & MINING - 9.9% | ||||||||
| Freeport-McMoRan Copper & Gold, Inc. | 37,677 | 1,245,977 | ||||||
| Southern Copper Corp. | 36,119 | 1,051,424 | ||||||
| BHP Billiton Ltd. ADR | 10,715 | 726,156 | ||||||
| Rio Tinto plc ADR1 | 12,525 | 699,271 | ||||||
| Teck Resources Ltd. — Class B | 21,303 | 461,849 | ||||||
| BHP Billiton plc ADR | 6,280 | 387,853 | ||||||
| Compass Minerals International, Inc. | 4,200 | 346,584 | ||||||
| US Silica Holdings, Inc. | 7,841 | 299,291 | ||||||
| Molycorp, Inc.*,1 | 44,737 | 209,817 | ||||||
| Total Diversified Metals & Mining | 5,428,222 | |||||||
| DIVERSIFIED CHEMICALS - 9.6% | ||||||||
| EI du Pont de Nemours & Co. | 23,874 | 1,601,945 | ||||||
| Dow Chemical Co. | 31,198 | 1,515,911 | ||||||
| Eastman Chemical Co. | 8,472 | 730,371 | ||||||
| FMC Corp. | 8,377 | 641,343 | ||||||
| Huntsman Corp. | 19,988 | 488,107 | ||||||
| Olin Corp. | 10,832 | 299,072 | ||||||
| Total Diversified Chemicals | 5,276,749 | |||||||
| FERTILIZERS & AGRICULTURAL CHEMICALS - 9.1% | ||||||||
| Monsanto Co. | 13,793 | 1,569,229 | ||||||
| Mosaic Co. | 18,232 | 911,600 | ||||||
| Potash Corporation of Saskatchewan, Inc. | 22,590 | 818,210 | ||||||
| CF Industries Holdings, Inc. | 2,954 | 769,931 | ||||||
| Agrium, Inc. | 5,273 | 514,223 | ||||||
| Scotts Miracle-Gro Co. — Class A | 6,540 | 400,771 | ||||||
| Total Fertilizers & Agricultural Chemicals | 4,983,964 | |||||||
| PAPER PACKAGING - 6.9% | ||||||||
| Rock-Tenn Co. — Class A | 5,295 | 558,992 | ||||||
| MeadWestvaco Corp. | 14,100 | 530,724 | ||||||
| Packaging Corporation of America | 7,380 | 519,331 | ||||||
| Sealed Air Corp. | 15,714 | 516,519 | ||||||
| Avery Dennison Corp. | 8,840 | 447,923 | ||||||
| Sonoco Products Co. | 10,200 | 418,404 | ||||||
| Bemis Company, Inc. | 10,558 | 414,296 | ||||||
| Graphic Packaging Holding Co.* | 36,860 | 374,498 | ||||||
| Total Paper Packaging | 3,780,687 | |||||||
| INDUSTRIAL GASES - 5.2% | ||||||||
| Praxair, Inc. | 9,571 | 1,253,514 | ||||||
| Air Products & Chemicals, Inc. | 8,444 | 1,005,174 | ||||||
| Airgas, Inc. | 5,371 | 572,065 | ||||||
| Total Industrial Gases | 2,830,753 | |||||||
| COMMODITY CHEMICALS - 5.1% | ||||||||
| LyondellBasell Industries N.V. — Class A | 15,802 | 1,405,429 | ||||||
| Westlake Chemical Corp. | 8,960 | 592,973 | ||||||
| Methanex Corp. | 6,470 | 413,692 | ||||||
| Axiall Corp. | 8,230 | 369,692 | ||||||
| Total Commodity Chemicals | 2,781,786 | |||||||
| CONSTRUCTION MATERIALS - 4.7% | ||||||||
| Cemex SAB de CV ADR* | 58,377 | 737,302 | ||||||
| Vulcan Materials Co. | 8,998 | 597,917 | ||||||
| Martin Marietta Materials, Inc. | 3,871 | 496,843 | ||||||
| Eagle Materials, Inc. | 4,890 | 433,547 | ||||||
| Texas Industries, Inc.* | 3,600 | 322,632 | ||||||
| Total Construction Materials | 2,588,241 | |||||||
| 22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| BASIC MATERIALS FUND |
| Shares | Value | |||||||
| METAL & GLASS CONTAINERS - 3.6% | ||||||||
| Ball Corp. | 10,452 | $ | 572,874 | |||||
| Crown Holdings, Inc.* | 11,381 | 509,186 | ||||||
| Owens-Illinois, Inc.* | 14,453 | 488,945 | ||||||
| AptarGroup, Inc. | 6,500 | 429,650 | ||||||
| Total Metal & Glass Containers | 2,000,655 | |||||||
| PAPER PRODUCTS - 3.1% | ||||||||
| International Paper Co. | 20,103 | 922,325 | ||||||
| Domtar Corp. | 4,090 | 458,980 | ||||||
| KapStone Paper and Packaging Corp.* | 11,300 | 325,892 | ||||||
| Total Paper Products | 1,707,197 | |||||||
| ALUMINUM - 1.9% | ||||||||
| Alcoa, Inc. | 61,199 | 787,631 | ||||||
| Kaiser Aluminum Corp. | 3,240 | 231,401 | ||||||
| Total Aluminum | 1,019,032 | |||||||
| SILVER - 0.9% | ||||||||
| Silver Wheaton Corp. | 21,102 | 479,015 | ||||||
| FOREST PRODUCTS - 0.6% | ||||||||
| Louisiana-Pacific Corp.* | 18,640 | 314,457 | ||||||
| PRECIOUS METALS & MINERALS - 0.5% | ||||||||
| Stillwater Mining Co.* | 18,108 | 268,179 | ||||||
| Total Common Stocks | ||||||||
| (Cost $35,432,749) | 54,402,806 | |||||||
| Face Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 271,958 | $ | 271,958 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $271,958) | 271,958 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 4.0% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,067,083 | 1,067,083 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 952,167 | 952,167 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 179,500 | 179,500 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $2,198,750) | 2,198,750 | |||||||
| Total Investments - 103.7% | ||||||||
| (Cost $37,903,457) | $ | 56,873,514 | ||||||
| Other Assets & Liabilities, net - (3.7)% | (2,011,287 | ) | ||||||
| Total Net Assets - 100.0% | $ | 54,862,227 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
| BASIC MATERIALS FUND |
STATEMENT OF ASSETS
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $2,129,025 of | ||||
| securities loaned | ||||
| (cost $35,432,749) | $ | 54,402,806 | ||
| Repurchase agreements, at value | ||||
| (cost $2,470,708) | 2,470,708 | |||
| Total investments | ||||
| (cost $37,903,457) | 56,873,514 | |||
| Receivables: | ||||
| Fund shares sold | 1,058,641 | |||
| Dividends | 70,982 | |||
| Securities lending income | 2,755 | |||
| Total assets | 58,005,892 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 2,198,750 | |||
| Securities purchased | 478,800 | |||
| Fund shares redeemed | 374,623 | |||
| Management fees | 38,083 | |||
| Transfer agent and administrative fees | 11,201 | |||
| Distribution and service fees | 7,566 | |||
| Portfolio accounting fees | 4,480 | |||
| Miscellaneous | 30,162 | |||
| Total liabilities | 3,143,665 | |||
| Net assets | $ | 54,862,227 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 63,927,319 | ||
| Undistributed net investment income | 199,782 | |||
| Accumulated net realized loss on investments | (28,234,931 | ) | ||
| Net unrealized appreciation on investments | 18,970,057 | |||
| Net assets | $ | 54,862,227 | ||
| Investor Class: | ||||
| Net assets | $ | 33,687,408 | ||
| Capital shares outstanding | 641,239 | |||
| Net asset value per share | $ | 52.53 | ||
| Advisor Class: | ||||
| Net assets | $ | 2,677,696 | ||
| Capital shares outstanding | 55,049 | |||
| Net asset value per share | $ | 48.64 | ||
| A-Class: | ||||
| Net assets | $ | 13,346,853 | ||
| Capital shares outstanding | 267,317 | |||
| Net asset value per share | $ | 49.93 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 52.42 | ||
| C-Class: | ||||
| Net assets | $ | 5,150,270 | ||
| Capital shares outstanding | 112,181 | |||
| Net asset value per share | $ | 45.91 |
STATEMENT OF
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $21,693) | $ | 903,312 | ||
| Income from securities lending, net | 19,151 | |||
| Interest | 16 | |||
| Total investment income | 922,479 | |||
| Expenses: | ||||
| Management fees | 381,625 | |||
| Transfer agent and administrative fees | 112,242 | |||
| Distribution and service fees: | ||||
| Advisor Class | 12,203 | |||
| A-Class | 22,254 | |||
| C-Class | 50,548 | |||
| Portfolio accounting fees | 44,897 | |||
| Trustees’ fees* | 5,479 | |||
| Tax expense | 5,107 | |||
| Custodian fees | 5,022 | |||
| Line of credit interest expense | 298 | |||
| Miscellaneous | 65,163 | |||
| Total expenses | 704,838 | |||
| Net investment income | 217,641 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 6,023,395 | |||
| Net realized gain | 6,023,395 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (5,738,840 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (5,738,840 | ) | ||
| Net realized and unrealized gain | 284,555 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 502,196 |
| * | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| 24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| BASIC MATERIALS FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 217,641 | $ | 453,823 | ||||
| Net realized gain on investments | 6,023,395 | 311,441 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (5,738,840 | ) | (1,310,252 | ) | ||||
| Net increase (decrease) in net assets resulting from operations | 502,196 | (544,988 | ) | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (196,131 | ) | (159,284 | ) | ||||
| Advisor Class | (14,384 | ) | (14,458 | ) | ||||
| A-Class | (54,137 | ) | (29,092 | ) | ||||
| C-Class | (34,529 | ) | (24,821 | ) | ||||
| Total distributions to shareholders | (299,181 | ) | (227,655 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 162,952,932 | 175,560,604 | ||||||
| Advisor Class | 8,129,722 | 10,456,179 | ||||||
| A-Class | 13,387,890 | 6,275,946 | ||||||
| C-Class | 22,384,921 | 28,696,473 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 187,009 | 142,259 | ||||||
| Advisor Class | 13,713 | 10,612 | ||||||
| A-Class | 50,565 | 26,621 | ||||||
| C-Class | 31,129 | 23,063 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (165,714,358 | ) | (176,485,331 | ) | ||||
| Advisor Class | (9,087,918 | ) | (11,897,822 | ) | ||||
| A-Class | (11,090,005 | ) | (4,371,972 | ) | ||||
| C-Class | (23,983,376 | ) | (30,128,845 | ) | ||||
| Net decrease from capital share transactions | (2,737,776 | ) | (1,692,213 | ) | ||||
| Net decrease in net assets | (2,534,761 | ) | (2,464,856 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 57,396,988 | 59,861,844 | ||||||
| End of year | $ | 54,862,227 | $ | 57,396,988 | ||||
| Undistributed net investment income at end of year | $ | 199,782 | $ | 259,097 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 3,283,583 | 3,611,782 | ||||||
| Advisor Class | 179,322 | 230,287 | ||||||
| A-Class | 276,591 | 130,171 | ||||||
| C-Class | 520,203 | 667,452 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 3,814 | 2,927 | ||||||
| Advisor Class | 302 | 234 | ||||||
| A-Class | 1,084 | 574 | ||||||
| C-Class | 724 | 535 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (3,367,228 | ) | (3,633,585 | ) | ||||
| Advisor Class | (202,337 | ) | (266,206 | ) | ||||
| A-Class | (243,630 | ) | (95,233 | ) | ||||
| C-Class | (559,837 | ) | (704,019 | ) | ||||
| Net decrease in shares | (107,409 | ) | (55,081 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.94 | $ | 49.80 | $ | 56.36 | $ | 44.65 | $ | 27.43 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .32 | .46 | .09 | —c | .24 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.58 | (.15 | ) | (6.65 | ) | 11.82 | 17.07 | |||||||||||||
| Total from investment operations | 2.90 | .31 | (6.56 | ) | 11.82 | 17.31 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Total distributions | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Net asset value, end of period | $ | 52.53 | $ | 49.94 | $ | 49.80 | $ | 56.36 | $ | 44.65 | ||||||||||
| Total Returnb | 5.84 | % | 0.65 | % | (11.66 | %) | 26.50 | % | 63.12 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 33,687 | $ | 36,012 | $ | 36,847 | $ | 73,606 | $ | 44,582 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.66 | % | 0.95 | % | 0.17 | % | 0.00 | % | 0.65 | % | ||||||||||
| Total expenses | 1.38 | % | 1.36 | % | 1.36 | % | 1.39 | % | 1.39 | % | ||||||||||
| Portfolio turnover rate | 349 | % | 251 | % | 217 | % | 292 | % | 455 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 46.50 | $ | 46.61 | $ | 53.00 | $ | 42.20 | $ | 26.06 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .08 | .19 | .08 | (.20 | ) | .03 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.37 | (.13 | ) | (6.47 | ) | 11.11 | 16.20 | |||||||||||||
| Total from investment operations | 2.45 | .06 | (6.39 | ) | 10.91 | 16.23 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Total distributions | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Net asset value, end of period | $ | 48.64 | $ | 46.50 | $ | 46.61 | $ | 53.00 | $ | 42.20 | ||||||||||
| Total Returnb | 5.31 | % | 0.16 | % | (12.08 | %) | 25.88 | % | 62.30 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,678 | $ | 3,616 | $ | 5,287 | $ | 15,986 | $ | 8,799 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.18 | % | 0.43 | % | 0.17 | % | (0.44 | %) | 0.07 | % | ||||||||||
| Total expenses | 1.88 | % | 1.86 | % | 1.86 | % | 1.89 | % | 1.89 | % | ||||||||||
| Portfolio turnover rate | 349 | % | 251 | % | 217 | % | 292 | % | 455 | % | ||||||||||
| 26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| BASIC MATERIALS FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 47.60 | $ | 47.58 | $ | 53.99 | $ | 42.88 | $ | 26.41 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .22 | .32 | (.01 | ) | (.09 | ) | .15 | |||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.42 | (.13 | ) | (6.40 | ) | 11.31 | 16.41 | |||||||||||||
| Total from investment operations | 2.64 | .19 | (6.41 | ) | 11.22 | 16.56 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Total distributions | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Net asset value, end of period | $ | 49.93 | $ | 47.60 | $ | 47.58 | $ | 53.99 | $ | 42.88 | ||||||||||
| Total Returnb | 5.58 | % | 0.41 | % | (11.87 | %) | 26.20 | % | 62.72 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 13,347 | $ | 11,104 | $ | 9,410 | $ | 18,187 | $ | 8,159 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.47 | % | 0.69 | % | (0.03 | %) | (0.19 | %) | 0.40 | % | ||||||||||
| Total expenses | 1.63 | % | 1.61 | % | 1.61 | % | 1.64 | % | 1.65 | % | ||||||||||
| Portfolio turnover rate | 349 | % | 251 | % | 217 | % | 292 | % | 455 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 44.12 | $ | 44.45 | $ | 50.80 | $ | 40.67 | $ | 25.24 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.15 | ) | (.03 | ) | (.33 | ) | (.40 | ) | (.13 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.25 | (.13 | ) | (6.02 | ) | 10.64 | 15.65 | |||||||||||||
| Total from investment operations | 2.10 | (.16 | ) | (6.35 | ) | 10.24 | 15.52 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Total distributions | (.31 | ) | (.17 | ) | — | (.11 | ) | (.09 | ) | |||||||||||
| Net asset value, end of period | $ | 45.91 | $ | 44.12 | $ | 44.45 | $ | 50.80 | $ | 40.67 | ||||||||||
| Total Returnb | 4.80 | % | (0.35 | %) | (12.50 | %) | 25.21 | % | 61.51 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,150 | $ | 6,666 | $ | 8,317 | $ | 13,353 | $ | 9,125 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.34 | %) | (0.07 | %) | (0.73 | %) | (0.93 | %) | (0.37 | %) | ||||||||||
| Total expenses | 2.38 | % | 2.36 | % | 2.36 | % | 2.39 | % | 2.40 | % | ||||||||||
| Portfolio turnover rate | 349 | % | 251 | % | 217 | % | 292 | % | 455 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
c Net investment income is less than $0.01 per share.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 biological engineering and in the design, manufacture or sale of related biotechnology products or services (“Biotechnology Companies”).
For the one-year period ended March 31, 2014, Biotechnology Fund Investor Class returned 39.82%, compared with the S&P 500 Health Care Index, which returned 29.24%. The broader S&P 500 Index returned 21.86%.
All industries contributed to Fund return. The industry contributing most to return was biotechnology, followed by life sciences tools & services, and pharmaceuticals.
The best-performing holdings in the Fund were Gilead Sciences, Inc., Intercept Pharmaceuticals, Inc. and Illumina, Inc. The worst-performing holdings in the Fund included Infinity Pharmaceuticals, Inc., Amarin Corporation plc ADR and Ariad Pharmaceuticals, 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 Dates: | |
| Investor Class | April 1, 1998 |
| Advisor Class | April 1, 1998 |
| A-Class | September 1, 2004 |
| C-Class | March 30, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Gilead Sciences, Inc. | 7.3 | % | ||
| Amgen, Inc. | 6.8 | % | ||
| Biogen Idec, Inc. | 5.8 | % | ||
| Celgene Corp. | 5.3 | % | ||
| Regeneron Pharmaceuticals, Inc. | 3.8 | % | ||
| Alexion Pharmaceuticals, Inc. | 3.7 | % | ||
| Illumina, Inc. | 3.0 | % | ||
| Vertex Pharmaceuticals, Inc. | 2.8 | % | ||
| BioMarin Pharmaceutical, Inc. | 2.1 | % | ||
| Incyte Corporation Ltd. | 1.9 | % | ||
| Top Ten Total | 42.5 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 28 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 39.82% | 28.73% | 12.78% | |||||||||
| Advisor Class Shares | 39.12% | 28.08% | 12.23% | |||||||||
| C-Class Shares | 38.45% | 27.47% | 11.68% | |||||||||
| C-Class Shares with CDSC‡ | 37.45% | 27.47% | 11.68% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Health Care Index | 29.24% | 21.64% | 9.02% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 39.48% | 28.41% | 14.31% | |||||||||
| A-Class Shares with sales charge† | 32.86% | 27.16% | 13.73% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Health Care Index | 29.24% | 21.64% | 9.53% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes The 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 29 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| BIOTECHNOLOGY FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.8% | ||||||||
| BIOTECHNOLOGY - 87.3% | ||||||||
| Gilead Sciences, Inc.* | 443,536 | $ | 31,428,960 | |||||
| Amgen, Inc. | 236,654 | 29,188,903 | ||||||
| Biogen Idec, Inc.* | 80,933 | 24,754,977 | ||||||
| Celgene Corp.* | 162,157 | 22,637,117 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 54,019 | 16,220,825 | ||||||
| Alexion Pharmaceuticals, Inc.* | 105,774 | 16,091,399 | ||||||
| Vertex Pharmaceuticals, Inc.* | 171,152 | 12,103,869 | ||||||
| BioMarin Pharmaceutical, Inc.* | 133,494 | 9,105,626 | ||||||
| Incyte Corporation Ltd.* | 155,569 | 8,326,053 | ||||||
| Pharmacyclics, Inc.* | 77,800 | 7,797,116 | ||||||
| Cubist Pharmaceuticals, Inc.* | 95,138 | 6,959,345 | ||||||
| Intercept Pharmaceuticals, Inc.* | 20,600 | 6,793,674 | ||||||
| Isis Pharmaceuticals, Inc.* | 156,080 | 6,744,217 | ||||||
| Alkermes plc* | 151,163 | 6,664,777 | ||||||
| United Therapeutics Corp.* | 70,843 | 6,661,367 | ||||||
| Medivation, Inc.* | 103,370 | 6,653,927 | ||||||
| Seattle Genetics, Inc.*,1 | 145,744 | 6,640,097 | ||||||
| OPKO Health, Inc.*,1 | 662,933 | 6,178,536 | ||||||
| Alnylam Pharmaceuticals, Inc.* | 91,608 | 6,150,561 | ||||||
| Grifols S.A. ADR | 141,116 | 5,828,091 | ||||||
| Cepheid, Inc.* | 110,176 | 5,682,878 | ||||||
| InterMune, Inc.* | 167,635 | 5,610,743 | ||||||
| Theravance, Inc.*,1 | 181,106 | 5,603,420 | ||||||
| NPS Pharmaceuticals, Inc.* | 175,769 | 5,260,766 | ||||||
| Puma Biotechnology, Inc.* | 48,100 | 5,009,134 | ||||||
| Myriad Genetics, Inc.* | 139,980 | 4,785,916 | ||||||
| Synageva BioPharma Corp.* | 55,400 | 4,596,538 | ||||||
| Intrexon Corp.*,1 | 174,200 | 4,579,718 | ||||||
| ACADIA Pharmaceuticals, Inc.*,1 | 182,633 | 4,443,461 | ||||||
| Clovis Oncology, Inc.* | 60,500 | 4,190,835 | ||||||
| Keryx Biopharmaceuticals, Inc.*,1 | 242,460 | 4,131,518 | ||||||
| Arena Pharmaceuticals, Inc.*,1 | 637,650 | 4,017,195 | ||||||
| Ironwood Pharmaceuticals, Inc. — Class A* | 307,324 | 3,786,232 | ||||||
| ARIAD Pharmaceuticals, Inc.*,1 | 469,145 | 3,781,309 | ||||||
| Acorda Therapeutics, Inc.* | 98,059 | 3,717,417 | ||||||
| Halozyme Therapeutics, Inc.* | 288,400 | 3,662,680 | ||||||
| Aegerion Pharmaceuticals, Inc.* | 75,900 | 3,500,508 | ||||||
| PDL BioPharma, Inc.1 | 415,213 | 3,450,420 | ||||||
| Celldex Therapeutics, Inc.* | 194,380 | 3,434,695 | ||||||
| Ligand Pharmaceuticals, Inc. — Class B* | 50,900 | 3,423,534 | ||||||
| ImmunoGen, Inc.*,1 | 223,900 | 3,342,827 | ||||||
| Neurocrine Biosciences, Inc.* | 206,400 | 3,323,040 | ||||||
| MannKind Corp.*,1 | 766,600 | 3,081,732 | ||||||
| Sangamo BioSciences, Inc.*,1 | 166,360 | 3,007,789 | ||||||
| Exact Sciences Corp.*,1 | 207,855 | 2,945,305 | ||||||
| KYTHERA Biopharmaceuticals, Inc.* | 73,200 | 2,910,432 | ||||||
| NewLink Genetics Corp.*,1 | 96,100 | 2,729,240 | ||||||
| Sarepta Therapeutics, Inc.*,1 | 112,639 | 2,706,715 | ||||||
| Idenix Pharmaceuticals, Inc.*,1 | 422,641 | 2,548,525 | ||||||
| Orexigen Therapeutics, Inc.* | 365,300 | 2,374,450 | ||||||
| Raptor Pharmaceutical Corp.*,1 | 231,300 | 2,313,000 | ||||||
| Organovo Holdings, Inc.*,1 | 302,480 | 2,310,947 | ||||||
| Vanda Pharmaceuticals, Inc.* | 133,700 | 2,172,625 | ||||||
| Arrowhead Research Corp.* | 131,500 | 2,159,230 | ||||||
| Momenta Pharmaceuticals, Inc.* | 183,400 | 2,136,610 | ||||||
| XOMA Corp.* | 398,600 | 2,076,706 | ||||||
| Chelsea Therapeutics International Ltd.* | 343,800 | 1,897,776 | ||||||
| Exelixis, Inc.*,1 | 526,500 | 1,863,810 | ||||||
| Total Biotechnology | 375,499,113 | |||||||
| LIFE SCIENCES TOOLS & SERVICES - 10.7% | ||||||||
| Illumina, Inc.*,1 | 87,246 | 12,969,990 | ||||||
| Quintiles Transnational Holdings, Inc.* | 153,419 | 7,789,083 | ||||||
| QIAGEN N.V.* | 303,300 | 6,396,597 | ||||||
| Bio-Rad Laboratories, Inc. — Class A* | 46,280 | 5,929,394 | ||||||
| Techne Corp. | 63,684 | 5,436,703 | ||||||
| Charles River Laboratories International, Inc.* | 85,800 | 5,177,172 | ||||||
| Affymetrix, Inc.*,1 | 304,900 | 2,173,937 | ||||||
| Total Life Sciences Tools & Services | 45,872,876 | |||||||
| PHARMACEUTICALS - 1.8% | ||||||||
| Medicines Co.* | 144,250 | 4,099,585 | ||||||
| Nektar Therapeutics* | 289,280 | 3,506,074 | ||||||
| Total Pharmaceuticals | 7,605,659 | |||||||
| Total Common Stocks | ||||||||
| (Cost $247,204,428) | 428,977,648 | |||||||
| RIGHTS - 0.0% | ||||||||
| Clinical Data, Inc. | ||||||||
| Expires 12/31/20*,†††,2 | 24,000 | — | ||||||
| Total Rights | ||||||||
| (Cost $—) | — | |||||||
| 30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| BIOTECHNOLOGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,3 - 0.3% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 1,110,853 | $ | 1,110,853 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $1,110,853) | 1,110,853 | |||||||
| SECURITIES LENDING COLLATERAL††,4 - 11.1% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 23,251,686 | 23,251,686 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 20,747,658 | 20,747,658 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 3,911,291 | 3,911,291 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $47,910,635) | 47,910,635 | |||||||
| Total Investments - 111.2% | ||||||||
| (Cost $296,225,916) | $ | 477,999,136 | ||||||
| Other Assets & Liabilities, net - (11.2)% | (48,256,850 | ) | ||||||
| Total Net Assets - 100.0% | $ | 429,742,286 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| ††† | Value determined based on Level 3 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Illiquid security. |
| 3 | Repurchase Agreement — See Note 5. |
| 4 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
| BIOTECHNOLOGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $48,074,600 | ||||
| of securities loaned | ||||
| (cost $247,204,428) | $ | 428,977,648 | ||
| Repurchase agreements, at value | ||||
| (cost $49,021,488) | 49,021,488 | |||
| Total investments | ||||
| (cost $296,225,916) | 477,999,136 | |||
| Receivables: | ||||
| Securities sold | 6,015,279 | |||
| Fund shares sold | 1,887,040 | |||
| Securities lending income | 179,486 | |||
| Total assets | 486,080,941 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 47,910,635 | |||
| Fund shares redeemed | 7,649,852 | |||
| Management fees | 341,183 | |||
| Transfer agent and administrative fees | 100,348 | |||
| Distribution and service fees | 54,400 | |||
| Portfolio accounting fees | 34,721 | |||
| Miscellaneous | 247,516 | |||
| Total liabilities | 56,338,655 | |||
| Net assets | $ | 429,742,286 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 252,664,416 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized gain on investments | (4,695,350 | ) | ||
| Net unrealized appreciation on investments | 181,773,220 | |||
| Net assets | $ | 429,742,286 | ||
| Investor Class: | ||||
| Net assets | $ | 313,323,681 | ||
| Capital shares outstanding | 4,576,179 | |||
| Net asset value per share | $ | 68.47 | ||
| Advisor Class: | ||||
| Net assets | $ | 37,978,227 | ||
| Capital shares outstanding | 603,028 | |||
| Net asset value per share | $ | 62.98 | ||
| A-Class: | ||||
| Net assets | $ | 51,270,348 | ||
| Capital shares outstanding | 796,047 | |||
| Net asset value per share | $ | 64.41 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 67.62 | ||
| C-Class: | ||||
| Net assets | $ | 27,170,030 | ||
| Capital shares outstanding | 452,094 | |||
| Net asset value per share | $ | 60.10 |
STATEMENT OF
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Income from securities lending, net | $ | 1,235,958 | ||
| Dividends | 770,165 | |||
| Interest | 260 | |||
| Total investment income | 2,006,383 | |||
| Expenses: | ||||
| Management fees | 3,145,637 | |||
| Transfer agent and administrative fees | 925,184 | |||
| Distribution and service fees: | ||||
| Advisor Class | 185,819 | |||
| A-Class | 114,763 | |||
| C-Class | 220,520 | |||
| Portfolio accounting fees | 339,360 | |||
| Custodian fees | 41,490 | |||
| Trustees’ fees* | 25,160 | |||
| Line of credit interest expense | 3,872 | |||
| Miscellaneous | 554,563 | |||
| Total expenses | 5,556,368 | |||
| Net investment loss | (3,549,985 | ) | ||
| Net Realized and Unrealized Gain (loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 22,271,740 | |||
| Net realized gain | 22,271,740 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 84,195,149 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 84,195,149 | |||
| Net realized and unrealized gain | 106,466,889 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 102,916,904 |
* 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. |
| BIOTECHNOLOGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (3,549,985 | ) | $ | (2,084,069 | ) | ||
| Net realized gain on investments | 22,271,740 | 4,729,472 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 84,195,149 | 51,758,234 | ||||||
| Net increase in net assets resulting from operations | 102,916,904 | 54,403,637 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 520,369,253 | 469,000,382 | ||||||
| Advisor Class | 128,608,371 | 78,606,634 | ||||||
| A-Class | 68,697,208 | 54,901,267 | ||||||
| C-Class | 39,913,128 | 40,956,893 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (452,747,513 | ) | (426,833,879 | ) | ||||
| Advisor Class | (123,757,687 | ) | (69,817,795 | ) | ||||
| A-Class | (55,968,103 | ) | (38,802,538 | ) | ||||
| C-Class | (32,688,163 | ) | (37,066,779 | ) | ||||
| Net increase from capital share transactions | 92,426,494 | 70,944,185 | ||||||
| Net increase in net assets | 195,343,398 | 125,347,822 | ||||||
| Net assets: | ||||||||
| Beginning of year | 234,398,888 | 109,051,066 | ||||||
| End of year | $ | 429,742,286 | $ | 234,398,888 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (1,307,774 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 8,519,648 | 11,739,617 | ||||||
| Advisor Class | 2,294,916 | 2,073,757 | ||||||
| A-Class | 1,179,822 | 1,440,618 | ||||||
| C-Class | 749,811 | 1,112,660 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (7,452,878 | ) | (10,642,905 | ) | ||||
| Advisor Class | (2,188,643 | ) | (1,819,571 | ) | ||||
| A-Class | (955,296 | ) | (1,005,019 | ) | ||||
| C-Class | (612,767 | ) | (1,008,536 | ) | ||||
| Net increase in shares | 1,534,613 | 1,890,621 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.97 | $ | 36.90 | $ | 29.16 | $ | 27.34 | $ | 19.37 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.51 | ) | (.40 | ) | (.34 | ) | (.33 | ) | (.21 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 20.01 | 12.47 | 8.08 | 2.15 | 8.18 | |||||||||||||||
| Total from investment operations | 19.50 | 12.07 | 7.74 | 1.82 | 7.97 | |||||||||||||||
| Net asset value, end of period | $ | 68.47 | $ | 48.97 | $ | 36.90 | $ | 29.16 | $ | 27.34 | ||||||||||
| Total Returnb | 39.82 | % | 32.71 | % | 26.54 | % | 6.66 | % | 41.15 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 313,324 | $ | 171,844 | $ | 89,027 | $ | 44,686 | $ | 147,631 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.82 | %) | (0.98 | %) | (1.09 | %) | (1.26 | %) | (0.90 | %) | ||||||||||
| Total expenses | 1.36 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.39 | % | ||||||||||
| Portfolio turnover rate | 119 | % | 197 | % | 333 | % | 337 | % | 316 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.27 | $ | 34.27 | $ | 27.22 | $ | 25.66 | $ | 18.27 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.74 | ) | (.56 | ) | (.48 | ) | (.43 | ) | (.30 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 18.45 | 11.56 | 7.53 | 1.99 | 7.69 | |||||||||||||||
| Total from investment operations | 17.71 | 11.00 | 7.05 | 1.56 | 7.39 | |||||||||||||||
| Net asset value, end of period | $ | 62.98 | $ | 45.27 | $ | 34.27 | $ | 27.22 | $ | 25.66 | ||||||||||
| �� | ||||||||||||||||||||
| Total Returnb | 39.12 | % | 32.10 | % | 25.90 | % | 6.08 | % | 40.45 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 37,978 | $ | 22,486 | $ | 8,313 | $ | 7,410 | $ | 9,144 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.32 | %) | (1.46 | %) | (1.65 | %) | (1.77 | %) | (1.38 | %) | ||||||||||
| Total expenses | 1.86 | % | 1.86 | % | 1.87 | % | 1.89 | % | 1.89 | % | ||||||||||
| Portfolio turnover rate | 119 | % | 197 | % | 333 | % | 337 | % | 316 | % | ||||||||||
| 34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| BIOTECHNOLOGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 46.18 | $ | 34.88 | $ | 27.64 | $ | 25.98 | $ | 18.45 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.62 | ) | (.48 | ) | (.37 | ) | (.37 | ) | (.25 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 18.85 | 11.78 | 7.61 | 2.03 | 7.78 | |||||||||||||||
| Total from investment operations | 18.23 | 11.30 | 7.24 | 1.66 | 7.53 | |||||||||||||||
| Net asset value, end of period | $ | 64.41 | $ | 46.18 | $ | 34.88 | $ | 27.64 | $ | 25.98 | ||||||||||
| Total Returnb | 39.48 | % | 32.40 | % | 26.19 | % | 6.39 | % | 40.81 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 51,270 | $ | 26,391 | $ | 4,741 | $ | 2,211 | $ | 2,869 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.07 | %) | (1.21 | %) | (1.30 | %) | (1.51 | %) | (1.12 | %) | ||||||||||
| Total expenses | 1.61 | % | 1.61 | % | 1.61 | % | 1.64 | % | 1.64 | % | ||||||||||
| Portfolio turnover rate | 119 | % | 197 | % | 333 | % | 337 | % | 316 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.41 | $ | 33.04 | $ | 26.38 | $ | 24.96 | $ | 17.87 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.99 | ) | (.73 | ) | (.58 | ) | (.54 | ) | (.38 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 17.68 | 11.10 | 7.24 | 1.96 | 7.47 | |||||||||||||||
| Total from investment operations | 16.69 | 10.37 | 6.66 | 1.42 | 7.09 | |||||||||||||||
| Net asset value, end of period | $ | 60.10 | $ | 43.41 | $ | 33.04 | $ | 26.38 | $ | 24.96 | ||||||||||
| Total Returnb | 38.45 | % | 31.39 | % | 25.25 | % | 5.65 | % | 39.68 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 27,170 | $ | 13,677 | $ | 6,969 | $ | 3,393 | $ | 4,705 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.82 | %) | (1.96 | %) | (2.06 | %) | (2.27 | %) | (1.78 | %) | ||||||||||
| Total expenses | 2.36 | % | 2.36 | % | 2.36 | % | 2.39 | % | 2.39 | % | ||||||||||
| Portfolio turnover rate | 119 | % | 197 | % | 333 | % | 337 | % | 316 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Consumer Products Fund Investor Class returned 13.24%, compared with 10.65% for the S&P 500 Consumer Staples Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the food products industry was the largest contributor to Fund return, followed by beverages. No industry detracted from return, but tobacco and personal products contributed least.
Fund performance for the period got the biggest boost from Keurig Green Mountain, Inc., Constellation Brands, Inc. — Class A and Tyson Foods, Inc. — Class A. The Fund’s leading detractors during the period were Philip Morris International, Inc., Avon Products, Inc. and ConAgra Foods, 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 Dates:
| Investor Class | July 6, 1998 |
| Advisor Class | August 17, 1998 |
| A-Class | September 1, 2004 |
| C-Class | July 24, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Procter & Gamble Co. | 5.5 | % | ||
| Coca-Cola Co. | 4.8 | % | ||
| Philip Morris International, Inc. | 4.2 | % | ||
| PepsiCo, Inc. | 4.2 | % | ||
| Altria Group, Inc. | 3.2 | % | ||
| Colgate-Palmolive Co. | 2.9 | % | ||
| Mondelez International, Inc. — Class A | 2.8 | % | ||
| Kimberly-Clark Corp. | 2.4 | % | ||
| Kraft Foods Group, Inc. | 2.1 | % | ||
| General Mills, Inc. | 2.1 | % | ||
| Top Ten Total | 34.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 36 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 13.24% | 20.73% | 9.32% | |||||||||
| Advisor Class Shares | 12.66% | 20.13% | 8.78% | |||||||||
| C-Class Shares | 12.11% | 19.54% | 8.22% | |||||||||
| C-Class Shares with CDSC‡ | 11.11% | 19.54% | 8.22% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Consumer Staples Index | 10.65% | 18.59% | 9.41% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 12.95% | 20.44% | 9.69% | |||||||||
| A-Class Shares with sales charge† | 7.59% | 19.27% | 9.13% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Consumer Staples Index | 10.65% | 18.59% | 10.13% | |||||||||
| * | 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 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 37 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| CONSUMER PRODUCTS FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.0% | ||||||||
| PACKAGED FOODS & MEATS - 29.0% | ||||||||
| Mondelez International, Inc. — Class A | 137,370 | $ | 4,746,135 | |||||
| Kraft Foods Group, Inc. | 63,500 | 3,562,351 | ||||||
| General Mills, Inc. | 67,737 | 3,510,131 | ||||||
| Hershey Co. | 28,792 | 3,005,885 | ||||||
| Kellogg Co. | 46,720 | 2,929,811 | ||||||
| Mead Johnson Nutrition Co. — Class A | 30,649 | 2,548,158 | ||||||
| Tyson Foods, Inc. — Class A | 54,895 | 2,415,929 | ||||||
| Keurig Green Mountain, Inc. | 21,974 | 2,320,235 | ||||||
| Campbell Soup Co. | 51,217 | 2,298,619 | ||||||
| Hormel Foods Corp. | 46,086 | 2,270,657 | ||||||
| ConAgra Foods, Inc. | 72,482 | 2,249,116 | ||||||
| McCormick & Company, Inc. | 27,339 | 1,961,300 | ||||||
| JM Smucker Co. | 20,131 | 1,957,538 | ||||||
| Unilever N.V. | 37,841 | 1,556,022 | ||||||
| Pilgrim’s Pride Corp.* | 71,500 | 1,495,780 | ||||||
| BRF S.A. ADR | 73,180 | 1,462,136 | ||||||
| WhiteWave Foods Co. — Class A* | 47,100 | 1,344,234 | ||||||
| Flowers Foods, Inc. | 60,992 | 1,308,278 | ||||||
| Hillshire Brands Co. | 35,040 | 1,305,590 | ||||||
| Hain Celestial Group, Inc.* | 14,180 | 1,297,045 | ||||||
| TreeHouse Foods, Inc.* | 13,701 | 986,335 | ||||||
| Post Holdings, Inc.* | 15,800 | 870,896 | ||||||
| Sanderson Farms, Inc. | 10,700 | 839,843 | ||||||
| Dean Foods Co. | 48,540 | 750,428 | ||||||
| Total Packaged Foods & Meats | 48,992,452 | |||||||
| HOUSEHOLD PRODUCTS - 14.8% | ||||||||
| Procter & Gamble Co. | 115,860 | 9,338,315 | ||||||
| Colgate-Palmolive Co. | 74,649 | 4,842,481 | ||||||
| Kimberly-Clark Corp. | 36,422 | 4,015,526 | ||||||
| Clorox Co. | 23,867 | 2,100,535 | ||||||
| Church & Dwight Company, Inc. | 27,866 | 1,924,705 | ||||||
| Energizer Holdings, Inc. | 15,565 | 1,568,018 | ||||||
| Spectrum Brands Holdings, Inc. | 15,900 | 1,267,230 | ||||||
| Total Household Products | 25,056,810 | |||||||
| SOFT DRINKS - 13.7% | ||||||||
| Coca-Cola Co. | 208,326 | 8,053,884 | ||||||
| PepsiCo, Inc. | 84,037 | 7,017,090 | ||||||
| Coca-Cola Enterprises, Inc. | 44,994 | 2,148,913 | ||||||
| Monster Beverage Corp.* | 30,553 | 2,121,906 | ||||||
| Dr Pepper Snapple Group, Inc. | 37,801 | 2,058,642 | ||||||
| Fomento Economico Mexicano | ||||||||
| SAB de CV ADR | 18,293 | 1,705,639 | ||||||
| Total Soft Drinks | 23,106,074 | |||||||
| TOBACCO - 12.8% | ||||||||
| Philip Morris International, Inc. | 86,697 | 7,097,884 | ||||||
| Altria Group, Inc. | 144,500 | 5,408,635 | ||||||
| Reynolds American, Inc. | 61,933 | 3,308,461 | ||||||
| Lorillard, Inc. | 51,531 | 2,786,796 | ||||||
| British American Tobacco plc ADR | 12,500 | 1,392,875 | ||||||
| Vector Group Ltd.1 | 41,800 | 900,372 | ||||||
| Universal Corp. | 12,700 | 709,803 | ||||||
| Total Tobacco | 21,604,826 | |||||||
| FOOD RETAIL - 7.1% | ||||||||
| Kroger Co. | 66,887 | 2,919,617 | ||||||
| Whole Foods Market, Inc. | 51,314 | 2,602,133 | ||||||
| Safeway, Inc. | 48,165 | 1,779,215 | ||||||
| Sprouts Farmers Market, Inc.* | 39,600 | 1,426,788 | ||||||
| Casey’s General Stores, Inc. | 14,523 | 981,610 | ||||||
| SUPERVALU, Inc.* | 120,682 | 825,465 | ||||||
| Fresh Market, Inc.* | 23,220 | 780,192 | ||||||
| Susser Holdings Corp.* | 11,300 | 705,911 | ||||||
| Total Food Retail | 12,020,931 | |||||||
| DISTILLERS & VINTNERS - 5.4% | ||||||||
| Brown-Forman Corp. — Class B | 29,820 | 2,674,555 | ||||||
| Constellation Brands, Inc. — Class A* | 29,544 | 2,510,354 | ||||||
| Beam, Inc. | 27,570 | 2,296,581 | ||||||
| Diageo plc ADR | 13,020 | 1,622,162 | ||||||
| Total Distillers & Vintners | 9,103,652 | |||||||
| AGRICULTURAL PRODUCTS - 4.7% | ||||||||
| Archer-Daniels-Midland Co. | 76,603 | 3,323,804 | ||||||
| Bunge Ltd. | 26,896 | 2,138,501 | ||||||
| Ingredion, Inc. | 20,774 | 1,414,294 | ||||||
| Darling International, Inc.* | 56,468 | 1,130,489 | ||||||
| Total Agricultural Products | 8,007,088 | |||||||
| PERSONAL PRODUCTS - 4.5% | ||||||||
| Estee Lauder Companies, Inc. — Class A | 46,556 | 3,113,664 | ||||||
| Herbalife Ltd.1 | 29,114 | 1,667,359 | ||||||
| Nu Skin Enterprises, Inc. — Class A | 17,430 | 1,444,076 | ||||||
| Avon Products, Inc. | 98,062 | 1,435,628 | ||||||
| Total Personal Products | 7,660,727 | |||||||
| BREWERS - 4.2% | ||||||||
| Anheuser-Busch InBev N.V. ADR | 20,712 | 2,180,973 | ||||||
| Molson Coors Brewing Co. — Class B | 34,624 | 2,037,969 | ||||||
| AMBEV S.A. ADR | 240,200 | 1,779,882 | ||||||
| Boston Beer Company, Inc. — Class A* | 4,600 | 1,125,758 | ||||||
| Total Brewers | 7,124,582 | |||||||
| FOOD DISTRIBUTORS - 2.8% | ||||||||
| Sysco Corp. | 78,305 | 2,829,159 | ||||||
| United Natural Foods, Inc.* | 16,330 | 1,158,124 | ||||||
| Andersons, Inc. | 14,000 | 829,360 | ||||||
| Total Food Distributors | 4,816,643 | |||||||
| Total Common Stocks | ||||||||
| (Cost $112,808,223) | 167,493,785 | |||||||
| 38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| CONSUMER PRODUCTS FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 771,645 | $ | 771,645 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $771,645) | 771,645 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 1.1% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 902,429 | 902,429 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 805,244 | 805,244 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 151,803 | 151,803 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,859,476) | 1,859,476 | |||||||
| Total Investments - 100.6% | ||||||||
| (Cost $115,439,344) | $ | 170,124,906 | ||||||
| Other Assets & Liabilities, net - (0.6)% | (1,068,643 | ) | ||||||
| Total Net Assets - 100.0% | $ | 169,056,263 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
| CONSUMER PRODUCTS FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value - including $1,858,892 of | ||||
| securities loaned | ||||
| (cost $112,808,223) | $ | 167,493,785 | ||
| Repurchase agreements, at value | ||||
| (cost $2,631,121) | 2,631,121 | |||
| Total investments | ||||
| (cost $115,439,344) | 170,124,906 | |||
| Receivables: | ||||
| Fund shares sold | 907,720 | |||
| Dividends | 381,489 | |||
| Foreign taxes reclaim | 1,910 | |||
| Securities lending income | 863 | |||
| Total assets | 171,416,888 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 1,859,476 | |||
| Fund shares redeemed | 215,420 | |||
| Management fees | 109,949 | |||
| Transfer agent and administrative fees | 32,338 | |||
| Distribution and service fees | 26,013 | |||
| Portfolio accounting fees | 12,935 | |||
| Miscellaneous | 104,494 | |||
| Total liabilities | 2,360,625 | |||
| Net assets | $ | 169,056,263 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 122,879,037 | ||
| Undistributed net investment income | 1,445,447 | |||
| Accumulated net realized loss on investments | (9,953,783 | ) | ||
| Net unrealized appreciation on investments | 54,685,562 | |||
| Net assets | $ | 169,056,263 | ||
| Investor Class: | ||||
| Net assets | $ | 102,231,104 | ||
| Capital shares outstanding | 1,962,880 | |||
| Net asset value per share | $ | 52.08 | ||
| Advisor Class: | ||||
| Net assets | $ | 27,161,899 | ||
| Capital shares outstanding | 573,201 | |||
| Net asset value per share | $ | 47.39 | ||
| A-Class: | ||||
| Net assets | $ | 25,537,804 | ||
| Capital shares outstanding | 523,436 | |||
| Net asset value per share | $ | 48.79 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 51.22 | ||
| C-Class: | ||||
| Net assets | $ | 14,125,456 | ||
| Capital shares outstanding | 318,916 | |||
| Net asset value per share | $ | 44.29 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $30,863) | $ | 4,234,123 | ||
| Income from securities lending, net | 36,943 | |||
| Interest | 132 | |||
| Total investment income | 4,271,198 | |||
| Expenses: | ||||
| Management fees | 1,576,131 | |||
| Transfer agent and administrative fees | 463,566 | |||
| Distribution and service fees: | ||||
| Advisor Class | 112,842 | |||
| A-Class | 55,413 | |||
| C-Class | 132,974 | |||
| Portfolio accounting fees | 185,425 | |||
| Custodian fees | 21,122 | |||
| Trustees’ fees* | 17,775 | |||
| Line of credit interest expense | 365 | |||
| Miscellaneous | 274,983 | |||
| Total expenses | 2,840,596 | |||
| Net investment income | 1,430,602 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 16,541,099 | |||
| Net realized gain | 16,541,099 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 2,525,092 | |||
| Net change in unrealized appreciation (depreciation) | 2,525,092 | |||
| Net realized and unrealized gain | 19,066,191 | |||
| Net increase in net assets resulting from operations | $ | 20,496,793 | ||
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| CONSUMER PRODUCTS FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,430,602 | $ | 2,160,769 | ||||
| Net realized gain on investments | 16,541,099 | 4,310,827 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 2,525,092 | 18,511,373 | ||||||
| Net increase in net assets resulting from operations | 20,496,793 | 24,982,969 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (1,145,002 | ) | (316,169 | ) | ||||
| Advisor Class | (232,317 | ) | (40,225 | ) | ||||
| A-Class | (203,982 | ) | (51,236 | ) | ||||
| C-Class | (138,802 | ) | (33,036 | ) | ||||
| Net realized gains | ||||||||
| Investor Class | (3,773,580 | ) | — | |||||
| Advisor Class | (765,646 | ) | — | |||||
| A-Class | (672,262 | ) | — | |||||
| C-Class | (457,448 | ) | — | |||||
| Total distributions to shareholders | (7,389,039 | ) | (440,666 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 198,150,046 | 400,842,592 | ||||||
| Advisor Class | 38,899,657 | 59,744,738 | ||||||
| A-Class | 21,016,640 | 11,183,601 | ||||||
| C-Class | 27,537,280 | 40,893,529 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 4,792,637 | 309,479 | ||||||
| Advisor Class | 995,811 | 40,024 | ||||||
| A-Class | 697,114 | 37,747 | ||||||
| C-Class | 581,614 | 31,073 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (291,984,030 | ) | (392,919,700 | ) | ||||
| Advisor Class | (24,065,444 | ) | (67,940,005 | ) | ||||
| A-Class | (19,454,898 | ) | (13,768,084 | ) | ||||
| C-Class | (26,613,638 | ) | (40,741,804 | ) | ||||
| Net decrease from capital share transactions | (69,447,211 | ) | (2,286,810 | ) | ||||
| Net increase (decrease) in net assets | (56,339,457 | ) | 22,255,493 | |||||
| Net assets: | ||||||||
| Beginning of year | 225,395,720 | 203,140,227 | ||||||
| End of year | $ | 169,056,263 | $ | 225,395,720 | ||||
| Undistributed net investment income at end of year | $ | 1,445,447 | $ | 1,720,103 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 3,954,307 | 9,597,574 | ||||||
| Advisor Class | 847,688 | 1,572,679 | ||||||
| A-Class | 446,742 | 283,087 | ||||||
| C-Class | 642,147 | 1,143,508 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 94,753 | 7,460 | ||||||
| Advisor Class | 21,601 | 1,050 | ||||||
| A-Class | 14,701 | 966 | ||||||
| C-Class | 13,476 | 864 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (5,892,976 | ) | (9,666,092 | ) | ||||
| Advisor Class | (527,437 | ) | (1,800,187 | ) | ||||
| A-Class | (418,104 | ) | (358,129 | ) | ||||
| C-Class | (619,832 | ) | (1,137,871 | ) | ||||
| Net decrease in shares | (1,422,934 | ) | (355,091 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 47.79 | $ | 40.19 | $ | 36.37 | $ | 37.83 | $ | 26.39 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .46 | .57 | .49 | .69 | .50 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 5.81 | 7.14 | 4.82 | 4.40 | 11.04 | |||||||||||||||
| Total from investment operations | 6.27 | 7.71 | 5.31 | 5.09 | 11.54 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.46 | ) | (.11 | ) | (.57 | ) | (.82 | ) | (.10 | ) | ||||||||||
| Net realized gains | (1.52 | ) | — | (.92 | ) | (5.73 | ) | — | ||||||||||||
| Total distributions | (1.98 | ) | (.11 | ) | (1.49 | ) | (6.55 | ) | (.10 | ) | ||||||||||
| Net asset value, end of period | $ | 52.08 | $ | 47.79 | $ | 40.19 | $ | 36.37 | $ | 37.83 | ||||||||||
| Total Returnb | 13.24 | % | 19.26 | % | 15.06 | % | 14.81 | % | 43.75 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 102,231 | $ | 181,945 | $ | 155,432 | $ | 57,876 | $ | 182,915 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.91 | % | 1.38 | % | 1.29 | % | 1.84 | % | 1.46 | % | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.35 | % | 1.38 | % | 1.37 | % | ||||||||||
| Portfolio turnover rate | 112 | % | 230 | % | 402 | % | 400 | % | 200 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.87 | $ | 37.08 | $ | 33.84 | $ | 35.77 | $ | 25.09 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .24 | .35 | .24 | .62 | .35 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 5.26 | 6.55 | 4.49 | 4.00 | 10.43 | |||||||||||||||
| Total from investment operations | 5.50 | 6.90 | 4.73 | 4.62 | 10.78 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.46 | ) | (.11 | ) | (.57 | ) | (.82 | ) | (.10 | ) | ||||||||||
| Net realized gains | (1.52 | ) | — | (.92 | ) | (5.73 | ) | — | ||||||||||||
| Total distributions | (1.98 | ) | (.11 | ) | (1.49 | ) | (6.55 | ) | (.10 | ) | ||||||||||
| Net asset value, end of period | $ | 47.39 | $ | 43.87 | $ | 37.08 | $ | 33.84 | $ | 35.77 | ||||||||||
| Total Returnb | 12.66 | % | 18.66 | % | 14.49 | % | 14.32 | % | 42.99 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 27,162 | $ | 10,148 | $ | 16,975 | $ | 3,475 | $ | 5,824 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.51 | % | 0.93 | % | 0.68 | % | 1.78 | % | 1.17 | % | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.84 | % | 1.88 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 112 | % | 230 | % | 402 | % | 400 | % | 200 | % | ||||||||||
| 42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| CONSUMER PRODUCTS FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.00 | $ | 37.93 | $ | 34.49 | $ | 36.26 | $ | 25.37 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .33 | .44 | .40 | .41 | .55 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 5.44 | 6.74 | 4.53 | 4.37 | 10.44 | |||||||||||||||
| Total from investment operations | 5.77 | 7.18 | 4.93 | 4.78 | 10.99 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.46 | ) | (.11 | ) | (.57 | ) | (.82 | ) | (.10 | ) | ||||||||||
| Net realized gains | (1.52 | ) | — | (.92 | ) | (5.73 | ) | — | ||||||||||||
| Total distributions | (1.98 | ) | (.11 | ) | (1.49 | ) | (6.55 | ) | (.10 | ) | ||||||||||
| Net asset value, end of period | $ | 48.79 | $ | 45.00 | $ | 37.93 | $ | 34.49 | $ | 36.26 | ||||||||||
| Total Returnb | 12.95 | % | 18.98 | % | 14.80 | % | 14.58 | % | 43.34 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 25,538 | $ | 21,604 | $ | 21,021 | $ | 5,033 | $ | 21,277 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.70 | % | 1.12 | % | 1.11 | % | 1.14 | % | 1.72 | % | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.60 | % | 1.63 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 112 | % | 230 | % | 402 | % | 400 | % | 200 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.32 | $ | 35.11 | $ | 32.28 | $ | 34.57 | $ | 24.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.01 | ) | .13 | .12 | .30 | .24 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.96 | 6.19 | 4.20 | 3.96 | 10.07 | |||||||||||||||
| Total from investment operations | 4.95 | 6.32 | 4.32 | 4.26 | 10.31 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.46 | ) | (.11 | ) | (.57 | ) | (.82 | ) | (.10 | ) | ||||||||||
| Net realized gains | (1.52 | ) | — | (.92 | ) | (5.73 | ) | — | ||||||||||||
| Total distributions | (1.98 | ) | (.11 | ) | (1.49 | ) | (6.55 | ) | (.10 | ) | ||||||||||
| Net asset value, end of period | $ | 44.29 | $ | 41.32 | $ | 35.11 | $ | 32.28 | $ | 34.57 | ||||||||||
| Total Returnb | 12.11 | % | 18.06 | % | 13.91 | % | 13.78 | % | 42.35 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 14,125 | $ | 11,699 | $ | 9,712 | $ | 3,484 | $ | 4,194 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.02 | %) | 0.37 | % | 0.36 | % | 0.90 | % | 0.77 | % | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.35 | % | 2.38 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 112 | % | 230 | % | 402 | % | 400 | % | 200 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 43 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Electronics Fund Investor Class returned 34.07%, compared with 25.59% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned 21.86%.
Almost all the holdings in the Fund are in the semiconductors industry and the semiconductor equipment industry. Both contributed to the Fund’s positive performance for the period.
For the period, Fund performance got the biggest boost from Micron Technology, Inc., First Solar, Inc. and Intel Corp. detracting from Fund performance for the period were Broadcom Corp. — Class A, Mellanox Technologies Ltd. and Semtech 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 Dates: | |
| Investor Class | April 1, 1998 |
| Advisor Class | April 2, 1998 |
| A-Class | September 1, 2004 |
| C-Class | March 26, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Intel Corp. | 8.3 | % | ||
| Texas Instruments, Inc. | 5.2 | % | ||
| Micron Technology, Inc. | 3.6 | % | ||
| Applied Materials, Inc. | 3.6 | % | ||
| Broadcom Corp. — Class A | 3.1 | % | ||
| Analog Devices, Inc. | 3.0 | % | ||
| Xilinx, Inc. | 2.7 | % | ||
| Taiwan Semiconductor Manufacturing Company Ltd. ADR | 2.6 | % | ||
| Linear Technology Corp. | 2.5 | % | ||
| Altera Corp. | 2.4 | % | ||
| Top Ten Total | 37.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 44 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 34.07% | 16.36% | 0.40% | |||||||||
| Advisor Class Shares | 33.34% | 15.76% | -0.10% | |||||||||
| C-Class Shares | 32.65% | 15.19% | -0.56% | |||||||||
| C-Class Shares with CDSC‡ | 31.65% | 15.19% | -0.56% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 7.69% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 33.72% | 16.06% | 3.80% | |||||||||
| A-Class Shares with sales charge† | 27.37% | 14.94% | 3.28% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 9.17% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 45 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 | |||
| ELECTRONICS FUND | ||||
| Shares | Value | |||||||
| COMMON STOCKS† - 100.2% | ||||||||
| SEMICONDUCTORS - 85.0% | ||||||||
| Intel Corp. | 62,662 | $ | 1,617,306 | |||||
| Texas Instruments, Inc. | 21,727 | 1,024,428 | ||||||
| Micron Technology, Inc.* | 30,210 | 714,769 | ||||||
| Broadcom Corp. — Class A | 19,341 | 608,855 | ||||||
| Analog Devices, Inc. | 10,943 | 581,511 | ||||||
| Xilinx, Inc. | 9,793 | 531,466 | ||||||
| Taiwan Semiconductor | ||||||||
| Manufacturing Company Ltd. ADR | 25,930 | 519,119 | ||||||
| Linear Technology Corp. | 9,935 | 483,735 | ||||||
| Altera Corp. | 13,247 | 480,071 | ||||||
| Maxim Integrated Products, Inc. | 13,242 | 438,575 | ||||||
| NVIDIA Corp. | 24,416 | 437,291 | ||||||
| Microchip Technology, Inc. | 9,101 | 434,664 | ||||||
| NXP Semiconductor N.V.* | 7,115 | 418,433 | ||||||
| Avago Technologies Ltd. | 5,958 | 383,755 | ||||||
| Freescale Semiconductor Ltd.* | 15,560 | 379,820 | ||||||
| LSI Corp. | 32,876 | 363,937 | ||||||
| Skyworks Solutions, Inc.* | 9,661 | 362,481 | ||||||
| Cree, Inc.* | 6,403 | 362,154 | ||||||
| First Solar, Inc.* | 4,841 | 337,853 | ||||||
| Marvell Technology Group Ltd. | 21,337 | 336,058 | ||||||
| ARM Holdings plc ADR | 6,063 | 309,031 | ||||||
| Canadian Solar, Inc.*,1 | 9,058 | 290,218 | ||||||
| ON Semiconductor Corp.* | 30,794 | 289,464 | ||||||
| SunPower Corp. — Class A*,1 | 8,259 | 266,435 | ||||||
| Atmel Corp.* | 31,615 | 264,301 | ||||||
| Himax Technologies, Inc. ADR1 | 19,964 | 229,985 | ||||||
| Trina Solar Ltd. ADR*,1 | 17,015 | 228,852 | ||||||
| JinkoSolar Holding Company Ltd. ADR*,1 | 7,949 | 222,175 | ||||||
| Mellanox Technologies Ltd.* | 5,516 | 215,841 | ||||||
| Microsemi Corp.* | 8,603 | 215,333 | ||||||
| Synaptics, Inc.* | 3,576 | 214,632 | ||||||
| RF Micro Devices, Inc.* | 27,049 | 213,146 | ||||||
| Silicon Laboratories, Inc.* | 4,073 | 212,814 | ||||||
| TriQuint Semiconductor, Inc.* | 15,787 | 211,388 | ||||||
| Cavium, Inc.* | 4,680 | 204,656 | ||||||
| Yingli Green Energy Holding | ||||||||
| Company Ltd. ADR*,1 | 46,562 | 202,545 | ||||||
| International Rectifier Corp.* | 7,186 | 196,896 | ||||||
| Power Integrations, Inc. | 2,973 | 195,564 | ||||||
| JA Solar Holdings Company Ltd. ADR* | 19,094 | 194,186 | ||||||
| Integrated Device Technology, Inc.* | 15,393 | 188,256 | ||||||
| Fairchild Semiconductor International, | ||||||||
| Inc. — Class A* | 13,479 | 185,875 | ||||||
| Semtech Corp.* | 7,241 | 183,487 | ||||||
| Intersil Corp. — Class A | 13,975 | 180,557 | ||||||
| Cypress Semiconductor Corp. | 17,021 | 174,806 | ||||||
| Cirrus Logic, Inc.* | 8,097 | 160,887 | ||||||
| OmniVision Technologies, Inc.* | 8,327 | 147,388 | ||||||
| Spansion, Inc. — Class A* | 8,180 | 142,496 | ||||||
| Ambarella, Inc.* | 4,430 | 118,325 | ||||||
| Total Semiconductors | 16,675,820 | |||||||
| SEMICONDUCTOR EQUIPMENT - 15.2% | ||||||||
| Applied Materials, Inc. | 34,655 | 707,655 | ||||||
| KLA-Tencor Corp. | 6,898 | 476,928 | ||||||
| Lam Research Corp.* | 7,477 | 411,235 | ||||||
| ASML Holding N.V. | 3,230 | 301,553 | ||||||
| SunEdison, Inc.* | 14,648 | 275,968 | ||||||
| Teradyne, Inc.* | 13,795 | 274,383 | ||||||
| GT Advanced Technologies, Inc.*,1 | 11,649 | 198,615 | ||||||
| Veeco Instruments, Inc.* | 4,538 | 190,278 | ||||||
| Advanced Energy Industries, Inc.* | 5,670 | 138,915 | ||||||
| Total Semiconductor Equipment | 2,975,530 | |||||||
| Total Common Stocks | ||||||||
| (Cost $16,689,658) | 19,651,350 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.0% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 418 | 418 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $418) | 418 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 5.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 494,777 | 494,777 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 441,494 | 441,494 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 83,229 | 83,229 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,019,500) | 1,019,500 | |||||||
| Total Investments - 105.4% | ||||||||
| (Cost $17,709,576) | $ | 20,671,268 | ||||||
| Other Assets & Liabilities, net - (5.4)% | (1,066,188 | ) | ||||||
| Total Net Assets - 100.0% | $ | 19,605,080 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| 46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| ELECTRONICS FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value - including $987,249 of | ||||
| securities loaned | ||||
| (cost $16,689,658) | $ | 19,651,350 | ||
| Repurchase agreements, at value | ||||
| (cost $1,019,918) | 1,019,918 | |||
| Total investments | ||||
| (cost $17,709,576) | 20,671,268 | |||
| Receivables: | ||||
| Securities sold | 838,462 | |||
| Fund shares sold | 320,522 | |||
| Dividends | 3,902 | |||
| Securities lending income | 1,269 | |||
| Total assets | 21,835,423 | |||
| Liabilities: | ||||
| Overdraft due to custodian bank | 23,000 | |||
| Payable for: | ||||
| Fund shares redeemed | 1,164,092 | |||
| Upon return of securities loaned | 1,019,500 | |||
| Management fees | 10,831 | |||
| Transfer agent and administrative fees | 3,186 | |||
| Distribution and service fees | 2,686 | |||
| Portfolio accounting fees | 1,274 | |||
| Miscellaneous | 5,774 | |||
| Total liabilities | 2,230,343 | |||
| Net assets | $ | 19,605,080 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 35,185,585 | ||
| Accumulated net investment loss | (12,414 | ) | ||
| Accumulated net realized loss on investments | (18,529,783 | ) | ||
| Net unrealized appreciation on investments | 2,961,692 | |||
| Net assets | $ | 19,605,080 | ||
| Investor Class: | ||||
| Net assets | $ | 9,655,395 | ||
| Capital shares outstanding | 138,296 | |||
| Net asset value per share | $ | 69.82 | ||
| Advisor Class: | ||||
| Net assets | $ | 3,577,324 | ||
| Capital shares outstanding | 55,549 | |||
| Net asset value per share | $ | 64.40 | ||
| A-Class: | ||||
| Net assets | $ | 5,329,420 | ||
| Capital shares outstanding | 80,907 | |||
| Net asset value per share | $ | 65.87 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 69.15 | ||
| C-Class: | ||||
| Net assets | $ | 1,042,941 | ||
| Capital shares outstanding | 16,985 | |||
| Net asset value per share | $ | 61.40 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $391) | $ | 109,334 | ||
| Income from securities lending, net | 3,861 | |||
| Interest | 8 | |||
| Total investment income | 113,203 | |||
| Expenses: | ||||
| Management fees | 74,819 | |||
| Transfer agent and administrative fees | 22,005 | |||
| Distribution and service fees: | ||||
| Advisor Class | 6,646 | |||
| A-Class | 4,653 | |||
| C-Class | 5,007 | |||
| Portfolio accounting fees | 8,802 | |||
| Custodian fees | 1,021 | |||
| Trustees’ fees* | 677 | |||
| Line of credit interest expense | 107 | |||
| Miscellaneous | 13,134 | |||
| Total expenses | 136,871 | |||
| Net investment loss | (23,668 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 690,809 | |||
| Net realized gain | 690,809 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 1,007,719 | |||
| Net change in unrealized appreciation (depreciation) | 1,007,719 | |||
| Net realized and unrealized gain | 1,698,528 | |||
| Net increase in net assets resulting from operations | $ | 1,674,860 | ||
* 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 | 47 |
| ELECTRONICS FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | (23,668 | ) | $ | 17,513 | |||
| Net realized gain on investments | 690,809 | 422,790 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 1,007,719 | (749,275 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 1,674,860 | (308,972 | ) | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (1,558 | ) | — | |||||
| Advisor Class | (974 | ) | — | |||||
| A-Class | (118 | ) | — | |||||
| C-Class | (329 | ) | — | |||||
| Total distributions to shareholders | (2,979 | ) | — | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 119,447,698 | 69,160,019 | ||||||
| Advisor Class | 29,407,626 | 21,228,472 | ||||||
| A-Class | 15,892,309 | 3,492,941 | ||||||
| C-Class | 20,348,276 | 27,559,976 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 1,521 | — | ||||||
| Advisor Class | 967 | — | ||||||
| A-Class | 118 | — | ||||||
| C-Class | 328 | — | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (113,730,945 | ) | (71,451,834 | ) | ||||
| Advisor Class | (27,385,057 | ) | (21,186,488 | ) | ||||
| A-Class | (11,112,191 | ) | (3,819,431 | ) | ||||
| C-Class | (20,133,392 | ) | (27,124,726 | ) | ||||
| Net increase (decrease) from capital share transactions | 12,737,258 | (2,141,071 | ) | |||||
| Net increase (decrease) in net assets | 14,409,139 | (2,450,043 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 5,195,941 | 7,645,984 | ||||||
| End of year | $ | 19,605,080 | $ | 5,195,941 | ||||
| Accumulated net investment loss/Undistributed net investment income at end of year | $ | (12,414 | ) | $ | 2,979 | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 1,999,524 | 1,407,308 | ||||||
| Advisor Class | 523,694 | 471,632 | ||||||
| A-Class | 274,282 | 75,195 | ||||||
| C-Class | 391,550 | 633,511 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 25 | — | ||||||
| Advisor Class | 17 | — | ||||||
| A-Class | 2 | — | ||||||
| C-Class | 6 | — | ||||||
| Shares redeemed | ||||||||
| Investor Class | (1,917,706 | ) | (1,449,849 | ) | ||||
| Advisor Class | (494,817 | ) | (469,703 | ) | ||||
| A-Class | (199,435 | ) | (81,755 | ) | ||||
| C-Class | (388,980 | ) | (624,407 | ) | ||||
| Net increase (decrease) in shares | 188,162 | (38,068 | ) | |||||
| 48 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 52.11 | $ | 55.09 | $ | 60.57 | $ | 52.33 | $ | 32.76 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.04 | ) | .22 | (.12 | ) | (.13 | ) | (.02 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 17.79 | (3.20 | ) | (5.36 | ) | 8.37 | 19.59 | |||||||||||||
| Total from investment operations | 17.75 | (2.98 | ) | (5.48 | ) | 8.24 | 19.57 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (.04 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 69.82 | $ | 52.11 | $ | 55.09 | $ | 60.57 | $ | 52.33 | ||||||||||
| Total Returnb | 34.07 | % | (5.41 | %) | (9.05 | %) | 15.75 | % | 59.74 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 9,655 | $ | 2,942 | $ | 5,453 | $ | 6,976 | $ | 15,988 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.07 | %) | 0.45 | % | (0.22 | %) | (0.23 | %) | (0.06 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.35 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 1,436 | % | 1,640 | % | 1,329 | % | 1,171 | % | 592 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.33 | $ | 51.40 | $ | 56.77 | $ | 49.26 | $ | 31.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.17 | ) | (.12 | ) | (.34 | ) | (.41 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 16.28 | (2.95 | ) | (5.03 | ) | 7.92 | 18.41 | |||||||||||||
| Total from investment operations | 16.11 | (3.07 | ) | (5.37 | ) | 7.51 | 18.25 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (.04 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 64.40 | $ | 48.33 | $ | 51.40 | $ | 56.77 | $ | 49.26 | ||||||||||
| Total Returnb | 33.34 | % | (5.97 | %) | (9.46 | %) | 15.25 | % | 58.85 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,577 | $ | 1,288 | $ | 1,271 | $ | 3,081 | $ | 1,634 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.29 | %) | (0.26 | %) | (0.67 | %) | (0.79 | %) | (0.39 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.86 | % | 1.89 | % | 1.87 | % | ||||||||||
| Portfolio turnover rate | 1,436 | % | 1,640 | % | 1,329 | % | 1,171 | % | 592 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
| ELECTRONICS FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.29 | $ | 52.23 | $ | 57.59 | $ | 49.88 | $ | 31.31 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.33 | ) | .24 | (.19 | ) | (.21 | ) | (.14 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 16.95 | (3.18 | ) | (5.17 | ) | 7.92 | 18.71 | |||||||||||||
| Total from investment operations | 16.62 | (2.94 | ) | (5.36 | ) | 7.71 | 18.57 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (.04 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 65.87 | $ | 49.29 | $ | 52.23 | $ | 57.59 | $ | 49.88 | ||||||||||
| Total Returnb | 33.72 | % | (5.63 | %) | (9.31 | %) | 15.46 | % | 59.31 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,329 | $ | 299 | $ | 659 | $ | 1,619 | $ | 1,329 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.59 | %) | 0.51 | % | (0.36 | %) | (0.43 | %) | (0.31 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.62 | % | 1.64 | % | 1.62 | % | ||||||||||
| Portfolio turnover rate | 1,436 | % | 1,640 | % | 1,329 | % | 1,171 | % | 592 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 46.32 | $ | 49.50 | $ | 55.03 | $ | 47.90 | $ | 30.28 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.54 | ) | (.18 | ) | (.70 | ) | (.65 | ) | (.51 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 15.66 | (3.00 | ) | (4.83 | ) | 7.78 | 18.13 | |||||||||||||
| Total from investment operations | 15.12 | (3.18 | ) | (5.53 | ) | 7.13 | 17.62 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (.04 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 61.40 | $ | 46.32 | $ | 49.50 | $ | 55.03 | $ | 47.90 | ||||||||||
| Total Returnb | 32.65 | % | (6.44 | %) | (10.01 | %) | 14.86 | % | 58.19 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,043 | $ | 667 | $ | 263 | $ | 1,246 | $ | 3,342 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.03 | %) | (0.41 | %) | (1.42 | %) | (1.31 | %) | (1.21 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 1,436 | % | 1,640 | % | 1,329 | % | 1,171 | % | 592 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 51 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Energy Fund Investor Class returned 13.71%, compared with 14.41% for the S&P 500 Energy Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the oil, gas & consumable fuels segment that composes about three-fourths of the Fund was the largest contributor to return, followed by the energy equipment & services industry. The lightly weighted industrial conglomerates industry was the only detractor from return.
Schlumberger Ltd., EOG Resources, Inc. and Haliburton Co. were among the most significant positive contributors to Fund performance for the period. Holdings detracting most from performance were Cobalt International Energy, Inc., Petroleo Brasileiro S.A. ADR and Diamond Offshore Drilling, 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 Dates: | |
| Investor Class | April 21, 1998 |
| Advisor Class | May 5, 1998 |
| A-Class | September 1, 2004 |
| C-Class | April 19, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Exxon Mobil Corp. | 5.6 | % | ||
| Chevron Corp. | 4.1 | % | ||
| Schlumberger Ltd. | 3.1 | % | ||
| ConocoPhillips | 2.5 | % | ||
| Occidental Petroleum Corp. | 2.4 | % | ||
| EOG Resources, Inc. | 2.0 | % | ||
| Halliburton Co. | 1.9 | % | ||
| Phillips 66 | 1.8 | % | ||
| Anadarko Petroleum Corp. | 1.7 | % | ||
| National Oilwell Varco, Inc. | 1.6 | % | ||
| Top Ten Total | 26.7 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 52 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 13.71% | 16.74% | 11.10% | |||||||||
| Advisor Class Shares | 13.08% | 16.15% | 10.52% | |||||||||
| C-Class Shares | 12.52% | 15.56% | 9.98% | |||||||||
| C-Class Shares with CDSC‡ | 11.52% | 15.56% | 9.98% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Energy Index | 14.41% | 16.45% | 12.96% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 13.37% | 16.42% | 10.23% | |||||||||
| A-Class Shares with sales charge† | 8.00% | 15.29% | 9.66% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Energy Index | 14.41% | 16.45% | 12.27% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 53 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| ENERGY FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.6% | ||||||||
| OIL & GAS EXPLORATION & PRODUCTION - 39.1% | ||||||||
| ConocoPhillips | 19,729 | $ | 1,387,934 | |||||
| EOG Resources, Inc. | 5,513 | 1,081,484 | ||||||
| Anadarko Petroleum Corp. | 11,301 | 957,872 | ||||||
| Apache Corp. | 10,280 | 852,725 | ||||||
| Devon Energy Corp. | 11,801 | 789,841 | ||||||
| Noble Energy, Inc. | 10,806 | 767,658 | ||||||
| Pioneer Natural Resources Co. | 4,075 | 762,596 | ||||||
| Marathon Oil Corp. | 20,957 | 744,393 | ||||||
| Continental Resources, Inc.* | 5,731 | 712,191 | ||||||
| Chesapeake Energy Corp. | 24,285 | 622,182 | ||||||
| Southwestern Energy Co.* | 12,765 | 587,318 | ||||||
| Antero Resources Corp.* | 9,120 | 570,912 | ||||||
| EQT Corp. | 5,840 | 566,305 | ||||||
| Concho Resources, Inc.* | 4,611 | 564,848 | ||||||
| Cabot Oil & Gas Corp. | 16,670 | 564,780 | ||||||
| Range Resources Corp. | 6,596 | 547,270 | ||||||
| Murphy Oil Corp. | 8,038 | 505,269 | ||||||
| Cimarex Energy Co. | 3,995 | 475,844 | ||||||
| Whiting Petroleum Corp.* | 6,086 | 422,308 | ||||||
| Encana Corp. | 19,544 | 417,851 | ||||||
| Canadian Natural Resources Ltd. | 10,762 | 412,938 | ||||||
| Cobalt International Energy, Inc.* | 22,310 | 408,719 | ||||||
| Gulfport Energy Corp.* | 5,410 | 385,084 | ||||||
| Energen Corp. | 4,590 | 370,918 | ||||||
| Denbury Resources, Inc. | 21,823 | 357,897 | ||||||
| Energy XXI Bermuda Ltd. | 14,370 | 338,701 | ||||||
| QEP Resources, Inc. | 11,462 | 337,441 | ||||||
| Talisman Energy, Inc. | 33,088 | 330,218 | ||||||
| SM Energy Co. | 4,468 | 318,524 | ||||||
| Newfield Exploration Co.* | 10,129 | 317,645 | ||||||
| Oasis Petroleum, Inc.* | 7,450 | 310,889 | ||||||
| Ultra Petroleum Corp.*,1 | 11,462 | 308,213 | ||||||
| CNOOC Ltd. ADR | 2,000 | 303,620 | ||||||
| Laredo Petroleum, Inc.* | 11,180 | 289,115 | ||||||
| Diamondback Energy, Inc.* | 4,080 | 274,625 | ||||||
| WPX Energy, Inc.* | 15,027 | 270,937 | ||||||
| LinnCo LLC | 10,000 | 270,500 | ||||||
| Kodiak Oil & Gas Corp.* | 22,209 | 269,617 | ||||||
| SandRidge Energy, Inc.*,1 | 40,821 | 250,641 | ||||||
| Rosetta Resources, Inc.* | 5,230 | 243,613 | ||||||
| Carrizo Oil & Gas, Inc.* | 4,410 | 235,759 | ||||||
| PDC Energy, Inc.* | 3,380 | 210,439 | ||||||
| Stone Energy Corp.* | 4,980 | 209,011 | ||||||
| Bonanza Creek Energy, Inc.* | 4,200 | 186,480 | ||||||
| Bill Barrett Corp.* | 6,200 | 158,720 | ||||||
| Penn Virginia Corp.* | 8,400 | 146,916 | ||||||
| Goodrich Petroleum Corp.*,1 | 8,290 | 131,148 | ||||||
| Total Oil & Gas Exploration & Production | 21,549,909 | |||||||
| OIL & GAS EQUIPMENT & SERVICES - 18.1% | ||||||||
| Schlumberger Ltd. | 17,488 | 1,705,080 | ||||||
| Halliburton Co. | 17,850 | 1,051,187 | ||||||
| National Oilwell Varco, Inc. | 11,294 | 879,464 | ||||||
| Baker Hughes, Inc. | 12,605 | 819,577 | ||||||
| Cameron International Corp.* | 8,611 | 531,901 | ||||||
| FMC Technologies, Inc.* | 9,816 | 513,279 | ||||||
| Weatherford International Ltd.* | 27,248 | 473,025 | ||||||
| Oceaneering International, Inc. | 5,724 | 411,327 | ||||||
| Core Laboratories N.V. | 1,797 | 356,597 | ||||||
| Superior Energy Services, Inc. | 11,078 | 340,759 | ||||||
| Tenaris S.A. ADR | 7,679 | 339,796 | ||||||
| Oil States International, Inc.* | 3,387 | 333,958 | ||||||
| Dresser-Rand Group, Inc.* | 5,440 | 317,750 | ||||||
| Dril-Quip, Inc.* | 2,830 | 317,243 | ||||||
| CARBO Ceramics, Inc. | 1,940 | 267,701 | ||||||
| Exterran Holdings, Inc. | 5,900 | 258,892 | ||||||
| Bristow Group, Inc. | 3,300 | 249,216 | ||||||
| Helix Energy Solutions Group, Inc.* | 10,280 | 236,234 | ||||||
| Tidewater, Inc. | 4,800 | 233,376 | ||||||
| McDermott International, Inc.* | 25,053 | 195,914 | ||||||
| Hornbeck Off shore Services, Inc.* | 4,250 | 177,693 | ||||||
| Total Oil & Gas Equipment & Services | 10,009,969 | |||||||
| INTEGRATED OIL & GAS - 18.0% | ||||||||
| Exxon Mobil Corp. | 31,471 | 3,074,087 | ||||||
| Chevron Corp. | 18,983 | 2,257,269 | ||||||
| Occidental Petroleum Corp. | 13,936 | 1,327,961 | ||||||
| Hess Corp. | 9,292 | 770,121 | ||||||
| Petroleo Brasileiro S.A. ADR | 48,512 | 637,933 | ||||||
| BP plc ADR | 12,226 | 588,071 | ||||||
| Royal Dutch Shell plc ADR | 6,867 | 501,703 | ||||||
| Suncor Energy, Inc. | 12,571 | 439,482 | ||||||
| YPF S.A. ADR | 11,200 | 348,992 | ||||||
| Total Integrated Oil & Gas | 9,945,619 | |||||||
| OIL & GAS STORAGE & TRANSPORTATION - 8.1% | ||||||||
| Kinder Morgan, Inc. | 26,697 | 867,385 | ||||||
| Williams Companies, Inc. | 19,212 | 779,623 | ||||||
| Spectra Energy Corp. | 20,070 | 741,386 | ||||||
| Cheniere Energy, Inc.* | 9,531 | 527,541 | ||||||
| ONEOK, Inc. | 8,690 | 514,883 | ||||||
| Kinder Morgan Management LLC* | 6,202 | 444,519 | ||||||
| Enbridge, Inc. | 7,200 | 327,672 | ||||||
| Targa Resources Corp. | 3,000 | 297,780 | ||||||
| Total Oil & Gas Storage & Transportation | 4,500,789 | |||||||
| OIL & GAS DRILLING - 7.9% | ||||||||
| Transocean Ltd.1 | 16,382 | 677,232 | ||||||
| Ensco plc — Class A | 10,082 | 532,128 | ||||||
| Noble Corporation plc | 15,457 | 506,062 | ||||||
| Helmerich & Payne, Inc. | 4,616 | 496,497 | ||||||
| Seadrill Ltd.1 | 12,614 | 443,508 | ||||||
| Nabors Industries Ltd. | 17,663 | 435,393 | ||||||
| Diamond Off shore Drilling, Inc.1 | 7,960 | 388,130 | ||||||
| Patterson-UTI Energy, Inc. | 9,943 | 314,994 | ||||||
| Rowan Companies plc — Class A* | 8,844 | 297,866 | ||||||
| Atwood Oceanics, Inc.* | 5,170 | 260,516 | ||||||
| Total Oil & Gas Drilling | 4,352,326 | |||||||
| 54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| ENERGY FUND |
| Shares | Value | |||||||
| OIL & GAS REFINING & MARKETING - 6.4% | ||||||||
| Phillips 66 | 12,832 | $ | 988,834 | |||||
| Valero Energy Corp. | 14,418 | 765,596 | ||||||
| Marathon Petroleum Corp. | 8,436 | 734,269 | ||||||
| HollyFrontier Corp. | 9,323 | 443,588 | ||||||
| Tesoro Corp. | 7,552 | 382,056 | ||||||
| Western Refining, Inc. | 6,510 | 251,286 | ||||||
| Total Oil & Gas Refining & Marketing | 3,565,629 | |||||||
| COAL & CONSUMABLE FUELS - 2.0% | ||||||||
| CONSOL Energy, Inc. | 10,966 | 438,092 | ||||||
| Cameco Corp. | 14,430 | 330,447 | ||||||
| Peabody Energy Corp. | 19,724 | 322,290 | ||||||
| Total Coal & Consumable Fuels | 1,090,829 | |||||||
| Total Common Stocks | ||||||||
| (Cost $28,816,546) | 55,015,070 | |||||||
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 1.0% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 568,918 | $ | 568,918 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $568,918) | 568,918 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 2.7% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 732,751 | 732,751 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 653,839 | 653,839 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 123,260 | 123,260 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,509,850) | 1,509,850 | |||||||
| Total Investments - 103.3% | ||||||||
| (Cost $30,895,314) | $ | 57,093,838 | ||||||
| Other Assets & Liabilities, net - (3.3)% | (1,803,914 | ) | ||||||
| Total Net Assets - 100.0% | $ | 55,289,924 | ||||||
| * | 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 portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
| ENERGY FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value - including $1,479,229 of securities loaned | ||||
| (cost $28,816,546) | $ | 55,015,070 | ||
| Repurchase agreements, at value | ||||
| (cost $2,078,768) | 2,078,768 | |||
| Total investments | ||||
| (cost $30,895,314) | 57,093,838 | |||
| Receivables: | ||||
| Fund shares sold | 1,062,980 | |||
| Dividends | 24,813 | |||
| Securities lending income | 1,350 | |||
| Total assets | 58,182,981 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 1,509,850 | |||
| Securities purchased | 669,891 | |||
| Fund shares redeemed | 618,937 | |||
| Management fees | 35,439 | |||
| Transfer agent and administrative fees | 10,423 | |||
| Distribution and service fees | 9,670 | |||
| Portfolio accounting fees | 4,169 | |||
| Miscellaneous | 34,678 | |||
| Total liabilities | 2,893,057 | |||
| Net assets | $ | 55,289,924 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 38,168,816 | ||
| Undistributed net investment income | 200,733 | |||
| Accumulated net realized loss on investments | (9,278,149 | ) | ||
| Net unrealized appreciation on investments | 26,198,524 | |||
| Net assets | $ | 55,289,924 | ||
| Investor Class: | ||||
| Net assets | $ | 35,545,785 | ||
| Capital shares outstanding | 1,196,977 | |||
| Net asset value per share | $ | 29.70 | ||
| Advisor Class: | ||||
| Net assets | $ | 4,763,820 | ||
| Capital shares outstanding | 173,849 | |||
| Net asset value per share | $ | 27.40 | ||
| A-Class: | ||||
| Net assets | $ | 6,623,797 | ||
| Capital shares outstanding | 235,940 | |||
| Net asset value per share | $ | 28.07 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 29.47 | ||
| C-Class: | ||||
| Net assets | $ | 8,356,522 | ||
| Capital shares outstanding | 323,867 | |||
| Net asset value per share | $ | 25.80 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $13,657) | $ | 1,154,266 | ||
| Income from securities lending, net | 25,630 | |||
| Interest | 34 | |||
| Total investment income | 1,179,930 | |||
| Expenses: | ||||
| Management fees | 529,453 | |||
| Transfer agent and administrative fees | 155,721 | |||
| Distribution and service fees: | ||||
| Advisor Class | 25,583 | |||
| A-Class | 13,702 | |||
| C-Class | 87,568 | |||
| Portfolio accounting fees | 62,288 | |||
| Custodian fees | 7,109 | |||
| Trustees’ fees* | 6,261 | |||
| Line of credit interest expense | 131 | |||
| Miscellaneous | 91,381 | |||
| Total expenses | 979,197 | |||
| Net investment income | 200,733 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 14,055,229 | |||
| Net realized gain | 14,055,229 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | (5,739,014 | ) | ||
| Net change in unrealized appreciation (depreciation) | (5,739,014 | ) | ||
| Net realized and unrealized gain | 8,316,215 | |||
| Net increase in net assets resulting from operations | $ | 8,516,948 | ||
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| ENERGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 200,733 | $ | 188,009 | ||||
| Net realized gain (loss) on investments | 14,055,229 | (30,051 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | (5,739,014 | ) | 3,094,351 | |||||
| Net increase in net assets resulting from operations | 8,516,948 | 3,252,309 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | — | (105,253 | ) | |||||
| Advisor Class | — | (19,330 | ) | |||||
| A-Class | — | (14,395 | ) | |||||
| C-Class | — | (31,997 | ) | |||||
| Return of capital | ||||||||
| Investor Class | — | (605,329 | ) | |||||
| Advisor Class | — | (111,169 | ) | |||||
| A-Class | — | (82,789 | ) | |||||
| C-Class | — | (184,019 | ) | |||||
| Total distributions to shareholders | — | (1,154,281 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 143,421,747 | 154,529,221 | ||||||
| Advisor Class | 9,124,810 | 21,390,571 | ||||||
| A-Class | 9,853,780 | 4,920,012 | ||||||
| C-Class | 25,870,251 | 36,226,645 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | — | 694,988 | ||||||
| Advisor Class | — | 128,424 | ||||||
| A-Class | — | 82,881 | ||||||
| C-Class | — | 209,883 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (163,234,190 | ) | (148,970,159 | ) | ||||
| Advisor Class | (10,093,114 | ) | (27,017,234 | ) | ||||
| A-Class | (9,665,717 | ) | (5,254,596 | ) | ||||
| C-Class | (28,215,805 | ) | (40,129,113 | ) | ||||
| Net decrease from capital share transactions | (22,938,238 | ) | (3,188,477 | ) | ||||
| Net decrease in net assets | (14,421,290 | ) | (1,090,449 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 69,711,214 | 70,801,663 | ||||||
| End of year | $ | 55,289,924 | $ | 69,711,214 | ||||
| Undistributed net investment income at end of year | $ | 200,733 | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 5,152,398 | 6,309,043 | ||||||
| Advisor Class | 356,398 | 991,630 | ||||||
| A-Class | 388,496 | 210,950 | ||||||
| C-Class | 1,083,634 | 1,745,084 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | — | 30,270 | ||||||
| Advisor Class | — | 6,021 | ||||||
| A-Class | — | 3,805 | ||||||
| C-Class | — | 10,380 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (5,837,470 | ) | (6,123,443 | ) | ||||
| Advisor Class | (400,131 | ) | (1,262,927 | ) | ||||
| A-Class | (378,139 | ) | (229,600 | ) | ||||
| C-Class | (1,182,490 | ) | (1,934,674 | ) | ||||
| Net decrease in shares | (817,304 | ) | (243,461 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 26.12 | $ | 24.58 | $ | 28.70 | $ | 20.91 | $ | 14.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .15 | .12 | .07 | — | b | .10 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.43 | 1.89 | (4.19 | ) | 7.82 | 6.82 | ||||||||||||||
| Total from investment operations | 3.58 | 2.01 | (4.12 | ) | 7.82 | 6.92 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.07 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Return of capital | — | (.40 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.47 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Net asset value, end of period | $ | 29.70 | $ | 26.12 | $ | 24.58 | $ | 28.70 | $ | 20.91 | ||||||||||
| Total Returnc | 13.71 | % | 8.50 | % | (14.39 | %) | 37.43 | % | 49.37 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 35,546 | $ | 49,160 | $ | 40,947 | $ | 93,648 | $ | 35,228 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.55 | % | 0.52 | % | 0.27 | % | 0.00 | % | 0.51 | % | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 231 | % | 248 | % | 288 | % | 273 | % | 228 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 24.23 | $ | 22.95 | $ | 26.93 | $ | 19.72 | $ | 13.28 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.02 | ) | .01 | (.08 | ) | (.11 | ) | (— | )b | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.19 | 1.74 | (3.90 | ) | 7.35 | 6.46 | ||||||||||||||
| Total from investment operations | 3.17 | 1.75 | (3.98 | ) | 7.24 | 6.46 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.07 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Return of capital | — | (.40 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.47 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Net asset value, end of period | $ | 27.40 | $ | 24.23 | $ | 22.95 | $ | 26.93 | $ | 19.72 | ||||||||||
| Total Returnc | 13.08 | % | 7.92 | % | (14.78 | %) | 36.75 | % | 48.62 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,764 | $ | 5,272 | $ | 11,080 | $ | 16,015 | $ | 6,489 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.09 | %) | 0.06 | % | (0.33 | %) | (0.53 | %) | (0.02 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.86 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 231 | % | 248 | % | 288 | % | 273 | % | 228 | % | ||||||||||
| 58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| ENERGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 24.76 | $ | 23.38 | $ | 27.40 | $ | 20.01 | $ | 13.44 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .08 | .08 | (.01 | ) | (.08 | ) | .06 | |||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.23 | 1.77 | (4.01 | ) | 7.50 | 6.53 | ||||||||||||||
| Total from investment operations | 3.31 | 1.85 | (4.02 | ) | 7.42 | 6.59 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.07 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Return of capital | — | (.40 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.47 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Net asset value, end of period | $ | 28.07 | $ | 24.76 | $ | 23.38 | $ | 27.40 | $ | 20.01 | ||||||||||
| Total Returnc | 13.37 | % | 8.20 | % | (14.67 | %) | 37.11 | % | 49.01 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 6,624 | $ | 5,586 | $ | 5,622 | $ | 14,752 | $ | 3,903 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.30 | % | 0.38 | % | (0.05 | %) | (0.38 | %) | 0.35 | % | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.61 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 231 | % | 248 | % | 288 | % | 273 | % | 228 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 22.93 | $ | 21.85 | $ | 25.78 | $ | 18.97 | $ | 12.84 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.12 | ) | (.09 | ) | (.19 | ) | (.20 | ) | (.08 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.99 | 1.64 | (3.74 | ) | 7.04 | 6.23 | ||||||||||||||
| Total from investment operations | 2.87 | 1.55 | (3.93 | ) | 6.84 | 6.15 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.07 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Return of capital | — | (.40 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.47 | ) | — | (.03 | ) | (.02 | ) | ||||||||||||
| Net asset value, end of period | $ | 25.80 | $ | 22.93 | $ | 21.85 | $ | 25.78 | $ | 18.97 | ||||||||||
| Total Returnc | 12.52 | % | 7.40 | % | (15.24 | %) | 36.09 | % | 47.87 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 8,357 | $ | 9,693 | $ | 13,153 | $ | 19,993 | $ | 13,972 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.52 | %) | (0.45 | %) | (0.84 | %) | (0.99 | %) | (0.48 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 231 | % | 248 | % | 288 | % | 273 | % | 228 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Net investment income is less than $0.01 per share.
c Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Energy Services Fund Investor Class returned 14.70%, compared with the S&P 500 Energy Index, which returned 14.41%. The broader S&P 500 Index returned 21.86%.
The oil & gas equipment & services holdings in this Fund accounted for most of the Fund’s positive return for the period, followed by the oil & gas drilling industry. The lightly weighted oil & gas storage & transportation industry was the only detractor from return.
Schlumberger Ltd., Halliburton Co. and Helmerich & Payne, Inc. were the Fund’s best-performing holdings for the period. The Fund’s worst-performing holdings included Diamond Offshore Drilling, Inc., Transocean Ltd. and McDermott International, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | ||||
| Investor Class | April 1, 1998 | |||
| Advisor Class | April 2, 1998 | |||
| A-Class | September 1, 2004 | |||
| C-Class | March 30, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Schlumberger Ltd. | 10.6 | % | ||
| Halliburton Co. | 6.5 | % | ||
| National Oilwell Varco, Inc. | 5.5 | % | ||
| Baker Hughes, Inc. | 5.1 | % | ||
| Transocean Ltd. | 3.8 | % | ||
| Cameron International Corp. | 3.3 | % | ||
| FMC Technologies, Inc. | 3.2 | % | ||
| Helmerich & Payne, Inc. | 3.1 | % | ||
| Ensco plc — Class A | 2.8 | % | ||
| Noble Corporation plc | 2.6 | % | ||
| Top Ten Total | 46.5 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 60 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 14.70% | 20.02% | 11.13% | |||||||||
| Advisor Class Shares | 14.14% | 19.43% | 10.58% | |||||||||
| C-Class Shares | 13.54% | 18.82% | 10.03% | |||||||||
| C-Class Shares with CDSC‡ | 12.54% | 18.82% | 10.03% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Energy Index | 14.41% | 16.45% | 12.96% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 14.42% | 19.72% | 10.31% | |||||||||
| A-Class Shares with sales charge† | 8.98% | 18.56% | 9.75% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Energy Index | 14.41% | 16.45% | 12.27% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. | |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. | |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 61 |
SCHEDULE OF INVESTMENTS | March 31, 2014 |
| ENERGY SERVICES FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 98.9% | ||||||||
| OIL & GAS EQUIPMENT & SERVICES - 70.5% | ||||||||
| Schlumberger Ltd. | 59,266 | $ | 5,778,434 | |||||
| Halliburton Co. | 60,324 | 3,552,479 | ||||||
| National Oilwell Varco, Inc. | 38,206 | 2,975,101 | ||||||
| Baker Hughes, Inc. | 42,564 | 2,767,511 | ||||||
| Cameron International Corp.* | 29,214 | 1,804,549 | ||||||
| FMC Technologies, Inc.* | 33,103 | 1,730,956 | ||||||
| Oceaneering International, Inc. | 19,499 | 1,401,198 | ||||||
| Weatherford International Ltd.* | 75,949 | 1,318,475 | ||||||
| Superior Energy Services, Inc. | 37,607 | 1,156,791 | ||||||
| Oil States International, Inc.* | 11,611 | 1,144,845 | ||||||
| Dresser-Rand Group, Inc.* | 18,510 | 1,081,169 | ||||||
| Dril-Quip, Inc.* | 9,558 | 1,071,452 | ||||||
| RPC, Inc. | 52,440 | 1,070,825 | ||||||
| CARBO Ceramics, Inc.1 | 6,803 | 938,746 | ||||||
| Core Laboratories N.V. | 4,565 | 905,879 | ||||||
| Exterran Holdings, Inc. | 19,990 | 877,161 | ||||||
| Forum Energy Technologies, Inc.* | 27,510 | 852,260 | ||||||
| Tenaris S.A. ADR | 18,635 | 824,599 | ||||||
| Helix Energy Solutions Group, Inc.* | 34,874 | 801,405 | ||||||
| Bristow Group, Inc. | 10,610 | 801,267 | ||||||
| Tidewater, Inc. | 16,277 | 791,388 | ||||||
| McDermott International, Inc.* | 84,885 | 663,801 | ||||||
| SEACOR Holdings, Inc.* | 7,665 | 662,409 | ||||||
| C&J Energy Services, Inc.* | 22,300 | 650,268 | ||||||
| Hornbeck Off shore Services, Inc.* | 14,457 | 604,447 | ||||||
| Key Energy Services, Inc.* | 64,441 | 595,435 | ||||||
| Basic Energy Services, Inc.* | 20,160 | 552,586 | ||||||
| Gulfmark Off shore, Inc. — Class A | 12,040 | 541,078 | ||||||
| Geospace Technologies Corp.* | 6,500 | 430,105 | ||||||
| Total Oil & Gas Equipment & Services | 38,346,619 | |||||||
| OIL & GAS DRILLING - 28.4% | ||||||||
| Transocean Ltd.1 | 50,461 | 2,086,057 | ||||||
| Helmerich & Payne, Inc. | 15,722 | 1,691,058 | ||||||
| Ensco plc — Class A | 29,049 | 1,533,206 | ||||||
| Noble Corporation plc | 43,554 | 1,425,958 | ||||||
| Diamond Off shore Drilling, Inc.1 | 27,172 | 1,324,907 | ||||||
| Seadrill Ltd.1 | 34,376 | 1,208,660 | ||||||
| Nabors Industries Ltd. | 47,618 | 1,173,784 | ||||||
| Patterson-UTI Energy, Inc. | 33,803 | 1,070,879 | ||||||
| Rowan Companies plc — Class A* | 30,207 | 1,017,372 | ||||||
| Unit Corp.* | 13,776 | 900,675 | ||||||
| Atwood Oceanics, Inc.* | 17,663 | 890,039 | ||||||
| Precision Drilling Corp. | 56,970 | 681,931 | ||||||
| Hercules Off shore, Inc.* | 89,780 | 412,090 | ||||||
| Total Oil & Gas Drilling | 15,416,616 | |||||||
| Total Common Stocks | ||||||||
| (Cost $28,319,163) | 53,763,235 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.7% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 354,252 | 354,252 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $354,252) | 354,252 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 5.4% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,425,111 | 1,425,111 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,271,638 | 1,271,638 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 239,726 | 239,726 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $2,936,475) | 2,936,475 | |||||||
| Total Investments - 105.0% | ||||||||
| (Cost $31,609,890) | $ | 57,053,962 | ||||||
| Other Assets & Liabilities, net - (5.0)% | (2,703,083 | ) | ||||||
| Total Net Assets - 100.0% | $ | 54,350,879 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. ADR — American Depositary Receipt |
plc — Public Limited Company
| 62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| ENERGY SERVICES FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $2,893,111 of | ||||
| securities loaned | ||||
| (cost $28,319,163) | $ | 53,763,235 | ||
| Repurchase agreements, at value | ||||
| (cost $3,290,727) | 3,290,727 | |||
| Total investments | ||||
| (cost $31,609,890) | 57,053,962 | |||
| Receivables: | ||||
| Fund shares sold | 11,950,152 | |||
| Dividends | 22,956 | |||
| Securities lending income | 675 | |||
| Total assets | 69,027,745 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 11,277,502 | |||
| Upon return of securities loaned | 2,936,475 | |||
| Fund shares redeemed | 387,448 | |||
| Management fees | 27,654 | |||
| Distribution and service fees | 9,954 | |||
| Transfer agent and administrative fees | 8,133 | |||
| Portfolio accounting fees | 3,253 | |||
| Miscellaneous | 26,447 | |||
| Total liabilities | 14,676,866 | |||
| Net assets | $ | 54,350,879 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 58,047,020 | ||
| Accumulated net investment loss | (5,592 | ) | ||
| Accumulated net realized loss on investments | (29,134,621 | ) | ||
| Net unrealized appreciation on investments | 25,444,072 | |||
| Net assets | $ | 54,350,879 | ||
| Investor Class: | ||||
| Net assets | $ | 33,244,224 | ||
| Capital shares outstanding | 532,506 | |||
| Net asset value per share | $ | 62.43 | ||
| Advisor Class: | ||||
| Net assets | $ | 4,933,232 | ||
| Capital shares outstanding | 85,218 | |||
| Net asset value per share | $ | 57.89 | ||
| A-Class: | ||||
| Net assets | $ | 7,557,338 | ||
| Capital shares outstanding | 127,352 | |||
| Net asset value per share | $ | 59.34 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 62.30 | ||
| C-Class: | ||||
| Net assets | $ | 8,616,085 | ||
| Capital shares outstanding | 156,872 | |||
| Net asset value per share | $ | 54.92 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $1,035) | $ | 630,992 | ||
| Income from securities lending, net | 15,769 | |||
| Interest | 31 | |||
| Total investment income | 646,792 | |||
| Expenses: | ||||
| Management fees | 395,193 | |||
| Transfer agent and administrative fees | 116,233 | |||
| Distribution and service fees: | ||||
| Advisor Class | 37,327 | |||
| A-Class | 16,536 | |||
| C-Class | 84,997 | |||
| Portfolio accounting fees | 46,493 | |||
| Custodian fees | 5,217 | |||
| Trustees’ fees* | 4,911 | |||
| Line of credit interest expense | 155 | |||
| Miscellaneous | 68,011 | |||
| Total expenses | 775,073 | |||
| Net investment loss | (128,281 | ) | ||
| Net Realized And Unrealized Gain (loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 10,172,016 | |||
| Net realized gain | 10,172,016 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (4,603,394 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (4,603,394 | ) | ||
| Net realized and unrealized gain | 5,568,622 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 5,440,341 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
| ENERGY SERVICES FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (128,281 | ) | $ | (183,941 | ) | ||
| Net realized gain on investments | 10,172,016 | 3,214,998 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (4,603,394 | ) | (1,359,057 | ) | ||||
| Net increase in net assets resulting from operations | 5,440,341 | 1,672,000 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 136,799,275 | 148,932,078 | ||||||
| Advisor Class | 47,862,323 | 44,594,641 | ||||||
| A-Class | 11,403,811 | 2,262,133 | ||||||
| C-Class | 25,331,498 | 29,691,711 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (132,689,190 | ) | (157,984,849 | ) | ||||
| Advisor Class | (53,070,944 | ) | (42,995,012 | ) | ||||
| A-Class | (10,306,276 | ) | (4,241,348 | ) | ||||
| C-Class | (26,390,621 | ) | (31,597,061 | ) | ||||
| Net decrease from capital share transactions | (1,060,124 | ) | (11,337,707 | ) | ||||
| Net increase (decrease) in net assets | 4,380,217 | (9,665,707 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 49,970,662 | 59,636,369 | ||||||
| End of year | $ | 54,350,879 | $ | 49,970,662 | ||||
| Accumulated net investment loss at end of year | $ | (5,592 | ) | $ | (83,951 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 2,359,895 | 3,027,302 | ||||||
| Advisor Class | 898,924 | 956,449 | ||||||
| A-Class | 204,539 | 47,873 | ||||||
| C-Class | 497,418 | 678,750 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (2,306,869 | ) | (3,223,101 | ) | ||||
| Advisor Class | (1,004,649 | ) | (933,961 | ) | ||||
| A-Class | (183,900 | ) | (87,570 | ) | ||||
| C-Class | (519,469 | ) | (721,979 | ) | ||||
| Net decrease in shares | (54,111 | ) | (256,237 | ) | ||||
| 64 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 54.43 | $ | 50.87 | $ | 62.66 | $ | 42.83 | $ | 25.07 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .02 | (.05 | ) | (.14 | ) | (.21 | ) | (.01 | ) | |||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.98 | 3.61 | (11.65 | ) | 20.04 | 17.77 | ||||||||||||||
| Total from investment operations | 8.00 | 3.56 | (11.79 | ) | 19.83 | 17.76 | ||||||||||||||
| Net asset value, end of period | $ | 62.43 | $ | 54.43 | $ | 50.87 | $ | 62.66 | $ | 42.83 | ||||||||||
| Total Returnb | 14.70 | % | 7.00 | % | (18.82 | %) | 46.27 | % | 70.84 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 33,244 | $ | 26,097 | $ | 34,353 | $ | 151,318 | $ | 49,371 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.03 | % | (0.10 | %) | (0.25 | %) | (0.42 | %) | (0.01 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 350 | % | 275 | % | 162 | % | 205 | % | 472 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 50.72 | $ | 47.64 | $ | 58.97 | $ | 40.50 | $ | 23.83 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.27 | ) | (.25 | ) | (.34 | ) | (.42 | ) | (.26 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.44 | 3.33 | (10.99 | ) | 18.89 | 16.93 | ||||||||||||||
| Total from investment operations | 7.17 | 3.08 | (11.33 | ) | 18.47 | 16.67 | ||||||||||||||
| Net asset value, end of period | $ | 57.89 | $ | 50.72 | $ | 47.64 | $ | 58.97 | $ | 40.50 | ||||||||||
| Total Returnb | 14.14 | % | 6.47 | % | (19.21 | %) | 45.61 | % | 69.95 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,933 | $ | 9,685 | $ | 8,025 | $ | 17,222 | $ | 6,631 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.50 | %) | (0.54 | %) | (0.66 | %) | (0.93 | %) | (0.70 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.86 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 350 | % | 275 | % | 162 | % | 205 | % | 472 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
| ENERGY SERVICES FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 51.86 | $ | 48.59 | $ | 60.01 | $ | 41.12 | $ | 24.13 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.13 | ) | (.17 | ) | (.25 | ) | (.31 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.61 | 3.44 | (11.17 | ) | 19.20 | 17.15 | ||||||||||||||
| Total from investment operations | 7.48 | 3.27 | (11.42 | ) | 18.89 | 16.99 | ||||||||||||||
| Net asset value, end of period | $ | 59.34 | $ | 51.86 | $ | 48.59 | $ | 60.01 | $ | 41.12 | ||||||||||
| Total Returnb | 14.42 | % | 6.73 | % | (19.03 | %) | 45.94 | % | 70.41 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,557 | $ | 5,535 | $ | 7,115 | $ | 24,849 | $ | 8,957 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.23 | %) | (0.37 | %) | (0.47 | %) | (0.67 | %) | (0.43 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.61 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 350 | % | 275 | % | 162 | % | 205 | % | 472 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.37 | $ | 45.66 | $ | 56.81 | $ | 39.22 | $ | 23.19 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.50 | ) | (.49 | ) | (.54 | ) | (.60 | ) | (.44 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.05 | 3.20 | (10.61 | ) | 18.19 | 16.47 | ||||||||||||||
| Total from investment operations | 6.55 | 2.71 | (11.15 | ) | 17.59 | 16.03 | ||||||||||||||
| Net asset value, end of period | $ | 54.92 | $ | 48.37 | $ | 45.66 | $ | 56.81 | $ | 39.22 | ||||||||||
| Total Returnb | 13.54 | % | 5.94 | % | (19.63 | %) | 44.85 | % | 69.12 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 8,616 | $ | 8,654 | $ | 10,144 | $ | 15,276 | $ | 11,059 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.97 | %) | (1.11 | %) | (1.13 | %) | (1.43 | %) | (1.25 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 350 | % | 275 | % | 162 | % | 205 | % | 472 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 67 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
OBJECTIVE: Seeks to provide capital appreciation by investing in companies involved in the financial services sector (“Financial Services Companies”).
For the one-year period ended March 31, 2014, Financial Services Fund Investor Class returned 17.67%, while the S&P 500 Financials Index returned 24.91% over the same period. The broader S&P 500 Index returned 21.86%.
The banks industry was the largest contributor to return, followed by the insurance industry. The commercial banks industry was the only detractor from return. The lightly weighted real estate management & development industry contributed least to return.
Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. were the best-performing holdings in the Fund for the period. The worst performing holdings for the period were Annaly Capital Management, Inc., American Capital Agency Corp. and HCP, 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 Dates: | ||
| Investor Class | April 2, 1998 | |
| Advisor Class | April 6, 1998 | |
| A-Class | September 1, 2004 | |
| C-Class | April 19, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Berkshire Hathaway, Inc. — Class B | 2.7 | % | ||
| Wells Fargo & Co. | 2.5 | % | ||
| JPMorgan Chase & Co. | 2.3 | % | ||
| Bank of America Corp. | 2.0 | % | ||
| Citigroup, Inc. | 1.8 | % | ||
| American Express Co. | 1.5 | % | ||
| U.S. Bancorp | 1.4 | % | ||
| American International Group, Inc. | 1.3 | % | ||
| Goldman Sachs Group, Inc. | 1.3 | % | ||
| MetLife, Inc. | 1.2 | % | ||
| Top Ten Total | 18.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 68 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 17.67% | 19.93% | 0.66% | |||||||||
| Advisor Class Shares | 17.10% | 19.33% | 0.14% | |||||||||
| C-Class Shares | 16.58% | 18.79% | -0.34% | |||||||||
| C-Class Shares with CDSC‡ | 15.58% | 18.79% | -0.34% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Financials Index | 24.91% | 22.39% | -0.47% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 17.41% | 19.65% | 0.53% | |||||||||
| A-Class Shares with sales charge† | 11.83% | 18.51% | 0.02% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Financials Index | 24.91% | 22.39% | -0.32% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 69 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| FINANCIAL SERVICES FUND | |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.3% | ||||||||
| DIVERSIFIED BANKS - 14.8% | ||||||||
| Wells Fargo & Co. | 15,735 | $ | 782,658 | |||||
| JPMorgan Chase & Co. | 11,913 | 723,238 | ||||||
| Bank of America Corp. | 36,499 | 627,783 | ||||||
| Citigroup, Inc. | 11,643 | 554,207 | ||||||
| U.S. Bancorp | 9,885 | 423,671 | ||||||
| Itau Unibanco Holding S.A. ADR | 15,292 | 227,239 | ||||||
| Banco Bradesco S.A. ADR | 15,768 | 215,549 | ||||||
| Credicorp Ltd. | 1,380 | 190,330 | ||||||
| ICICI Bank Ltd. ADR | 4,311 | 188,822 | ||||||
| HSBC Holdings plc ADR | 3,701 | 188,122 | ||||||
| HDFC Bank Ltd. ADR | 4,510 | 185,045 | ||||||
| Barclays plc ADR | 10,820 | 169,874 | ||||||
| Comerica, Inc. | 2,698 | 139,756 | ||||||
| Total Diversified Banks | 4,616,294 | |||||||
| ASSET MANAGEMENT & CUSTODY BANKS - 8.9% | ||||||||
| BlackRock, Inc. — Class A | 1,041 | 327,373 | ||||||
| Bank of New York Mellon Corp. | 8,489 | 299,576 | ||||||
| Franklin Resources, Inc. | 5,335 | 289,050 | ||||||
| State Street Corp. | 3,798 | 264,151 | ||||||
| T. Rowe Price Group, Inc. | 2,633 | 216,828 | ||||||
| Ameriprise Financial, Inc. | 1,922 | 211,555 | ||||||
| Invesco Ltd. | 5,207 | 192,659 | ||||||
| Northern Trust Corp. | 2,763 | 181,142 | ||||||
| Affiliated Managers Group, Inc.* | 750 | 150,038 | ||||||
| Waddell & Reed Financial, Inc. — Class A | 1,580 | 116,320 | ||||||
| Legg Mason, Inc. | 2,310 | 113,282 | ||||||
| American Capital Ltd.* | 6,610 | 104,372 | ||||||
| Eaton Vance Corp. | 2,620 | 99,979 | ||||||
| Prospect Capital Corp. | 8,180 | 88,344 | ||||||
| Janus Capital Group, Inc. | 6,280 | 68,264 | ||||||
| WisdomTree Investments, Inc.* | 4,990 | 65,469 | ||||||
| Total Asset Management & Custody Banks | 2,788,402 | |||||||
| REGIONAL BANKS - 7.7% | ||||||||
| PNC Financial Services Group, Inc. | 3,754 | 326,599 | ||||||
| BB&T Corp. | 6,401 | 257,128 | ||||||
| SunTrust Banks, Inc. | 5,514 | 219,402 | ||||||
| Fifth Third Bancorp | 9,114 | 209,166 | ||||||
| M&T Bank Corp. | 1,519 | 184,255 | ||||||
| Regions Financial Corp. | 16,551 | 183,882 | ||||||
| KeyCorp | 11,835 | 168,530 | ||||||
| CIT Group, Inc. | 2,899 | 142,109 | ||||||
| Huntington Bancshares, Inc. | 13,827 | 137,855 | ||||||
| Zions Bancorporation | 3,550 | 109,979 | ||||||
| SVB Financial Group* | 840 | 108,175 | ||||||
| Signature Bank* | 860 | 108,007 | ||||||
| Cullen/Frost Bankers, Inc. | 1,310 | 101,564 | ||||||
| First Niagara Financial Group, Inc. | 9,290 | 87,791 | ||||||
| First Horizon National Corp. | 6,520 | 80,457 | ||||||
| Total Regional Banks | 2,424,899 | |||||||
| PROPERTY & CASUALTY INSURANCE - 7.4% | ||||||||
| Travelers Companies, Inc. | 3,163 | 269,171 | ||||||
| ACE Ltd. | 2,622 | 259,735 | ||||||
| Chubb Corp. | 2,530 | 225,929 | ||||||
| XL Group plc — Class A | 6,289 | 196,531 | ||||||
| Progressive Corp. | 7,658 | 185,477 | ||||||
| Assured Guaranty Ltd. | 7,150 | 181,038 | ||||||
| Axis Capital Holdings Ltd. | 3,780 | 173,313 | ||||||
| Arch Capital Group Ltd. | 2,890 | 166,291 | ||||||
| Allstate Corp. | 2,886 | 163,290 | ||||||
| Fidelity National Financial, Inc. — Class A | 4,550 | 143,052 | ||||||
| Cincinnati Financial Corp. | 2,737 | 133,182 | ||||||
| WR Berkley Corp. | 2,630 | 109,461 | ||||||
| MBIA, Inc.* | 5,540 | 77,505 | ||||||
| Total Property & Casualty Insurance | 2,283,975 | |||||||
| RETAIL REITs - 5.9% | ||||||||
| Simon Property Group, Inc. | 2,099 | 344,235 | ||||||
| General Growth Properties, Inc. | 9,924 | 218,328 | ||||||
| Kimco Realty Corp. | 6,755 | 147,799 | ||||||
| Realty Income Corp. | 3,544 | 144,808 | ||||||
| Macerich Co. | 2,302 | 143,484 | ||||||
| Federal Realty Investment Trust | 1,078 | 123,668 | ||||||
| DDR Corp. | 7,280 | 119,974 | ||||||
| Regency Centers Corp. | 2,060 | 105,184 | ||||||
| Taubman Centers, Inc. | 1,430 | 101,230 | ||||||
| National Retail Properties, Inc. | 2,905 | 99,700 | ||||||
| Weingarten Realty Investors | 3,080 | 92,400 | ||||||
| CBL & Associates Properties, Inc. | 5,000 | 88,750 | ||||||
| Tanger Factory Outlet Centers, Inc. | 2,480 | 86,800 | ||||||
| Total Retail REITs | 1,816,360 | |||||||
| INVESTMENT BANKING & BROKERAGE - 5.1% | ||||||||
| Goldman Sachs Group, Inc. | 2,456 | 402,415 | ||||||
| Morgan Stanley | 11,700 | 364,689 | ||||||
| Charles Schwab Corp. | 10,030 | 274,120 | ||||||
| TD Ameritrade Holding Corp. | 5,929 | 201,290 | ||||||
| Raymond James Financial, Inc. | 2,360 | 131,995 | ||||||
| E*TRADE Financial Corp.* | 5,060 | 116,481 | ||||||
| LPL Financial Holdings, Inc. | 1,940 | 101,928 | ||||||
| Total Investment Banking & Brokerage | 1,592,918 | |||||||
| LIFE & HEALTH INSURANCE - 5.0% | ||||||||
| MetLife, Inc. | 6,921 | 365,429 | ||||||
| Prudential Financial, Inc. | 3,470 | 293,736 | ||||||
| Aflac, Inc. | 4,158 | 262,120 | ||||||
| Principal Financial Group, Inc. | 3,885 | 178,671 | ||||||
| Lincoln National Corp. | 3,410 | 172,785 | ||||||
| Unum Group | 4,123 | 145,583 | ||||||
| Torchmark Corp. | 1,570 | 123,559 | ||||||
| Total Life & Health Insurance | 1,541,883 | |||||||
| SPECIALIZED REITs - 4.9% | ||||||||
| American Tower Corp. — Class A | 3,400 | 278,357 | ||||||
| Public Storage | 1,518 | 255,768 | ||||||
| Crown Castle International Corp.* | 3,280 | 241,998 | ||||||
| 70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| FINANCIAL SERVICES FUND |
| Shares | Value | |||||||
| Weyerhaeuser Co. | 6,898 | $ | 202,456 | |||||
| Plum Creek Timber Company, Inc. | 3,065 | 128,853 | ||||||
| Rayonier, Inc. | 2,524 | 115,877 | ||||||
| Extra Space Storage, Inc. | 2,360 | 114,484 | ||||||
| Gaming and Leisure Properties, Inc.* | 2,630 | 95,890 | ||||||
| Corrections Corporation of America | 2,841 | 88,980 | ||||||
| Total Specialized REITs | 1,522,663 | |||||||
| CONSUMER FINANCE - 3.9% | ||||||||
| American Express Co. | 5,220 | 469,956 | ||||||
| Capital One Financial Corp. | 4,244 | 327,467 | ||||||
| Discover Financial Services | 4,309 | 250,741 | ||||||
| SLM Corp. | 6,212 | 152,070 | ||||||
| Total Consumer Finance | 1,200,234 | |||||||
| RESIDENTIAL REITs - 3.8% | ||||||||
| Equity Residential | 3,899 | 226,102 | ||||||
| AvalonBay Communities, Inc. | 1,494 | 196,192 | ||||||
| UDR, Inc. | 4,858 | 125,482 | ||||||
| Essex Property Trust, Inc. | 701 | 119,205 | ||||||
| Camden Property Trust | 1,688 | 113,670 | ||||||
| Mid-America Apartment Communities, Inc. | 1,580 | 107,867 | ||||||
| BRE Properties, Inc. | 1,670 | 104,843 | ||||||
| Apartment Investment & Management | ||||||||
| Co. — Class A | 3,390 | 102,446 | ||||||
| American Campus Communities, Inc. | 2,550 | 95,243 | ||||||
| Total Residential REITs | 1,191,050 | |||||||
| SPECIALIZED FINANCE - 3.5% | ||||||||
| CME Group, Inc. — Class A | 3,090 | 228,692 | ||||||
| IntercontinentalExchange Group, Inc. | 1,127 | 222,954 | ||||||
| McGraw Hill Financial, Inc. | 2,840 | 216,692 | ||||||
| Moody’s Corp. | 2,429 | 192,668 | ||||||
| NASDAQ OMX Group, Inc. | 3,364 | 124,266 | ||||||
| CBOE Holdings, Inc. | 1,870 | 105,842 | ||||||
| Total Specialized Finance | 1,091,114 | |||||||
| MULTI-LINE INSURANCE - 3.4% | ||||||||
| American International Group, Inc. | 8,170 | 408,582 | ||||||
| Loews Corp. | 4,560 | 200,868 | ||||||
| Hartford Financial Services Group, Inc. | 5,441 | 191,904 | ||||||
| Genworth Financial, Inc. — Class A* | 7,840 | 139,003 | ||||||
| Assurant, Inc. | 1,560 | 101,338 | ||||||
| Total Multi-Line Insurance | 1,041,695 | |||||||
| MULTI-SECTOR HOLDINGS - 3.3% | ||||||||
| Berkshire Hathaway, Inc. — Class B* | 6,809 | 850,921 | ||||||
| Leucadia National Corp. | 5,677 | 158,956 | ||||||
| Total Multi-Sector Holdings | 1,009,877 | |||||||
| REINSURANCE - 3.1% | ||||||||
| Everest Re Group Ltd. | 1,238 | 189,476 | ||||||
| RenaissanceRe Holdings Ltd. | 1,820 | 177,632 | ||||||
| PartnerRe Ltd. | 1,690 | 174,915 | ||||||
| Validus Holdings Ltd. | 4,570 | 172,335 | ||||||
| Alleghany Corp.* | 330 | 134,435 | ||||||
| Reinsurance Group of America, Inc. — Class A | 1,390 | 110,686 | ||||||
| Total Reinsurance | 959,479 | |||||||
| OFFICE REITs - 2.8% | ||||||||
| Boston Properties, Inc. | 1,728 | 197,909 | ||||||
| SL Green Realty Corp. | 1,473 | 148,213 | ||||||
| Digital Realty Trust, Inc. | 2,443 | 129,674 | ||||||
| Alexandria Real Estate Equities, Inc. | 1,490 | 108,114 | ||||||
| Kilroy Realty Corp. | 1,770 | 103,687 | ||||||
| BioMed Realty Trust, Inc. | 4,790 | 98,147 | ||||||
| Highwoods Properties, Inc. | 2,310 | 88,727 | ||||||
| Total Office REITs | 874,471 | |||||||
| HEALTH CARE REITs - 2.7% | ||||||||
| HCP, Inc. | 5,535 | 214,703 | ||||||
| Ventas, Inc. | 3,474 | 210,420 | ||||||
| Health Care REIT, Inc. | 3,519 | 209,732 | ||||||
| Senior Housing Properties Trust | 4,590 | 103,137 | ||||||
| Omega Healthcare Investors, Inc. | 2,930 | 98,214 | ||||||
| Total Health Care REITs | 836,206 | |||||||
| DIVERSIFIED REITs - 2.6% | ||||||||
| Vornado Realty Trust | 2,052 | 202,244 | ||||||
| American Realty Capital Properties, Inc. | 11,675 | 163,684 | ||||||
| Duke Realty Corp. | 6,953 | 117,367 | ||||||
| WP Carey, Inc. | 1,890 | 113,532 | ||||||
| Liberty Property Trust | 3,010 | 111,250 | ||||||
| Spirit Realty Capital, Inc. | 9,042 | 99,281 | ||||||
| Total Diversified REITs | 807,358 | |||||||
| MORTGAGE REITs - 2.5% | ||||||||
| Altisource Residential Corp. | 5,480 | 172,948 | ||||||
| Annaly Capital Management, Inc. | 14,270 | 156,542 | ||||||
| American Capital Agency Corp. | 6,264 | 134,613 | ||||||
| NorthStar Realty Finance Corp. | 6,900 | 111,366 | ||||||
| Starwood Property Trust, Inc. | 4,420 | 104,268 | ||||||
| Two Harbors Investment Corp. | 9,190 | 94,198 | ||||||
| Total Mortgage REITs | 773,935 | |||||||
| INSURANCE BROKERS - 2.3% | ||||||||
| Marsh & McLennan Companies, Inc. | 5,107 | 251,776 | ||||||
| Aon plc | 2,733 | 230,337 | ||||||
| Arthur J Gallagher & Co. | 2,590 | 123,232 | ||||||
| Brown & Brown, Inc. | 3,320 | 102,123 | ||||||
| Total Insurance Brokers | 707,468 | |||||||
| THRIFTS & MORTGAGE FINANCE - 2.0% | ||||||||
| New York Community Bancorp, Inc. | 8,000 | 128,559 | ||||||
| Ocwen Financial Corp.* | 2,907 | 113,896 | ||||||
| Hudson City Bancorp, Inc. | 11,130 | 109,408 | ||||||
| People’s United Financial, Inc. | 6,925 | 102,975 | ||||||
| MGIC Investment Corp.* | 9,480 | 80,770 | ||||||
| Radian Group, Inc. | 5,090 | 76,503 | ||||||
| Total Thrifts & Mortgage Finance | 612,111 | |||||||
| REAL ESTATE SERVICES - 1.2% | ||||||||
| CBRE Group, Inc. — Class A* | 5,270 | 144,556 | ||||||
| Realogy Holdings Corp.* | 2,660 | 115,577 | ||||||
| Jones Lang LaSalle, Inc. | 880 | 104,280 | ||||||
| Total Real Estate Services | 364,413 |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| FINANCIAL SERVICES FUND |
| Shares | Value | |||||||
| INDUSTRIAL REITs - 1.0% | ||||||||
| Prologis, Inc. | 5,436 | $ | 221,952 | |||||
| DCT Industrial Trust, Inc. | 9,980 | 78,642 | ||||||
| Total Industrial REITs | 300,594 | |||||||
| HOTEL & RESORT REITs - 0.9% | ||||||||
| Host Hotels & Resorts, Inc. | 9,558 | 193,454 | ||||||
| LaSalle Hotel Properties | 2,690 | 84,224 | ||||||
| Total Hotel & Resort REITs | 277,678 | |||||||
| DIVERSIFIED CAPITAL MARKETS - 0.6% | ||||||||
| Deutsche Bank AG | 3,916 | 175,554 | ||||||
| Total Common Stocks | ||||||||
| (Cost $24,016,278) | 30,810,631 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,1 - 0.4% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 120,508 | 120,508 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $120,508) | 120,508 | |||||||
| Total Investments - 99.7% | ||||||||
| (Cost $24,136,786) | $ | 30,931,139 | ||||||
| Other Assets & Liabilities, net - 0.3% | 89,242 | |||||||
| Total Net Assets - 100.0% | $ | 31,020,381 | ||||||
| * | 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 Agreement — See Note 5. |
ADR — American Depositary Receipt
plc — Public Limited Company
REIT — Real Estate Investment Trust
| 72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| FINANCIAL SERVICES FUND |
STATEMENT OF ASSETS |
March 31, 2014
| Assets: | ||||
| Investments, at value | ||||
| (cost $24,016,278) | $ | 30,810,631 | ||
| Repurchase agreements, at value | ||||
| (cost $120,508) | 120,508 | |||
| Total investments | ||||
| (cost $24,136,786) | 30,931,139 | |||
| Receivables: | ||||
| Fund shares sold | 1,645,138 | |||
| Dividends | 50,365 | |||
| Securities lending income | 100 | |||
| Total assets | 32,626,742 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,514,349 | |||
| Fund shares redeemed | 54,156 | |||
| Management fees | 15,030 | |||
| Transfer agent and administrative fees | 4,420 | |||
| Distribution and service fees | 3,464 | |||
| Portfolio accounting fees | 1,768 | |||
| Miscellaneous | 13,174 | |||
| Total liabilities | 1,606,361 | |||
| Net assets | $ | 31,020,381 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 28,730,042 | ||
| Undistributed net investment income | 149,519 | |||
| Accumulated net realized loss on investments | (4,653,533 | ) | ||
| Net unrealized appreciation on investments | 6,794,353 | |||
| Net assets | $ | 31,020,381 | ||
| Investor Class: | ||||
| Net assets | $ | 17,688,412 | ||
| Capital shares outstanding | 166,713 | |||
| Net asset value per share | $ | 106.10 | ||
| Advisor Class: | ||||
| Net assets | $ | 4,583,067 | ||
| Capital shares outstanding | 46,591 | |||
| Net asset value per share | $ | 98.37 | ||
| A-Class: | ||||
| Net assets | $ | 7,698,103 | ||
| Capital shares outstanding | 76,266 | |||
| Net asset value per share | $ | 100.94 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 105.97 | ||
| C-Class: | ||||
| Net assets | $ | 1,050,799 | ||
| Capital shares outstanding | 11,296 | |||
| Net asset value per share | $ | 93.02 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $2,199) | $ | 518,504 | ||
| Income from securities lending, net | 474 | |||
| Interest | 18 | |||
| Total investment income | 518,996 | |||
| Expenses: | ||||
| Management fees | 202,648 | |||
| Transfer agent and administrative fees | 59,602 | |||
| Distribution and service fees: | ||||
| Advisor Class | 23,295 | |||
| A-Class | 7,587 | |||
| C-Class | 13,420 | |||
| Portfolio accounting fees | 23,841 | |||
| Custodian fees | 2,818 | |||
| Trustees’ fees* | 2,235 | |||
| Line of credit interest expense | 250 | |||
| Miscellaneous | 35,326 | |||
| Total expenses | 371,022 | |||
| Net investment income | 147,974 | |||
| Net Realized And Unrealized Gain (loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 2,155,894 | |||
| Net realized gain | 2,155,894 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 512,726 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 512,726 | |||
| Net realized and unrealized gain | 2,668,620 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 2,816,594 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 73 |
| FINANCIAL SERVICES FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 147,974 | $ | 138,121 | ||||
| Net realized gain on investments | 2,155,894 | 1,636,460 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 512,726 | 432,216 | ||||||
| Net increase in net assets resulting from operations | 2,816,594 | 2,206,797 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (79,512 | ) | (74,299 | ) | ||||
| Advisor Class | (17,906 | ) | (14,247 | ) | ||||
| A-Class | (40,320 | ) | (8,366 | ) | ||||
| C-Class | (7,809 | ) | (6,964 | ) | ||||
| Total distributions to shareholders | (145,547 | ) | (103,876 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 87,025,488 | 112,921,803 | ||||||
| Advisor Class | 9,891,676 | 17,902,624 | ||||||
| A-Class | 16,249,371 | 3,785,000 | ||||||
| C-Class | 21,219,453 | 12,008,532 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 78,044 | 73,463 | ||||||
| Advisor Class | 17,860 | 14,202 | ||||||
| A-Class | 35,520 | 3,063 | ||||||
| C-Class | 7,710 | 6,753 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (87,847,468 | ) | (117,502,931 | ) | ||||
| Advisor Class | (12,957,819 | ) | (15,219,045 | ) | ||||
| A-Class | (10,980,642 | ) | (2,833,487 | ) | ||||
| C-Class | (21,766,316 | ) | (11,551,082 | ) | ||||
| Net increase (decrease) from capital share transactions | 972,877 | (391,105 | ) | |||||
| Net increase in net assets | 3,643,924 | 1,711,816 | ||||||
| Net assets: | ||||||||
| Beginning of year | 27,376,457 | 25,664,641 | ||||||
| End of year | $ | 31,020,381 | $ | 27,376,457 | ||||
| Undistributed net investment income at end of year | $ | 149,519 | $ | 138,121 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 880,833 | 1,435,476 | ||||||
| Advisor Class | 107,616 | 244,596 | ||||||
| A-Class | 170,038 | 47,740 | ||||||
| C-Class | 243,282 | 168,822 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 774 | 940 | ||||||
| Advisor Class | 191 | 195 | ||||||
| A-Class | 370 | 41 | ||||||
| C-Class | 87 | 97 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (902,467 | ) | (1,503,386 | ) | ||||
| Advisor Class | (145,268 | ) | (218,443 | ) | ||||
| A-Class | (115,259 | ) | (35,080 | ) | ||||
| C-Class | (250,011 | ) | (162,605 | ) | ||||
| Net decrease in shares | (9,814 | ) | (21,607 | ) | ||||
| 74 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 90.67 | $ | 78.47 | $ | 81.18 | $ | 75.23 | $ | 44.37 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .78 | .76 | .61 | .15 | .41 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 15.21 | 11.99 | (3.29 | ) | 6.75 | 31.07 | ||||||||||||||
| Total from investment operations | 15.99 | 12.75 | (2.68 | ) | 6.90 | 31.48 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Total distributions | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Net asset value, end of period | $ | 106.10 | $ | 90.67 | $ | 78.47 | $ | 81.18 | $ | 75.23 | ||||||||||
| Total Returnb | 17.67 | % | 16.37 | % | (3.31 | %) | 9.33 | % | 71.12 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 17,688 | $ | 17,007 | $ | 19,973 | $ | 4,885 | $ | 26,364 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.81 | % | 0.95 | % | 0.86 | % | 0.19 | % | 0.64 | % | ||||||||||
| Total expenses | 1.37 | % | 1.36 | % | 1.34 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 414 | % | 590 | % | 970 | % | 601 | % | 447 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 84.51 | $ | 73.53 | $ | 76.47 | $ | 71.29 | $ | 42.28 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .24 | .22 | .26 | (.14 | ) | .12 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 14.18 | 11.31 | (3.17 | ) | 6.27 | 29.51 | ||||||||||||||
| Total from investment operations | 14.42 | 11.53 | (2.91 | ) | 6.13 | 29.63 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Total distributions | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Net asset value, end of period | $ | 98.37 | $ | 84.51 | $ | 73.53 | $ | 76.47 | $ | 71.29 | ||||||||||
| Total Returnb | 17.10 | % | 15.80 | % | (3.80 | %) | 8.76 | % | 70.26 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,583 | $ | 7,103 | $ | 4,243 | $ | 3,634 | $ | 3,285 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.26 | % | 0.29 | % | 0.37 | % | (0.20 | %) | 0.21 | % | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.85 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 414 | % | 590 | % | 970 | % | 601 | % | 447 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
| FINANCIAL SERVICES FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 86.48 | $ | 75.07 | $ | 77.87 | $ | 72.38 | $ | 42.80 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .58 | .51 | .45 | (.01 | ) | .30 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 14.44 | 11.45 | (3.22 | ) | 6.45 | 29.90 | ||||||||||||||
| Total from investment operations | 15.02 | 11.96 | (2.77 | ) | 6.44 | 30.20 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Total distributions | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Net asset value, end of period | $ | 100.94 | $ | 86.48 | $ | 75.07 | $ | 77.87 | $ | 72.38 | ||||||||||
| Total Returnb | 17.41 | % | 16.06 | % | (3.57 | %) | 9.06 | % | 70.74 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,698 | $ | 1,826 | $ | 632 | $ | 1,782 | $ | 1,408 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.62 | % | 0.66 | % | 0.64 | % | (0.01 | %) | 0.50 | % | ||||||||||
| Total expenses | 1.62 | % | 1.61 | % | 1.61 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 414 | % | 590 | % | 970 | % | 601 | % | 447 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 80.30 | $ | 70.26 | $ | 73.42 | $ | 68.79 | $ | 41.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.16 | ) | .03 | (.12 | ) | (.49 | ) | (.24 | ) | |||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 13.44 | 10.56 | (3.01 | ) | 6.07 | 28.64 | ||||||||||||||
| Total from investment operations | 13.28 | 10.59 | (3.13 | ) | 5.58 | 28.40 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Total distributions | (.56 | ) | (.55 | ) | (.03 | ) | (.95 | ) | (.62 | ) | ||||||||||
| Net asset value, end of period | $ | 93.02 | $ | 80.30 | $ | 70.26 | $ | 73.42 | $ | 68.79 | ||||||||||
| Total Returnb | 16.58 | % | 15.21 | % | (4.27 | %) | 8.28 | % | 69.44 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,051 | $ | 1,440 | $ | 817 | $ | 1,114 | $ | 1,942 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.18 | %) | 0.04 | % | (0.18 | %) | (0.72 | %) | (0.40 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.36 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 414 | % | 590 | % | 970 | % | 601 | % | 447 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the period presented through April 20, 2009, have been restated to reflect a 1:10 reverse share split effective April 20, 2009. |
| 76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 77 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that are involved in the health care industry (“Health Care Companies”).
For the one-year period ended March 31, 2014, Health Care Fund Investor Class returned 31.70%, compared with a return of 29.24% for the S&P 500 Health Care Index. The broader S&P 500 Index returned 21.86%.
All segments contributed to return. The biggest contributor to Fund performance was pharmaceuticals, followed by bio-technology. The lightly weighted health care technology segment was the smallest contributor to return.
The Fund’s top-performing holdings were Actavis plc, Gilead Sciences, Inc. and Biogen Idec, Inc. The worst-performing holdings in the Fund included Ariad Pharmaceuticals, Inc., Intuitive Surgical, Inc. and Edwards Lifesciences 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 Dates: | ||
| Investor Class | April 17, 1998 | |
| Advisor Class | May 11, 1998 | |
| A-Class | September 1, 2004 | |
| C-Class | March 30, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Johnson & Johnson | 3.6 | % | ||
| Pfizer, Inc. | 3.1 | % | ||
| Merck & Company, Inc. | 2.8 | % | ||
| Gilead Sciences, Inc. | 2.2 | % | ||
| Amgen, Inc. | 2.0 | % | ||
| Bristol-Myers Squibb Co. | 2.0 | % | ||
| UnitedHealth Group, Inc. | 1.9 | % | ||
| AbbVie, Inc. | 1.9 | % | ||
| Eli Lilly & Co. | 1.8 | % | ||
| Biogen Idec, Inc. | 1.7 | % | ||
| Top Ten Total | 23.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 78 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 31.70% | 21.39% | 8.98% | |||||||||
| Advisor Class Shares | 31.03% | 20.83% | 8.45% | |||||||||
| C-Class Shares | 30.38% | 20.27% | 7.91% | |||||||||
| C-Class Shares with CDSC‡ | 29.38% | 20.27% | 7.91% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Health Care Index | 29.24% | 21.64% | 9.02% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 31.36% | 21.13% | 9.54% | |||||||||
| A-Class Shares with sales charge† | 25.15% | 19.96% | 8.98% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Health Care Index | 29.24% | 21.64% | 9.53% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 79 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| HEALTH CARE FUND | |
| Shares | value | |||||||
| COMMON STOCKS† - 99.9% | ||||||||
| PHARMACEUTICALS - 31.3% | ||||||||
| Johnson & Johnson | 56,406 | $ | 5,540,762 | |||||
| Pfizer, Inc. | 144,684 | 4,647,250 | ||||||
| Merck & Company, Inc. | 75,520 | 4,287,270 | ||||||
| Bristol-Myers Squibb Co. | 57,456 | 2,984,839 | ||||||
| AbbVie, Inc. | 55,045 | 2,829,313 | ||||||
| Eli Lilly & Co. | 45,233 | 2,662,414 | ||||||
| Valeant Pharmaceuticals International, Inc.* | 15,966 | 2,104,798 | ||||||
| Allergan, Inc. | 15,868 | 1,969,219 | ||||||
| Teva Pharmaceutical Industries Ltd. ADR | 36,967 | 1,953,336 | ||||||
| Actavis plc* | 9,155 | 1,884,557 | ||||||
| Forest Laboratories, Inc.* | 17,317 | 1,597,840 | ||||||
| Perrigo Company plc | 9,094 | 1,406,478 | ||||||
| Mylan, Inc.* | 27,676 | 1,351,419 | ||||||
| Endo International plc* | 18,210 | 1,250,117 | ||||||
| Zoetis, Inc. | 41,700 | 1,206,798 | ||||||
| Jazz Pharmaceuticals plc* | 7,900 | 1,095,572 | ||||||
| Novartis AG ADR | 12,679 | 1,077,969 | ||||||
| AstraZeneca plc ADR | 16,188 | 1,050,277 | ||||||
| GlaxoSmithKline plc ADR | 19,504 | 1,042,099 | ||||||
| Novo Nordisk A/S ADR | 20,400 | 931,260 | ||||||
| Hospira, Inc.* | 20,373 | 881,132 | ||||||
| Shire plc ADR | 5,900 | 876,327 | ||||||
| Mallinckrodt plc* | 13,600 | 862,376 | ||||||
| Salix Pharmaceuticals Ltd.* | 7,600 | 787,436 | ||||||
| Questcor Pharmaceuticals, Inc.1 | 9,880 | 641,508 | ||||||
| Medicines Co.* | 15,200 | 431,984 | ||||||
| Auxilium Pharmaceuticals, Inc.* | 13,100 | 356,058 | ||||||
| Total Pharmaceuticals | 47,710,408 | |||||||
| BIOTECHNOLOGY - 20.4% | ||||||||
| Gilead Sciences, Inc.* | 46,776 | 3,314,548 | ||||||
| Amgen, Inc. | 24,953 | 3,077,703 | ||||||
| Biogen Idec, Inc.* | 8,506 | 2,601,730 | ||||||
| Celgene Corp.* | 17,074 | 2,383,530 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 5,721 | 1,717,902 | ||||||
| Alexion Pharmaceuticals, Inc.* | 11,119 | 1,691,533 | ||||||
| Vertex Pharmaceuticals, Inc.* | 18,001 | 1,273,031 | ||||||
| BioMarin Pharmaceutical, Inc.* | 14,100 | 961,761 | ||||||
| Incyte Corporation Ltd.* | 16,400 | 877,728 | ||||||
| Alkermes plc* | 19,700 | 868,573 | ||||||
| Pharmacyclics, Inc.* | 8,200 | 821,804 | ||||||
| Cubist Pharmaceuticals, Inc.* | 9,986 | 730,476 | ||||||
| Intercept Pharmaceuticals, Inc.* | 2,200 | 725,538 | ||||||
| Isis Pharmaceuticals, Inc.* | 16,400 | 708,644 | ||||||
| United Therapeutics Corp.* | 7,500 | 705,225 | ||||||
| Medivation, Inc.* | 10,900 | 701,633 | ||||||
| Seattle Genetics, Inc.* | 15,400 | 701,624 | ||||||
| OPKO Health, Inc.* | 73,380 | 683,902 | ||||||
| Alnylam Pharmaceuticals, Inc.* | 9,700 | 651,258 | ||||||
| Cepheid, Inc.* | 11,600 | 598,328 | ||||||
| Theravance, Inc.* | 19,100 | 590,954 | ||||||
| NPS Pharmaceuticals, Inc.* | 18,500 | 553,705 | ||||||
| Myriad Genetics, Inc.*,1 | 15,700 | 536,783 | ||||||
| Puma Biotechnology, Inc.* | 5,100 | 531,114 | ||||||
| ACADIA Pharmaceuticals, Inc.* | 19,200 | 467,136 | ||||||
| Arena Pharmaceuticals, Inc.*,1 | 71,700 | 451,710 | ||||||
| Clovis Oncology, Inc.* | 6,400 | 443,328 | ||||||
| Keryx Biopharmaceuticals, Inc.* | 25,600 | 436,224 | ||||||
| ARIAD Pharmaceuticals, Inc.*,1 | 49,439 | 398,478 | ||||||
| Aegerion Pharmaceuticals, Inc.* | 8,000 | 368,960 | ||||||
| Celldex Therapeutics, Inc.* | 20,500 | 362,235 | ||||||
| Total Biotechnology | 30,937,098 | |||||||
| HEALTH CARE EQUIPMENT - 17.3% | ||||||||
| Medtronic, Inc. | 42,112 | 2,591,573 | ||||||
| Abbott Laboratories | 65,290 | 2,514,318 | ||||||
| Baxter International, Inc. | 28,997 | 2,133,599 | ||||||
| Stryker Corp. | 22,153 | 1,804,805 | ||||||
| Covidien plc | 21,220 | 1,563,065 | ||||||
| Becton Dickinson and Co. | 13,307 | 1,557,984 | ||||||
| Boston Scientific Corp.* | 103,715 | 1,402,227 | ||||||
| St. Jude Medical, Inc. | 21,263 | 1,390,388 | ||||||
| Intuitive Surgical, Inc.* | 3,061 | 1,340,687 | ||||||
| Zimmer Holdings, Inc. | 13,708 | 1,296,503 | ||||||
| CR Bard, Inc. | 7,499 | 1,109,702 | ||||||
| Varian Medical Systems, Inc.* | 11,436 | 960,510 | ||||||
| CareFusion Corp.* | 23,134 | 930,449 | ||||||
| Edwards Lifesciences Corp.* | 12,420 | 921,191 | ||||||
| ResMed, Inc.1 | 18,489 | 826,273 | ||||||
| IDEXX Laboratories, Inc.* | 6,803 | 825,884 | ||||||
| Hologic, Inc.* | 36,940 | 794,210 | ||||||
| Teleflex, Inc. | 6,500 | 697,060 | ||||||
| Sirona Dental Systems, Inc.* | 8,900 | 664,563 | ||||||
| DexCom, Inc.* | 12,800 | 529,408 | ||||||
| Thoratec Corp.* | 12,600 | 451,206 | ||||||
| Total Health Care Equipment | 26,305,605 | |||||||
| MANAGED HEALTH CARE - 7.0% | ||||||||
| UnitedHealth Group, Inc. | 34,774 | 2,851,121 | ||||||
| WellPoint, Inc. | 16,886 | 1,681,001 | ||||||
| Aetna, Inc. | 22,227 | 1,666,358 | ||||||
| Cigna Corp. | 18,043 | 1,510,740 | ||||||
| Humana, Inc. | 11,342 | 1,278,470 | ||||||
| Centene Corp.* | 9,600 | 597,600 | ||||||
| Health Net, Inc.* | 15,366 | 522,598 | ||||||
| WellCare Health Plans, Inc.* | 8,120 | 515,782 | ||||||
| Total Managed Health Care | 10,623,670 | |||||||
| LIFE SCIENCES TOOLS & SERVICES - 6.2% | ||||||||
| Thermo Fisher Scientific, Inc. | 18,392 | 2,211,454 | ||||||
| Agilent Technologies, Inc. | 24,714 | 1,382,007 | ||||||
| Illumina, Inc.* | 9,214 | 1,369,753 | ||||||
| Waters Corp.* | 8,997 | 975,365 | ||||||
| Mettler-Toledo International, Inc.* | 3,650 | 860,232 | ||||||
| Covance, Inc.* | 7,400 | 768,860 | ||||||
| PerkinElmer, Inc. | 15,900 | 716,454 | ||||||
| PAREXEL International Corp.* | 10,300 | 557,127 | ||||||
| Charles River Laboratories International, Inc.* | 9,000 | 543,060 | ||||||
| Total Life Sciences Tools & Services | 9,384,312 | |||||||
| 80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| HEALTH CARE FUND | |
| Shares | Value | |||||||
| HEALTH CARE SERVICES - 6.0% | ||||||||
| Express Scripts Holding Co.* | 32,296 | $ | 2,425,107 | |||||
| DaVita HealthCare Partners, Inc.* | 17,902 | 1,232,553 | ||||||
| Catamaran Corp.* | 21,990 | 984,272 | ||||||
| Laboratory Corporation of America Holdings* | 9,665 | 949,200 | ||||||
| Quest Diagnostics, Inc. | 16,344 | 946,644 | ||||||
| MEDNAX, Inc.* | 13,000 | 805,740 | ||||||
| Omnicare, Inc. | 13,179 | 786,391 | ||||||
| Team Health Holdings, Inc.* | 12,500 | 559,375 | ||||||
| Chemed Corp.1 | 4,600 | 411,470 | ||||||
| Total Health Care Services | 9,100,752 | |||||||
| HEALTH CARE DISTRIBUTORS - 4.3% | ||||||||
| McKesson Corp. | 11,437 | 2,019,432 | ||||||
| Cardinal Health, Inc. | 22,652 | 1,585,187 | ||||||
| AmerisourceBergen Corp. — Class A | 19,360 | 1,269,822 | ||||||
| Henry Schein, Inc.* | 8,784 | 1,048,546 | ||||||
| Patterson Companies, Inc. | 16,300 | 680,688 | ||||||
| Total Health Care Distributors | 6,603,675 | |||||||
| HEALTH CARE FACILITIES - 3.4% | ||||||||
| HCA Holdings, Inc.* | 30,477 | 1,600,043 | ||||||
| Universal Health Services, Inc. — Class B | 11,562 | 948,893 | ||||||
| Community Health Systems, Inc.* | 18,025 | 706,039 | ||||||
| Tenet Healthcare Corp.* | 15,900 | 680,679 | ||||||
| Brookdale Senior Living, Inc. — Class A* | 19,800 | 663,498 | ||||||
| LifePoint Hospitals, Inc.* | 9,700 | 529,135 | ||||||
| Total Health Care Facilities | 5,128,287 | |||||||
| HEALTH CARE TECHNOLOGY - 2.1% | ||||||||
| Cerner Corp.* | 24,796 | 1,394,775 | ||||||
| athenahealth, Inc.* | 4,700 | 753,128 | ||||||
| Allscripts Healthcare Solutions, Inc.* | 31,100 | 560,733 | ||||||
| Medidata Solutions, Inc.* | 9,400 | 510,796 | ||||||
| Total Health Care Technology | 3,219,432 | |||||||
| HEALTH CARE SUPPLIES - 1.9% | ||||||||
| DENTSPLY International, Inc. | 18,100 | 833,324 | ||||||
| Cooper Companies, Inc. | 5,900 | 810,424 | ||||||
| Align Technology, Inc.* | 12,400 | 642,196 | ||||||
| Alere, Inc.* | 15,600 | 535,860 | ||||||
| Total Health Care Supplies | 2,821,804 | |||||||
| Total Common Stocks | ||||||||
| (Cost $114,443,419) | 151,835,043 | |||||||
| Face Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.2% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 234,319 | 234,319 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $234,319) | 234,319 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 1.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 957,160 | 957,160 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 854,081 | 854,081 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 161,009 | 161,009 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,972,250) | 1,972,250 | |||||||
| Total Investments - 101.4% | ||||||||
| (Cost $116,649,988) | $ | 154,041,612 | ||||||
| Other Assets & Liabilities, net - (1.4)% | (2,126,784 | ) | ||||||
| Total Net Assets - 100.0% | $ | 151,914,828 |
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
| HEALTH CARE FUND |
| STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value – including $1,972,673 of | ||||
| securities loaned | ||||
| (cost $114,443,419) | $ | 151,835,043 | ||
| Repurchase agreements, at value | ||||
| (cost $2,206,569) | 2,206,569 | |||
| Total investments | ||||
| (cost $116,649,988) | 154,041,612 | |||
| Receivables: | ||||
| Securities sold | 14,147,753 | |||
| Fund shares sold | 1,205,041 | |||
| Dividends | 135,871 | |||
| Securities lending income | 15,032 | |||
| Total assets | 169,545,309 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 15,416,755 | |||
| Upon return of securities loaned | 1,972,250 | |||
| Management fees | 106,905 | |||
| Transfer agent and administrative fees | 31,443 | |||
| Distribution and service fees | 16,947 | |||
| Portfolio accounting fees | 12,577 | |||
| Miscellaneous | 73,604 | |||
| Total liabilities | 17,630,481 | |||
| Net assets | $ | 151,914,828 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 120,790,754 | ||
| Accumulated net investment loss | — | |||
| Accumulated net realized gain on investments | (6,267,550 | ) | ||
| Net unrealized appreciation on investments | 37,391,624 | |||
| Net assets | $ | 151,914,828 | ||
| Investor Class: | ||||
| Net assets | $ | 98,209,020 | ||
| Capital shares outstanding | 3,537,673 | |||
| Net asset value per share | $ | 27.76 | ||
| Advisor Class: | ||||
| Net assets | $ | 38,479,516 | ||
| Capital shares outstanding | 1,509,494 | |||
| Net asset value per share | $ | 25.49 | ||
| A-Class: | ||||
| Net assets | $ | 7,908,757 | ||
| Capital shares outstanding | 302,905 | |||
| Net asset value per share | $ | 26.11 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 27.41 | ||
| C-Class: | ||||
| Net assets | $ | 7,317,535 | ||
| Capital shares outstanding | 302,931 | |||
| Net asset value per share | $ | 24.16 |
| STATEMENT OF OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $103) | $ | 1,392,655 | ||
| Income from securities lending, net | 72,429 | |||
| Interest | 88 | |||
| Total investment income | 1,465,172 | |||
| Expenses: | ||||
| Management fees | 999,042 | |||
| Transfer agent and administrative fees | 293,835 | |||
| Distribution and service fees: | ||||
| Advisor Class | 38,895 | |||
| A-Class | 14,505 | |||
| C-Class | 54,696 | |||
| Portfolio accounting fees | 117,533 | |||
| Custodian fees | 12,720 | |||
| Trustees’ fees* | 11,045 | |||
| Tax expense | 2,368 | |||
| Line of credit interest expense | 557 | |||
| Miscellaneous | 174,122 | |||
| Total expenses | 1,719,318 | |||
| Net investment loss | (254,146 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 20,336,238 | |||
| Net realized gain | 20,336,238 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 7,106,133 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 7,106,133 | |||
| Net realized and unrealized gain | 27,442,371 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 27,188,225 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| HEALTH CARE FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | (254,146 | ) | $ | 364,983 | |||
| Net realized gain (loss) on investments | 20,336,238 | (3,758,797 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 7,106,133 | 17,930,169 | ||||||
| Net increase in net assets resulting from operations | 27,188,225 | 14,536,355 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (89,982 | ) | (217,663 | ) | ||||
| Advisor Class | (7,552 | ) | (18,320 | ) | ||||
| A-Class | (7,852 | ) | (5,822 | ) | ||||
| C-Class | (7,895 | ) | (9,992 | ) | ||||
| Net realized gains | ||||||||
| Investor Class | (3,786,592 | ) | — | |||||
| Advisor Class | (317,778 | ) | — | |||||
| A-Class | (326,428 | ) | — | |||||
| C-Class | (332,239 | ) | — | |||||
| Total distributions to shareholders | (4,876,318 | ) | (251,797 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 324,677,607 | 318,344,556 | ||||||
| Advisor Class | 76,308,656 | 49,746,384 | ||||||
| A-Class | 20,247,591 | 4,381,953 | ||||||
| C-Class | 33,842,495 | 34,482,974 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 3,851,003 | 216,489 | ||||||
| Advisor Class | 323,914 | 18,217 | ||||||
| A-Class | 330,789 | 4,942 | ||||||
| C-Class | 328,744 | 9,651 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (354,047,641 | ) | (266,582,144 | ) | ||||
| Advisor Class | (42,786,393 | ) | (50,173,739 | ) | ||||
| A-Class | (17,317,347 | ) | (4,134,009 | ) | ||||
| C-Class | (32,535,770 | ) | (33,962,592 | ) | ||||
| Net increase from capital share transactions | 13,223,648 | 52,352,682 | ||||||
| Net increase in net assets | 35,535,555 | 66,637,240 | ||||||
| Net assets: | ||||||||
| Beginning of year | 116,379,273 | 49,742,033 | ||||||
| End of year | $ | 151,914,828 | $ | 116,379,273 | ||||
| Undistributed net investment income at end of year | $ | — | $ | 113,186 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 12,765,655 | 16,459,910 | ||||||
| Advisor Class | 3,036,456 | 2,731,471 | ||||||
| A-Class | 823,789 | 224,541 | ||||||
| C-Class | 1,521,467 | 1,981,649 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 148,573 | 11,105 | ||||||
| Advisor Class | 13,587 | 999 | ||||||
| A-Class | 13,557 | 268 | ||||||
| C-Class | 14,527 | 557 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (14,053,114 | ) | (13,867,240 | ) | ||||
| Advisor Class | (1,714,436 | ) | (2,802,207 | ) | ||||
| A-Class | (707,448 | ) | (217,683 | ) | ||||
| C-Class | (1,464,775 | ) | (1,956,184 | ) | ||||
| Net increase in shares | 397,838 | 2,567,186 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 22.35 | $ | 18.83 | $ | 17.14 | $ | 15.80 | $ | 11.20 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.03 | ) | .09 | .01 | (.02 | ) | (.01 | ) | ||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 7.00 | 3.48 | 1.68 | 1.36 | 4.62 | |||||||||||||||
| Total from investment operations | 6.97 | 3.57 | 1.69 | 1.34 | 4.61 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.03 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net realized gains | (1.53 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.56 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net asset value, end of period | $ | 27.76 | $ | 22.35 | $ | 18.83 | $ | 17.14 | $ | 15.80 | ||||||||||
| Total Returnb | 31.70 | % | 18.98 | % | 9.86 | % | 8.48 | % | 41.17 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 98,209 | $ | 104,525 | $ | 39,036 | $ | 19,534 | $ | 195,616 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.12 | %) | 0.45 | % | 0.08 | % | (0.10 | %) | (0.04 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.36 | % | 1.38 | % | 1.37 | % | ||||||||||
| Portfolio turnover rate | 277 | % | 266 | % | 582 | % | 619 | % | 241 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 20.73 | $ | 17.55 | $ | 16.04 | $ | 14.85 | $ | 10.58 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.15 | ) | (.06 | ) | (.07 | ) | (.05 | ) | (.04 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 6.47 | 3.29 | 1.58 | 1.24 | 4.32 | |||||||||||||||
| Total from investment operations | 6.32 | 3.23 | 1.51 | 1.19 | 4.28 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.03 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net realized gains | (1.53 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.56 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net asset value, end of period | $ | 25.49 | $ | 20.73 | $ | 17.55 | $ | 16.04 | $ | 14.85 | ||||||||||
| Total Returnb | 31.03 | % | 18.43 | % | 9.41 | % | 8.01 | % | 40.46 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 38,480 | $ | 3,605 | $ | 4,275 | $ | 2,229 | $ | 3,432 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.62 | %) | (0.31 | %) | (0.44 | %) | (0.36 | %) | (0.33 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.86 | % | 1.85 | % | 1.88 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 277 | % | 266 | % | 582 | % | 619 | % | 241 | % | ||||||||||
| 84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| HEALTH CARE FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 21.15 | $ | 17.87 | $ | 16.30 | $ | 15.05 | $ | 10.69 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.09 | ) | .04 | (.02 | ) | (.02 | ) | (.03 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 6.61 | 3.29 | 1.59 | 1.27 | 4.40 | |||||||||||||||
| Total from investment operations | 6.52 | 3.33 | 1.57 | 1.25 | 4.37 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.03 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net realized gains | (1.53 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.56 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net asset value, end of period | $ | 26.11 | $ | 21.15 | $ | 17.87 | $ | 16.30 | $ | 15.05 | ||||||||||
| Total Returnb | 31.36 | % | 18.65 | % | 9.63 | % | 8.31 | % | 40.88 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,909 | $ | 3,660 | $ | 2,964 | $ | 1,156 | $ | 6,204 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.37 | %) | 0.20 | % | (0.13 | %) | (0.14 | %) | (0.25 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.60 | % | 1.63 | % | 1.62 | % | ||||||||||
| Portfolio turnover rate | 277 | % | 266 | % | 582 | % | 619 | % | 241 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.81 | $ | 16.86 | $ | 15.50 | $ | 14.39 | $ | 10.30 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.26 | ) | (.09 | ) | (.14 | ) | (.11 | ) | (.11 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 6.17 | 3.09 | 1.50 | 1.22 | 4.21 | |||||||||||||||
| Total from investment operations | 5.91 | 3.00 | 1.36 | 1.11 | 4.10 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.03 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net realized gains | (1.53 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.56 | ) | (.05 | ) | — | — | (.01 | ) | ||||||||||||
| Net asset value, end of period | $ | 24.16 | $ | 19.81 | $ | 16.86 | $ | 15.50 | $ | 14.39 | ||||||||||
| Total Returnb | 30.38 | % | 17.81 | % | 8.77 | % | 7.71 | % | 39.81 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,318 | $ | 4,589 | $ | 3,468 | $ | 3,870 | $ | 8,393 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.14 | %) | (0.53 | %) | (0.91 | %) | (0.76 | %) | (0.91 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.38 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 277 | % | 266 | % | 582 | % | 619 | % | 241 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Internet Fund Investor Class returned 35.93%, compared with 25.59% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned 21.86%.
The internet software & services segment was the largest contributor to return, followed by the internet & catalog retail segment. The largest detractor from return was the technology hardware storage & peripheral industry, followed by the semiconductors & semiconductor equipment segment.
Facebook, Inc. — Class A, Google, Inc. — Class A and Vipshop Holdings Ltd. ADR added the most to Fund performance for the period, while BlackBerry Ltd., Twitter, Inc. and Rackspace Hosting, Inc. detracted most from Fund 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 Dates: | |||
| Investor Class | April 6, 2000 | ||
| Advisor Class | April 6, 2000 | ||
| A-Class | September 1, 2004 | ||
| C-Class | April 19, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Google, Inc. — Class C | 7.2 | % | ||
| Amazon.com, Inc. | 4.6 | % | ||
| Facebook, Inc. — Class A | 4.4 | % | ||
| QUALCOMM, Inc. | 4.3 | % | ||
| Cisco Systems, Inc. | 4.1 | % | ||
| eBay, Inc. | 3.1 | % | ||
| Priceline Group, Inc. | 2.9 | % | ||
| Time Warner, Inc. | 2.9 | % | ||
| Yahoo!, Inc. | 2.2 | % | ||
| Baidu, Inc. ADR | 2.0 | % | ||
| Top Ten Total | 37.7 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 86 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 35.93% | 23.82% | 8.31% | |||||||||
| Advisor Class Shares | 35.23% | 23.20% | 7.77% | |||||||||
| C-Class Shares | 34.56% | 22.56% | 7.24% | |||||||||
| C-Class Shares with CDSC‡ | 33.56% | 22.56% | 7.24% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 7.69% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 35.58% | 23.50% | 9.86% | |||||||||
| A-Class Shares with sales charge† | 29.13% | 22.31% | 9.30% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 9.17% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 87 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INTERNET FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.4% | ||||||||
| INTERNET SOFTWARE & SERVICES - 47.9% | ||||||||
| Google, Inc. — Class C* | 3,622 | $ | 4,036,756 | |||||
| Facebook, Inc. — Class A* | 41,148 | 2,478,756 | ||||||
| eBay, Inc.* | 31,810 | 1,757,184 | ||||||
| Yahoo!, Inc.* | 34,940 | 1,254,346 | ||||||
| Baidu, Inc. ADR* | 7,169 | 1,092,412 | ||||||
| Twitter, Inc.*,1 | 22,743 | 1,061,416 | ||||||
| LinkedIn Corp. — Class A* | 5,024 | 929,139 | ||||||
| Equinix, Inc.* | 3,589 | 663,391 | ||||||
| Qihoo 360 Technology Company Ltd. ADR* | 6,579 | 655,137 | ||||||
| Akamai Technologies, Inc.* | 11,070 | 644,385 | ||||||
| SINA Corp.* | 10,635 | 642,460 | ||||||
| Yandex N.V. — Class A* | 20,167 | 608,842 | ||||||
| Youku Tudou, Inc. ADR* | 20,823 | 583,877 | ||||||
| YY, Inc. ADR* | 7,453 | 569,111 | ||||||
| MercadoLibre, Inc.1 | 5,958 | 566,665 | ||||||
| VeriSign, Inc.* | 10,504 | 566,271 | ||||||
| NetEase, Inc. ADR | 8,249 | 555,158 | ||||||
| SouFun Holdings Ltd. ADR | 7,620 | 521,360 | ||||||
| IAC/InterActiveCorp | 7,160 | 511,152 | ||||||
| Pandora Media, Inc.* | 16,358 | 495,975 | ||||||
| Sohu.com, Inc.*,1 | 7,433 | 483,814 | ||||||
| CoStar Group, Inc.* | 2,550 | 476,187 | ||||||
| Yelp, Inc. — Class A* | 6,169 | 474,581 | ||||||
| Rackspace Hosting, Inc.* | 13,782 | 452,325 | ||||||
| Bitauto Holdings Ltd. ADR* | 12,338 | 442,194 | ||||||
| AOL, Inc.* | 8,787 | 384,607 | ||||||
| Zillow, Inc. — Class A*,1 | 4,146 | 365,263 | ||||||
| j2 Global, Inc. | 6,720 | 336,336 | ||||||
| Cornerstone OnDemand, Inc.* | 6,400 | 306,368 | ||||||
| Demandware, Inc.* | 4,720 | 302,363 | ||||||
| Conversant, Inc.* | 10,703 | 301,289 | ||||||
| Dealertrack Technologies, Inc.* | 6,060 | 298,091 | ||||||
| WebMD Health Corp. — Class A* | 6,810 | 281,934 | ||||||
| OpenTable, Inc.* | 3,662 | 281,718 | ||||||
| Web.com Group, Inc.* | 7,860 | 267,476 | ||||||
| Gogo, Inc.*,1 | 12,648 | 259,790 | ||||||
| Rocket Fuel, Inc.*,1 | 5,950 | 255,136 | ||||||
| Trulia, Inc.*,1 | 6,690 | 222,108 | ||||||
| ChannelAdvisor Corp.* | 5,006 | 188,926 | ||||||
| Angie’s List, Inc.*,1 | 14,155 | 172,408 | ||||||
| Total Internet Software & Services | 26,746,707 | |||||||
| COMMUNICATIONS EQUIPMENT - 21.8% | ||||||||
| QUALCOMM, Inc. | 30,803 | 2,429,126 | ||||||
| Cisco Systems, Inc. | 101,778 | 2,280,845 | ||||||
| Motorola Solutions, Inc. | 12,800 | 822,912 | ||||||
| Juniper Networks, Inc.* | 28,282 | 728,544 | ||||||
| Harris Corp. | 8,000 | 585,280 | ||||||
| F5 Networks, Inc.* | 5,410 | 576,868 | ||||||
| Telefonaktiebolaget LM Ericsson ADR | 39,274 | 523,522 | ||||||
| Palo Alto Networks, Inc.* | 6,600 | 452,760 | ||||||
| Brocade Communications Systems, Inc.* | 42,000 | 445,620 | ||||||
| ARRIS Group, Inc.* | 14,600 | 411,428 | ||||||
| JDS Uniphase Corp.* | 26,635 | 372,890 | ||||||
| ViaSat, Inc.* | 5,400 | 372,816 | ||||||
| Riverbed Technology, Inc.* | 18,800 | 370,548 | ||||||
| Ubiquiti Networks, Inc.*,1 | 8,134 | 369,853 | ||||||
| Finisar Corp.* | 12,200 | 323,422 | ||||||
| Ciena Corp.* | 13,837 | 314,653 | ||||||
| Polycom, Inc.* | 21,300 | 292,236 | ||||||
| Aruba Networks, Inc.* | 15,277 | 286,444 | ||||||
| ADTRAN, Inc. | 9,900 | 241,659 | ||||||
| Total Communications Equipment | 12,201,426 | |||||||
| INTERNET RETAIL - 17.3% | ||||||||
| Amazon.com, Inc.* | 7,643 | 2,572,022 | ||||||
| Priceline Group, Inc.* | 1,381 | 1,646,000 | ||||||
| Netflix, Inc.* | 2,606 | 917,390 | ||||||
| Ctrip.com International Ltd. ADR* | 14,350 | 723,527 | ||||||
| TripAdvisor, Inc.* | 7,956 | 720,734 | ||||||
| Expedia, Inc. | 8,842 | 641,045 | ||||||
| Vipshop Holdings Ltd. ADR* | 4,112 | 613,922 | ||||||
| Groupon, Inc. — Class A* | 60,155 | 471,615 | ||||||
| Liberty Ventures* | 3,455 | 450,290 | ||||||
| HomeAway, Inc.* | 10,157 | 382,614 | ||||||
| Shutterfly, Inc.* | 6,622 | 282,627 | ||||||
| RetailMeNot, Inc.* | 8,300 | 265,600 | ||||||
| Total Internet Retail | 9,687,386 | |||||||
| SYSTEMS SOFTWARE - 3.5% | ||||||||
| Symantec Corp. | 38,327 | 765,390 | ||||||
| Red Hat, Inc.* | 12,002 | 635,866 | ||||||
| Check Point Software Technologies Ltd.* | 8,409 | 568,701 | ||||||
| Total Systems Software | 1,969,957 | |||||||
| MOVIES & ENTERTAINMENT - 2.9% | ||||||||
| Time Warner, Inc. | 24,426 | 1,595,751 | ||||||
| APPLICATION SOFTWARE - 2.4% | ||||||||
| Intuit, Inc. | 12,482 | 970,226 | ||||||
| TIBCO Software, Inc.* | 18,317 | 372,201 | ||||||
| Total Application Software | 1,342,427 | |||||||
| SEMICONDUCTORS - 1.6% | ||||||||
| Broadcom Corp. — Class A | 28,382 | 893,465 | ||||||
| TECHNOLOGY HARDWARE, | ||||||||
| STORAGE & PERIPHERALS - 1.1% | ||||||||
| BlackBerry Ltd.*,1 | 72,956 | 589,484 | ||||||
| INVESTMENT BANKING & BROKERAGE - 0.9% | ||||||||
| E*TRADE Financial Corp.* | 22,635 | 521,058 | ||||||
| Total Common Stocks | ||||||||
| (Cost $46,119,203) | 55,547,661 | |||||||
| 88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| INTERNET FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 0.3% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 144,526 | $ | 144,526 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $144,526) | 144,526 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 6.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,671,808 | 1,671,808 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,491,768 | 1,491,768 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 281,224 | 281,224 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $3,444,800) | 3,444,800 | |||||||
| Total Investments - 105.9% | ||||||||
| (Cost $49,708,529) | $ | 59,136,987 | ||||||
| Other Assets & Liabilities, net - (5.9)% | (3,273,171 | ) | ||||||
| Total Net Assets - 100.0% | $ | 55,863,816 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
| INTERNET FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $3,322,822 of | ||||
| securities loaned | ||||
| (cost $46,119,203) | $ | 55,547,661 | ||
| Repurchase agreements, at value | ||||
| (cost $3,589,326) | 3,589,326 | |||
| Total investments | ||||
| (cost $49,708,529) | 59,136,987 | |||
| Receivables: | ||||
| Securities sold | 892,186 | |||
| Fund shares sold | 187,568 | |||
| Securities lending income | 5,776 | |||
| Dividends | 1,055 | |||
| Total assets | 60,223,572 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 3,444,800 | |||
| Fund shares redeemed | 813,531 | |||
| Management fees | 43,389 | |||
| Transfer agent and administrative fees | 12,761 | |||
| Distribution and service fees | 11,929 | |||
| Portfolio accounting fees | 5,104 | |||
| Miscellaneous | 28,242 | |||
| Total liabilities | 4,359,756 | |||
| Net assets | $ | 55,863,816 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 50,580,093 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (4,144,735 | ) | ||
| Net unrealized appreciation on investments | 9,428,458 | |||
| Net assets | $ | 55,863,816 | ||
| Investor Class: | ||||
| Net assets | $ | 26,828,055 | ||
| Capital shares outstanding | 357,480 | |||
| Net asset value per share | $ | 75.05 | ||
| Advisor Class: | ||||
| Net assets | $ | 11,814,341 | ||
| Capital shares outstanding | 169,792 | |||
| Net asset value per share | $ | 69.58 | ||
A-Class: | ||||
| Net assets | $ | 12,566,265 | ||
| Capital shares outstanding | 176,201 | |||
| Net asset value per share | $ | 71.32 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 74.88 | ||
C-Class: | ||||
| Net assets | $ | 4,655,155 | ||
| Capital shares outstanding | 70,924 | |||
| Net asset value per share | $ | 65.64 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
Investment Income: | ||||
| Dividends (net of foreign withholding tax of $1,539) | $ | 125,503 | ||
| Income from securities lending, net | 26,055 | |||
| Interest | 24 | |||
| Total investment income | 151,582 | |||
| Expenses: | ||||
| Management fees | 277,315 | |||
| Transfer agent and administrative fees | 81,563 | |||
| Distribution and service fees: | ||||
| Advisor Class | 33,569 | |||
| A-Class | 15,366 | |||
| C-Class | 24,366 | |||
| Portfolio accounting fees | 32,625 | |||
| Custodian fees | 3,808 | |||
| Trustees’ fees* | 1,349 | |||
| Line of credit interest expense | 199 | |||
| Miscellaneous | 49,571 | |||
| Total expenses | 519,731 | |||
| Net investment loss | (368,149 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (1,599,042 | ) | ||
| Net realized loss | (1,599,042 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 6,184,558 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 6,184,558 | |||
| Net realized and unrealized gain | 4,585,516 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 4,217,367 |
* 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. |
| INTERNET FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (368,149 | ) | $ | (76,382 | ) | ||
| Net realized gain (loss) on investments | (1,599,042 | ) | 884,433 | |||||
| Net change in unrealized appreciation (depreciation) on investments | 6,184,558 | (551,262 | ) | |||||
| Net increase in net assets resulting from operations | 4,217,367 | 256,789 | ||||||
Distributions to shareholders from: | ||||||||
| Net realized gains | ||||||||
| Investor Class | (111,377 | ) | (63,522 | ) | ||||
| Advisor Class | (17,627 | ) | (15,594 | ) | ||||
| A-Class | (40,920 | ) | (16,401 | ) | ||||
| C-Class | (15,187 | ) | (17,867 | ) | ||||
| Total distributions to shareholders | (185,111 | ) | (113,384 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 137,136,622 | 31,124,261 | ||||||
| Advisor Class | 71,839,042 | 453,813 | ||||||
| A-Class | 18,920,974 | 2,380,935 | ||||||
| C-Class | 18,712,886 | 9,906,871 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 108,663 | 62,343 | ||||||
| Advisor Class | 17,580 | 14,930 | ||||||
| A-Class | 37,431 | 16,078 | ||||||
| C-Class | 14,695 | 16,446 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (119,310,474 | ) | (31,339,015 | ) | ||||
| Advisor Class | (60,492,721 | ) | (678,019 | ) | ||||
| A-Class | (8,526,665 | ) | (2,032,055 | ) | ||||
| C-Class | (15,590,538 | ) | (9,501,396 | ) | ||||
| Net increase from capital share transactions | 42,867,495 | 425,192 | ||||||
| Net increase in net assets | 46,899,751 | 568,597 | ||||||
| Net assets: | ||||||||
| Beginning of year | 8,964,065 | 8,395,468 | ||||||
| End of year | $ | 55,863,816 | $ | 8,964,065 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (35,811 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 1,953,833 | 609,789 | ||||||
| Advisor Class | 1,024,297 | 9,956 | ||||||
| A-Class | 275,049 | 46,920 | ||||||
| C-Class | 314,443 | 221,607 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 1,528 | 1,290 | ||||||
| Advisor Class | 266 | 331 | ||||||
| A-Class | 554 | 349 | ||||||
| C-Class | 236 | 384 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (1,708,029 | ) | (620,499 | ) | ||||
| Advisor Class | (865,440 | ) | (14,374 | ) | ||||
| A-Class | (121,953 | ) | (41,403 | ) | ||||
| C-Class | (266,422 | ) | (213,154 | ) | ||||
| Net increase in shares | 608,362 | 1,196 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 55.46 | $ | 51.90 | $ | 52.28 | $ | 41.74 | $ | 26.58 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.62 | ) | (.44 | ) | (.51 | ) | (.34 | ) | (.38 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 20.53 | 5.26 | .13 | 10.88 | 15.54 | |||||||||||||||
| Total from investment operations | 19.91 | 4.82 | (.38 | ) | 10.54 | 15.16 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Total distributions | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 75.05 | $ | 55.46 | $ | 51.90 | $ | 52.28 | $ | 41.74 | ||||||||||
| Total Returnb | 35.93 | % | 9.65 | % | (0.73 | %) | 25.25 | % | 57.04 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 26,828 | $ | 6,109 | $ | 6,206 | $ | 20,589 | $ | 21,924 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.87 | %) | (0.87 | %) | (1.05 | %) | (0.69 | %) | (1.12 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.37 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 442 | % | 380 | % | 291 | % | 443 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 51.70 | $ | 48.71 | $ | 49.31 | $ | 39.57 | $ | 25.32 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.07 | ) | (.64 | ) | (.71 | ) | (.59 | ) | (.58 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 19.27 | 4.89 | .11 | 10.33 | 14.83 | |||||||||||||||
| Total from investment operations | 18.20 | 4.25 | (.60 | ) | 9.74 | 14.25 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Total distributions | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 69.58 | $ | 51.70 | $ | 48.71 | $ | 49.31 | $ | 39.57 | ||||||||||
| Total Returnb | 35.23 | % | 9.13 | % | (1.24 | %) | 24.61 | % | 56.28 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 11,814 | $ | 552 | $ | 719 | $ | 2,124 | $ | 3,908 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.53 | %) | (1.36 | %) | (1.58 | %) | (1.32 | %) | (1.74 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.86 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 442 | % | 380 | % | 291 | % | 443 | % | ||||||||||
| 92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INTERNET FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 52.85 | $ | 49.63 | $ | 50.13 | $ | 40.12 | $ | 25.62 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.79 | ) | (.52 | ) | (.64 | ) | (.46 | ) | (.50 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 19.58 | 5.00 | .14 | 10.47 | 15.00 | |||||||||||||||
| Total from investment operations | 18.79 | 4.48 | (.50 | ) | 10.01 | 14.50 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Total distributions | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 71.32 | $ | 52.85 | $ | 49.63 | $ | 50.13 | $ | 40.12 | ||||||||||
| Total Returnb | 35.58 | % | 9.41 | % | (1.00 | %) | 24.95 | % | 56.60 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 12,566 | $ | 1,192 | $ | 828 | $ | 1,101 | $ | 2,989 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.12 | %) | (1.08 | %) | (1.39 | %) | (1.01 | %) | (1.44 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.61 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 442 | % | 380 | % | 291 | % | 443 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.03 | $ | 46.50 | $ | 47.30 | $ | 38.17 | $ | 24.56 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.16 | ) | (.85 | ) | (.94 | ) | (.83 | ) | (.66 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 18.09 | 4.64 | .14 | 9.96 | 14.27 | |||||||||||||||
| Total from investment operations | 16.93 | 3.79 | (.80 | ) | 9.13 | 13.61 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Total distributions | (.32 | ) | (1.26 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 65.64 | $ | 49.03 | $ | 46.50 | $ | 47.30 | $ | 38.17 | ||||||||||
| Total Returnb | 34.56 | % | 8.55 | % | (1.69 | %) | 23.92 | % | 55.42 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,655 | $ | 1,111 | $ | 643 | $ | 1,770 | $ | 1,057 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.85 | %) | (1.91 | %) | (2.17 | %) | (1.92 | %) | (2.00 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 442 | % | 380 | % | 291 | % | 443 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 93 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
OBJECTIVE: Seeks to provide capital appreciation by investing in companies in leisure and entertainment businesses (“Leisure Companies”).
For the one-year period ended March 31, 2014, Leisure Fund Investor Class returned 24.83%, compared with 24.00% for the S&P 500 Consumer Discretionary Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the media segment was the largest contributor to return, followed by the hotels, restaurants & leisure segment. The lightly weighted real estate investment trust segment was the only detractor from return.
Among the holdings that contributed the most to the Fund’s performance for the period were Walt Disney Co., Las Vegas Sands Corp. and Wynn Resorts Ltd. The Fund’s weakest holdings for the period were Philip Morris International, Inc., Ambev S.A. ADR and Sturm, Ruger & Company, 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 Dates: | ||||
| Investor Class | April 1, 1998 | |||
| Advisor Class | June 3, 1998 | |||
| A-Class | September 1, 2004 | |||
| C-Class | May 3, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Walt Disney Co. | 3.7 | % | ||
| Philip Morris International, Inc. | 3.6 | % | ||
| Comcast Corp. — Class A | 3.5 | % | ||
| McDonald’s Corp. | 3.1 | % | ||
| Altria Group, Inc. | 2.7 | % | ||
| Twenty-First Century Fox, Inc. — Class A | 2.6 | % | ||
| Las Vegas Sands Corp. | 2.5 | % | ||
| Time Warner, Inc. | 2.3 | % | ||
| Starbucks Corp. | 2.2 | % | ||
| DIRECTV | 2.0 | % | ||
| Top Ten Total | 28.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 94 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 24.83% | 29.52% | 7.33% | |||||||||
| Advisor Class Shares | 24.18% | 28.86% | 6.80% | |||||||||
| C-Class Shares | 23.61% | 28.21% | 6.25% | |||||||||
| C-Class Shares with CDSC‡ | 22.61% | 28.21% | 6.25% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Consumer Discretionary Index | 24.00% | 29.13% | 9.00% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 24.53% | 29.19% | 8.30% | |||||||||
| A-Class Shares with sales charge† | 18.62% | 27.94% | 7.75% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Consumer Discretionary Index | 24.00% | 29.13% | 9.88% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in the fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 95 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| LEISURE FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.4% | ||||||||
| RESTAURANTS - 16.0% | ||||||||
| McDonald’s Corp. | 9,639 | $ | 944,911 | |||||
| Starbucks Corp. | 9,248 | 678,618 | ||||||
| Yum! Brands, Inc. | 7,381 | 556,454 | ||||||
| Chipotle Mexican Grill, Inc. — Class A* | 649 | 368,664 | ||||||
| Burger King Worldwide, Inc. | 11,100 | 294,705 | ||||||
| Darden Restaurants, Inc. | 4,983 | 252,937 | ||||||
| Dunkin’ Brands Group, Inc. | 4,340 | 217,781 | ||||||
| Panera Bread Co. — Class A* | 1,108 | 195,529 | ||||||
| Domino’s Pizza, Inc. | 2,500 | 192,425 | ||||||
| Brinker International, Inc. | 3,340 | 175,183 | ||||||
| Wendy’s Co. | 18,910 | 172,459 | ||||||
| Buff alo Wild Wings, Inc.* | 1,017 | 151,431 | ||||||
| Cheesecake Factory, Inc. | 3,044 | 144,986 | ||||||
| Jack in the Box, Inc.* | 2,420 | 142,635 | ||||||
| Cracker Barrel Old Country Store, Inc. | 1,450 | 140,998 | ||||||
| Texas Roadhouse, Inc. — Class A | 4,900 | 127,792 | ||||||
| Krispy Kreme Doughnuts, Inc.* | 5,740 | 101,770 | ||||||
| Total Restaurants | 4,859,278 | |||||||
| MOVIES & ENTERTAINMENT - 14.4% | ||||||||
| Walt Disney Co. | 13,934 | 1,115,694 | ||||||
| Twenty-First Century Fox, Inc. — Class A | 24,760 | 791,576 | ||||||
| Time Warner, Inc. | 11,002 | 718,761 | ||||||
| Viacom, Inc. — Class B | 6,818 | 579,462 | ||||||
| Live Nation Entertainment, Inc.* | 8,920 | 194,010 | ||||||
| Madison Square Garden Co. — Class A* | 3,360 | 190,781 | ||||||
| Cinemark Holdings, Inc. | 6,316 | 183,227 | ||||||
| Lions Gate Entertainment Corp. | 6,597 | 176,338 | ||||||
| Regal Entertainment Group — Class A | 8,770 | 163,824 | ||||||
| DreamWorks Animation SKG, Inc. — Class A* | 5,390 | 143,105 | ||||||
| World Wrestling Entertainment, Inc. — Class A | 4,610 | 133,137 | ||||||
| Total Movies & Entertainment | 4,389,915 | |||||||
| CABLE & SATELLITE - 14.1% | ||||||||
| Comcast Corp. — Class A | 21,533 | 1,077,082 | ||||||
| DIRECTV* | 7,952 | 607,692 | ||||||
| Time Warner Cable, Inc. | 4,302 | 590,148 | ||||||
| DISH Network Corp. — Class A* | 8,176 | 508,629 | ||||||
| Charter Communications, Inc. — Class A* | 2,710 | 333,872 | ||||||
| Liberty Global plc — Class A* | 7,159 | 297,814 | ||||||
| Liberty Global plc* | 7,299 | 297,142 | ||||||
| AMC Networks, Inc. — Class A* | 2,880 | 210,499 | ||||||
| Cablevision Systems Corp. — Class A | 12,208 | 205,949 | ||||||
| Starz — Class A* | 5,647 | 182,285 | ||||||
| Total Cable & Satellite | 4,311,112 | |||||||
| TOBACCO - 9.4% | ||||||||
| Philip Morris International, Inc. | 13,306 | 1,089,363 | ||||||
| Altria Group, Inc. | 22,149 | 829,037 | ||||||
| Reynolds American, Inc. | 9,505 | 507,757 | ||||||
| Lorillard, Inc. | 7,902 | 427,340 | ||||||
| Total Tobacco | 2,853,497 | |||||||
| HOTELS, RESORTS & CRUISE LINES - 8.4% | ||||||||
| Carnival Corp. | 13,014 | 492,710 | ||||||
| Hilton Worldwide Holdings, Inc.* | 19,980 | 444,355 | ||||||
| Marriott International, Inc. — Class A | 7,103 | 397,910 | ||||||
| Starwood Hotels & Resorts Worldwide, Inc. | 4,776 | 380,170 | ||||||
| Royal Caribbean Cruises Ltd. | 5,932 | 323,650 | ||||||
| Wyndham Worldwide Corp. | 3,935 | 288,160 | ||||||
| Norwegian Cruise Line Holdings Ltd.* | 7,400 | 238,798 | ||||||
| Total Hotels, Resorts & Cruise Lines | 2,565,753 | |||||||
| CASINOS & GAMING - 8.3% | ||||||||
| Las Vegas Sands Corp. | 9,587 | 774,438 | ||||||
| Wynn Resorts Ltd. | 1,971 | 437,858 | ||||||
| MGM Resorts International* | 12,970 | 335,404 | ||||||
| Melco Crown Entertainment Ltd. ADR* | 7,563 | 292,310 | ||||||
| International Game Technology | 12,358 | 173,753 | ||||||
| Bally Technologies, Inc.* | 2,357 | 156,198 | ||||||
| Caesars Entertainment Corp.* | 7,270 | 138,203 | ||||||
| Pinnacle Entertainment, Inc.* | 4,860 | 115,182 | ||||||
| Boyd Gaming Corp.* | 8,330 | 109,956 | ||||||
| Total Casinos & Gaming | 2,533,302 | |||||||
| BROADCASTING - 7.3% | ||||||||
| CBS Corp. — Class B | 8,995 | 555,892 | ||||||
| Discovery Communications, Inc. — Class A* | 6,160 | 509,432 | ||||||
| Liberty Media Corp. — Class A* | 2,690 | 351,664 | ||||||
| Scripps Networks Interactive, Inc. — Class A | 4,120 | 312,749 | ||||||
| Grupo Televisa SAB ADR | 7,490 | 249,342 | ||||||
| Sinclair Broadcast Group, Inc. — Class A | 5,560 | 150,620 | ||||||
| Nexstar Broadcasting Group, Inc. — Class A | 2,720 | 102,054 | ||||||
| Total Broadcasting | 2,231,753 | |||||||
| DISTILLERS & VINTNERS - 4.5% | ||||||||
| Brown-Forman Corp. — Class B | 4,643 | 416,431 | ||||||
| Constellation Brands, Inc. — Class A* | 4,591 | 390,097 | ||||||
| Beam, Inc. | 4,284 | 356,857 | ||||||
| Diageo plc ADR | 1,790 | 223,016 | ||||||
| Total Distillers & Vintners | 1,386,401 | |||||||
| PUBLISHING - 3.9% | ||||||||
| Thomson Reuters Corp. | 14,784 | 505,612 | ||||||
| News Corp. — Class A* | 17,073 | 293,997 | ||||||
| Gannett Company, Inc. | 8,376 | 231,178 | ||||||
| New York Times Co. — Class A | 9,040 | 154,765 | ||||||
| Total Publishing | 1,185,552 | |||||||
| LEISURE PRODUCTS - 3.9% | ||||||||
| Mattel, Inc. | 8,799 | 352,928 | ||||||
| Polaris Industries, Inc. | 2,025 | 282,913 | ||||||
| Hasbro, Inc. | 4,702 | 261,525 | ||||||
| Brunswick Corp. | 4,104 | 185,870 | ||||||
| Sturm Ruger & Company, Inc.1 | 1,620 | 96,876 | ||||||
| Total Leisure Products | 1,180,112 | |||||||
| 96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| LEISURE FUND |
| Shares | Value | |||||||
| HOME ENTERTAINMENT SOFTWARE - 3.1% | ||||||||
| Activision Blizzard, Inc. | 17,531 | $ | 358,333 | |||||
| Electronic Arts, Inc.* | 9,560 | 277,336 | ||||||
| Zynga, Inc. — Class A* | 41,050 | 176,515 | ||||||
| Take-Two Interactive Software, Inc.* | 6,459 | 141,646 | ||||||
| Total Home Entertainment Software | 953,830 | |||||||
| BREWERS - 2.9% | ||||||||
| Molson Coors Brewing Co. — Class B | 5,396 | 317,609 | ||||||
| Anheuser-Busch InBev N.V. ADR | 2,893 | 304,633 | ||||||
| AMBEV S.A. ADR | 33,730 | 249,939 | ||||||
| Total Brewers | 872,181 | |||||||
| LEISURE FACILITIES - 2.0% | ||||||||
| Six Flags Entertainment Corp. | 4,540 | 182,281 | ||||||
| SeaWorld Entertainment, Inc. | 4,990 | 150,848 | ||||||
| Vail Resorts, Inc. | 2,060 | 143,582 | ||||||
| Life Time Fitness, Inc.* | 2,819 | 135,594 | ||||||
| Total Leisure Facilities | 612,305 | |||||||
| MOTORCYCLE MANUFACTURERS - 1.2% | ||||||||
| Harley-Davidson, Inc. | 5,457 | 363,491 | ||||||
| Total Common Stocks | ||||||||
| (Cost $20,875,026) | 30,298,482 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 151,240 | 151,240 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $151,240) | 151,240 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 32,698 | 32,698 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 29,177 | 29,177 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 5,500 | 5,500 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $67,375) | 67,375 | |||||||
| Total Investments - 100.1% | ||||||||
| (Cost $21,093,641) | $ | 30,517,097 | ||||||
| Other Assets & Liabilities, net - (0.1)% | (25,408 | ) | ||||||
| Total Net Assets - 100.0% | $ | 30,491,689 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 97 |
| LEISURE FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $65,780 | ||||
| of securities loaned | ||||
| (cost $20,875,026) | $ | 30,298,482 | ||
| Repurchase agreements, at value | ||||
| (cost $218,615) | 218,615 | |||
| Total investments | ||||
| (cost $21,093,641) | 30,517,097 | |||
| Receivables: | ||||
| Securities sold | 253,897 | |||
| Fund shares sold | 178,926 | |||
| Dividends | 53,626 | |||
| Securities lending income | 243 | |||
| Total assets | 31,003,789 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 393,782 | |||
| Upon return of securities loaned | 67,375 | |||
| Management fees | 20,316 | |||
| Transfer agent and administrative fees | 5,975 | |||
| Portfolio accounting fees | 2,390 | |||
| Distribution and service fees | 2,378 | |||
| Miscellaneous | 19,884 | |||
| Total liabilities | 512,100 | |||
| Net assets | $ | 30,491,689 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 23,681,019 | ||
| Undistributed net investment income | 94,646 | |||
| Accumulated net realized loss on investments | (2,707,432 | ) | ||
| Net unrealized appreciation on investments | 9,423,456 | |||
| Net assets | $ | 30,491,689 | ||
Investor Class: | ||||
| Net assets | $ | 24,138,756 | ||
| Capital shares outstanding | 432,506 | |||
| Net asset value per share | $ | 55.81 | ||
| Advisor Class: | ||||
| Net assets | $ | 3,114,597 | ||
| Capital shares outstanding | 60,702 | |||
| Net asset value per share | $ | 51.31 | ||
| A-Class: | ||||
| Net assets | $ | 1,778,196 | ||
| Capital shares outstanding | 33,897 | |||
| Net asset value per share | $ | 52.46 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 55.08 | ||
| C-Class: | ||||
| Net assets | $ | 1,460,140 | ||
| Capital shares outstanding | 29,756 | |||
| Net asset value per share | $ | 49.07 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $8,020) | $ | 582,522 | ||
| Income from securities lending, net | 3,993 | |||
| Interest | 25 | |||
| Total investment income | 586,540 | |||
| Expenses: | ||||
| Management fees | 285,220 | |||
| Transfer agent and administrative fees | 83,888 | |||
| Distribution and service fees: | ||||
| Advisor Class | 15,229 | |||
| A-Class | 4,921 | |||
| C-Class | 12,600 | |||
| Portfolio accounting fees | 33,555 | |||
| Custodian fees | 3,725 | |||
| Trustees’ fees* | 2,762 | |||
| Line of credit interest expense | 107 | |||
| Miscellaneous | 49,887 | |||
| Total expenses | 491,894 | |||
| Net investment income | 94,646 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,028,207 | |||
| Net realized gain | 3,028,207 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 2,702,964 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 2,702,964 | |||
| Net realized and unrealized gain | 5,731,171 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 5,825,817 |
* 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. |
| LEISURE FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 94,646 | $ | 200,095 | ||||
| Net realized gain (loss) on investments | 3,028,207 | (1,458,372 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 2,702,964 | 4,422,133 | ||||||
| Net increase in net assets resulting from operations | 5,825,817 | 3,163,856 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (167,161 | ) | (21,538 | ) | ||||
| Advisor Class | (17,486 | ) | (1,404 | ) | ||||
| A-Class | (8,764 | ) | (533 | ) | ||||
| C-Class | (6,684 | ) | (670 | ) | ||||
| Total distributions to shareholders | (200,095 | ) | (24,145 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 71,016,096 | 121,992,772 | ||||||
| Advisor Class | 18,567,120 | 1,469,892 | ||||||
| A-Class | 6,654,372 | �� | 1,396,599 | |||||
| C-Class | 1,632,199 | 999,420 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 166,413 | 21,523 | ||||||
| Advisor Class | 17,418 | 1,397 | ||||||
| A-Class | 8,624 | 520 | ||||||
| C-Class | 6,192 | 625 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (73,669,092 | ) | (115,360,323 | ) | ||||
| Advisor Class | (17,145,281 | ) | (1,820,349 | ) | ||||
| A-Class | (6,623,023 | ) | (584,020 | ) | ||||
| C-Class | (1,347,238 | ) | (1,535,038 | ) | ||||
| Net increase (decrease) from capital share transactions | (716,200 | ) | 6,583,018 | |||||
| Net increase in net assets | 4,909,522 | 9,722,729 | ||||||
| Net assets: | ||||||||
| Beginning of year | 25,582,167 | 15,859,438 | ||||||
| End of year | $ | 30,491,689 | $ | 25,582,167 | ||||
| Undistributed net investment income at end of year | $ | 94,646 | $ | 200,095 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 1,384,928 | 3,272,413 | ||||||
| Advisor Class | 385,324 | 41,315 | ||||||
| A-Class | 134,495 | 36,502 | ||||||
| C-Class | 36,131 | 28,954 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 3,093 | 562 | ||||||
| Advisor Class | 351 | 39 | ||||||
| A-Class | 170 | 14 | ||||||
| C-Class | 130 | 18 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (1,445,332 | ) | (3,126,614 | ) | ||||
| Advisor Class | (354,839 | ) | (51,650 | ) | ||||
| A-Class | (134,028 | ) | (16,098 | ) | ||||
| C-Class | (29,738 | ) | (46,312 | ) | ||||
| Net increase (decrease) in shares | (19,315 | ) | 139,143 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 99 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 44.93 | $ | 36.94 | $ | 33.50 | $ | 27.48 | $ | 15.40 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .20 | .36 | .17 | (.02 | ) | .03 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 10.95 | 7.66 | 3.27 | 6.04 | 12.05 | |||||||||||||||
| Total from investment operations | 11.15 | 8.02 | 3.44 | 6.02 | 12.08 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Total distributions | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 55.81 | $ | 44.93 | $ | 36.94 | $ | 33.50 | $ | 27.48 | ||||||||||
| Total Returnb | 24.83 | % | 21.74 | % | 10.27 | % | 21.91 | % | 78.44 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 24,139 | $ | 22,005 | $ | 12,687 | $ | 2,141 | $ | 13,186 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.39 | % | 0.92 | % | 0.49 | % | (0.07 | %) | 0.13 | % | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.35 | % | 1.39 | % | 1.37 | % | ||||||||||
| Portfolio turnover rate | 265 | % | 517 | % | 797 | % | 963 | % | 943 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.54 | $ | 34.33 | $ | 31.29 | $ | 25.81 | $ | 14.53 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.11 | ) | .29 | (.01 | ) | (.16 | ) | (.11 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 10.15 | 6.95 | 3.05 | 5.64 | 11.39 | |||||||||||||||
| Total from investment operations | 10.04 | 7.24 | 3.04 | 5.48 | 11.28 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Total distributions | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 51.31 | $ | 41.54 | $ | 34.33 | $ | 31.29 | $ | 25.81 | ||||||||||
| Total Returnb | 24.18 | % | 21.12 | % | 9.72 | % | 21.23 | % | 77.63 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,115 | $ | 1,241 | $ | 1,379 | $ | 582 | $ | 1,111 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.23 | %) | 0.80 | % | (0.03 | %) | (0.61 | %) | (0.56 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.86 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 265 | % | 517 | % | 797 | % | 963 | % | 943 | % | ||||||||||
| 100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| LEISURE FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 42.35 | $ | 34.91 | $ | 31.75 | $ | 26.13 | $ | 14.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .04 | .29 | .07 | (.05 | ) | .17 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 10.34 | 7.18 | 3.09 | 5.67 | 11.29 | |||||||||||||||
| Total from investment operations | 10.38 | 7.47 | 3.16 | 5.62 | 11.46 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Total distributions | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 52.46 | $ | 42.35 | $ | 34.91 | $ | 31.75 | $ | 26.13 | ||||||||||
| Total Returnb | 24.53 | % | 21.42 | % | 9.95 | % | 21.51 | % | 78.12 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,778 | $ | 1,409 | $ | 448 | $ | 1,157 | $ | 489 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.09 | % | 0.80 | % | 0.23 | % | (0.18 | %) | 0.74 | % | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.60 | % | 1.63 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 265 | % | 517 | % | 797 | % | 963 | % | 943 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 39.92 | $ | 33.16 | $ | 30.36 | $ | 25.19 | $ | 14.26 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.27 | ) | .01 | (.15 | ) | (.30 | ) | (.22 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 9.69 | 6.78 | 2.95 | 5.47 | 11.15 | |||||||||||||||
| Total from investment operations | 9.42 | 6.79 | 2.80 | 5.17 | 10.93 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Total distributions | (.27 | ) | (.03 | ) | — | — | — | |||||||||||||
| Net asset value, end of period | $ | 49.07 | $ | 39.92 | $ | 33.16 | $ | 30.36 | $ | 25.19 | ||||||||||
| Total Returnb | 23.61 | % | 20.54 | % | 9.19 | % | 20.52 | % | 76.65 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,460 | $ | 928 | $ | 1,345 | $ | 828 | $ | 929 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.59 | %) | 0.03 | % | (0.50 | %) | (1.13 | %) | (1.01 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.35 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 265 | % | 517 | % | 797 | % | 963 | % | 943 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Precious Metals Fund Investor Class returned -30.37%, compared with 23.29% for the S&P 500 Materials Index. The broader S&P 500 Index returned 21.86%.
The gold mining industry was the main detractor from return, followed by the silver mining segment. The diversified metals & mining industry was the only industry contributing to return for the period.
Freeport-McMoRan Copper & Gold, Inc., Franco-Nevada Corp. and Silver Standard Resources, Inc. were the leading contributors to return. Newmont Mining Corp., Barrick Gold Corp. and Kinross Gold Corp. detracted 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 Dates:
| Investor Class | December 1, 1993 | |
| Advisor Class | August 1, 2003 | |
| A-Class | September 1, 2004 | |
| C-Class | April 27, 2001 | |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Freeport-McMoRan Copper & Gold, Inc. | 9.9 | % | ||
| Barrick Gold Corp. | 7.3 | % | ||
| Newmont Mining Corp. | 7.0 | % | ||
| Goldcorp, Inc. | 6.0 | % | ||
| Silver Wheaton Corp. | 4.5 | % | ||
| Southern Copper Corp. | 3.8 | % | ||
| Yamana Gold, Inc. | 3.6 | % | ||
| Agnico Eagle Mines Ltd. | 3.5 | % | ||
| Randgold Resources Ltd. ADR | 3.5 | % | ||
| AngloGold Ashanti Ltd. ADR | 3.1 | % | ||
| Top Ten Total | 52.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 102 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014 %
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | -30.37% | -4.15% | -1.66% | |||||||||
| Advisor Class Shares | -30.71% | -4.62% | -2.13% | |||||||||
| C-Class Shares | -31.05% | -5.10% | -2.64% | |||||||||
| C-Class Shares with CDSC‡ | -31.74% | -5.10% | -2.64% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Materials Index | 23.29% | 19.97% | 8.75% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | -30.52% | -4.39% | -0.22% | |||||||||
| A-Class Shares with sales charge† | -33.83% | -5.32% | -0.73% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Materials Index | 23.29% | 19.97% | 8.87% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 103 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| PRECIOUS METALS FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 100.2% | ||||||||
| GOLD - 66.7% | ||||||||
| Barrick Gold Corp. | 252,936 | $ | 4,509,849 | |||||
| Newmont Mining Corp. | 182,903 | 4,287,246 | ||||||
| Goldcorp, Inc. | 149,318 | 3,655,305 | ||||||
| Yamana Gold, Inc.1 | 252,416 | 2,216,212 | ||||||
| Agnico Eagle Mines Ltd. | 71,252 | 2,155,373 | ||||||
| Randgold Resources Ltd. ADR | 28,469 | 2,135,175 | ||||||
| AngloGold Ashanti Ltd. ADR* | 111,015 | 1,896,136 | ||||||
| Royal Gold, Inc. | 28,933 | 1,811,784 | ||||||
| Kinross Gold Corp. | 419,606 | 1,737,169 | ||||||
| Franco-Nevada Corp. | 35,459 | 1,626,150 | ||||||
| Eldorado Gold Corp. | 277,497 | 1,548,433 | ||||||
| Cia de Minas Buenaventura | ||||||||
| SAA ADR | 118,985 | 1,495,641 | ||||||
| IAMGOLD Corp. | 418,390 | 1,472,733 | ||||||
| Gold Fields Ltd. ADR | 347,252 | 1,281,360 | ||||||
| New Gold, Inc.* | 245,840 | 1,199,699 | ||||||
| Allied Nevada Gold Corp.*,1 | 240,250 | 1,035,478 | ||||||
| AuRico Gold, Inc. | 213,209 | 927,459 | ||||||
| Harmony Gold Mining Company | ||||||||
| Ltd. ADR* | 267,376 | 815,497 | ||||||
| McEwen Mining, Inc.*,1 | 286,461 | 678,913 | ||||||
| Sibanye Gold Ltd. ADR | 75,775 | 631,206 | ||||||
| Novagold Resources, Inc.* | 168,053 | 606,671 | ||||||
| B2Gold Corp.*,1 | 224,387 | 603,601 | ||||||
| Alamos Gold, Inc. | 63,929 | 576,640 | ||||||
| Pretium Resources, Inc.*,1 | 97,428 | 561,185 | ||||||
| Seabridge Gold, Inc.*,1 | 75,766 | 536,423 | ||||||
| Sandstorm Gold Ltd.* | 88,900 | 495,173 | ||||||
| Gold Resource Corp.1 | 93,593 | 447,375 | ||||||
| Total Gold | 40,943,886 | |||||||
| SILVER - 15.0% | ||||||||
| Silver Wheaton Corp. | 120,366 | 2,732,309 | ||||||
| Pan American Silver Corp. | 104,177 | 1,340,758 | ||||||
| Coeur Mining, Inc.* | 117,428 | 1,090,906 | ||||||
| Hecla Mining Co.1 | 349,246 | 1,072,185 | ||||||
| First Majestic Silver Corp.* | 98,666 | 951,140 | ||||||
| Silver Standard Resources, Inc.* | 91,782 | 911,395 | ||||||
| Endeavour Silver Corp.*,1 | 150,086 | 646,871 | ||||||
| Silvercorp Metals, Inc.1 | 243,415 | 474,659 | ||||||
| Total Silver | 9,220,223 | |||||||
| DIVERSIFIED METALS & MINING - 15.0% | ||||||||
| Freeport-McMoRan Copper & Gold, Inc. | 182,987 | 6,051,380 | ||||||
| Southern Copper Corp. | 80,434 | 2,341,434 | ||||||
| RTI International Metals, Inc.* | 28,600 | 794,508 | ||||||
| Total Diversified Metals & Mining | 9,187,322 | |||||||
| PRECIOUS METALS & MINERALS - 3.5% | ||||||||
| Stillwater Mining Co.* | 81,936 | 1,213,472 | ||||||
| Dominion Diamond Corp.* | 41,122 | 551,857 | ||||||
| Tahoe Resources, Inc.* | 17,653 | 373,361 | ||||||
| Total Precious Metals & Minerals | 2,138,690 | |||||||
| Total Common Stocks | ||||||||
| (Cost $38,528,835) | 61,490,121 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 285,469 | 285,469 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $285,469) | 285,469 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 10.1% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 3,007,178 | 3,007,178 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 2,683,327 | 2,683,327 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 505,853 | 505,853 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $6,196,358) | 6,196,358 | |||||||
| Total Investments - 110.8% | ||||||||
| (Cost $45,010,662) | $ | 67,971,948 | ||||||
| Other Assets & Liabilities, net - (10.8)% | (6,632,697 | ) | ||||||
| Total Net Assets - 100.0% | $ | 61,339,251 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. ADR — American Depositary Receipt |
| 104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| PRECIOUS METALS FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including | ||||
| $5,657,182 of securities loaned | ||||
| (cost $38,528,835) | $ | 61,490,121 | ||
| Repurchase agreements, at value | ||||
| (cost $6,481,827) | 6,481,827 | |||
| Total investments | ||||
| (cost $45,010,662) | 67,971,948 | |||
| Receivables: | ||||
| Securities sold | 4,812,086 | |||
| Fund shares sold | 352,564 | |||
| Dividends | 25,420 | |||
| Securities lending income | 8,337 | |||
| Total assets | 73,170,355 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 6,196,358 | |||
| Fund shares redeemed | 5,511,660 | |||
| Management fees | 44,524 | |||
| Transfer agent and administrative fees | 14,841 | |||
| Distribution and service fees | 12,045 | |||
| Portfolio accounting fees | 5,936 | |||
| Miscellaneous | 45,740 | |||
| Total liabilities | 11,831,104 | |||
| Net assets | $ | 61,339,251 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 86,656,598 | ||
| Undistributed net investment income | 741,411 | |||
| Accumulated net realized loss on investments | (49,020,040 | ) | ||
| Net unrealized appreciation on investments | 22,961,282 | |||
| Net assets | $ | 61,339,251 | ||
| Investor Class: | ||||
| Net assets | $ | 42,845,520 | ||
| Capital shares outstanding | 1,197,437 | |||
| Net asset value per share | $ | 35.78 | ||
| Advisor Class: | ||||
| Net assets | $ | 4,008,513 | ||
| Capital shares outstanding | 118,191 | |||
| Net asset value per share | $ | 33.92 | ||
| A-Class: | ||||
| Net assets | $ | 5,235,148 | ||
| Capital shares outstanding | 150,662 | |||
| Net asset value per share | $ | 34.75 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 36.48 | ||
| C-Class: | ||||
| Net assets | $ | 9,250,070 | ||
| Capital shares outstanding | 295,147 | |||
| Net asset value per share | $ | 31.34 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding | ||||
| tax of $94,285) | $ | 1,574,057 | ||
| Income from securities lending, net | 48,885 | |||
| Interest | 57 | |||
| Total investment income | 1,622,999 | |||
| Expenses: | ||||
| Management fees | 559,642 | |||
| Transfer agent and administrative fees | 186,547 | |||
| Distribution and service fees: | ||||
| Advisor Class | 23,341 | |||
| A-Class | 10,909 | |||
| C-Class | 110,717 | |||
| Portfolio accounting fees | 74,616 | |||
| Registration fees | 60,681 | |||
| Trustees’ fees* | 11,237 | |||
| Custodian fees | 7,449 | |||
| Line of credit interest expense | 216 | |||
| Miscellaneous | 45,917 | |||
| Total expenses | 1,091,272 | |||
| Net investment income | 531,727 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (21,811,676 | ) | ||
| Foreign currency | (189 | ) | ||
| Net realized loss | (21,811,865 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (18,958,801 | ) | ||
| Foreign currency | (5 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (18,958,806 | ) | ||
| Net realized and unrealized loss | (40,770,671 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (40,238,944 | ) |
* 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 |
| PRECIOUS METALS FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 531,727 | $ | 472,985 | ||||
| Net realized loss on investments | (21,811,865 | ) | (2,819,942 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | (18,958,806 | ) | (17,844,799 | ) | ||||
| Net decrease in net assets resulting from operations | (40,238,944 | ) | (20,191,756 | ) | ||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (214,700 | ) | (192,477 | ) | ||||
| Advisor Class | (17,921 | ) | (8,168 | ) | ||||
| A-Class | (18,796 | ) | (15,320 | ) | ||||
| C-Class | (51,914 | ) | (41,649 | ) | ||||
| Net realized gains | ||||||||
| Investor Class | — | (4,128,966 | ) | |||||
| Advisor Class | — | (175,216 | ) | |||||
| A-Class | — | (328,641 | ) | |||||
| C-Class | — | (893,443 | ) | |||||
| Total distributions to shareholders | (303,331 | ) | (5,783,880 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 338,664,021 | 366,675,941 | ||||||
| Advisor Class | 73,664,880 | 66,385,396 | ||||||
| A-Class | 8,057,501 | 10,420,356 | ||||||
| C-Class | 25,324,298 | 55,350,011 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 205,735 | 4,213,393 | ||||||
| Advisor Class | 17,782 | 181,989 | ||||||
| A-Class | 15,489 | 258,731 | ||||||
| C-Class | 49,648 | 916,449 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (336,034,319 | ) | (362,487,037 | ) | ||||
| Advisor Class | (71,421,958 | ) | (71,618,028 | ) | ||||
| A-Class | (6,716,766 | ) | (9,211,579 | ) | ||||
| C-Class | (29,074,122 | ) | (58,172,115 | ) | ||||
| Net increase from capital share transactions | 2,752,189 | 2,913,507 | ||||||
| Net decrease in net assets | (37,790,086 | ) | (23,062,129 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 99,129,337 | 122,191,466 | ||||||
| End of year | $ | 61,339,251 | $ | 99,129,337 | ||||
| Undistributed net investment income at end of year | $ | 741,411 | $ | 291,910 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 8,791,258 | 5,958,091 | ||||||
| Advisor Class | 2,073,315 | 1,151,300 | ||||||
| A-Class | 216,466 | 174,830 | ||||||
| C-Class | 747,420 | 1,016,646 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 6,301 | 65,701 | ||||||
| Advisor Class | 574 | 2,974 | ||||||
| A-Class | 488 | 4,140 | ||||||
| C-Class | 1,730 | 16,087 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (8,982,178 | ) | (5,853,272 | ) | ||||
| Advisor Class | (2,019,696 | ) | (1,242,772 | ) | ||||
| A-Class | (185,372 | ) | (159,753 | ) | ||||
| C-Class | (860,994 | ) | (1,075,323 | ) | ||||
| Net increase (decrease) in shares | (210,688 | ) | 58,649 | |||||
| 106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 51.65 | $ | 65.73 | $ | 86.74 | $ | 61.73 | $ | 46.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .36 | .34 | (.02 | ) | (.28 | ) | (.44 | ) | ||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (16.06 | ) | (12.12 | ) | (20.70 | ) | 25.32 | 15.96 | ||||||||||||
| Total from investment operations | (15.70 | ) | (11.78 | ) | (20.72 | ) | 25.04 | 15.52 | ||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.17 | ) | (.10 | ) | (.29 | ) | (.03 | ) | — | |||||||||||
| Net realized gains | — | (2.20 | ) | — | — | (.08 | ) | |||||||||||||
| Return of capital | — | — | — | — | (.07 | ) | ||||||||||||||
| Total distributions | (.17 | ) | (2.30 | ) | (.29 | ) | (.03 | ) | (.15 | ) | ||||||||||
| Net asset value, end of period | $ | 35.78 | $ | 51.65 | $ | 65.73 | $ | 86.74 | $ | 61.73 | ||||||||||
| Total Returnb | (30.37 | %) | (18.60 | %) | (23.91 | %) | 40.57 | % | 33.44 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 42,846 | $ | 71,386 | $ | 79,637 | $ | 141,798 | $ | 113,546 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.96 | % | 0.55 | % | (0.03 | %) | (0.37 | %) | (0.76 | %) | ||||||||||
| Total expenses | 1.27 | % | 1.25 | % | 1.26 | % | 1.28 | % | 1.28 | % | ||||||||||
| Portfolio turnover rate | 348 | % | 206 | % | 235 | % | 322 | % | 383 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.20 | $ | 63.02 | $ | 83.59 | $ | 59.79 | $ | 45.12 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .12 | (.02 | ) | (.44 | ) | (.61 | ) | (.79 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | (15.23 | ) | (11.50 | ) | (19.84 | ) | 24.44 | 15.61 | ||||||||||||
| Total from investment operations | (15.11 | ) | (11.52 | ) | (20.28 | ) | 23.83 | 14.82 | ||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.17 | ) | (.10 | ) | (.29 | ) | (.03 | ) | — | |||||||||||
| Net realized gains | — | (2.20 | ) | — | — | (.08 | ) | |||||||||||||
| Return of capital | — | — | — | — | (.07 | ) | ||||||||||||||
| Total distributions | (.17 | ) | (2.30 | ) | (.29 | ) | (.03 | ) | (.15 | ) | ||||||||||
| Net asset value, end of period | $ | 33.92 | $ | 49.20 | $ | 63.02 | $ | 83.59 | $ | 59.79 | ||||||||||
| Total Returnb | (30.71 | %) | (18.99 | %) | (24.29 | %) | 39.87 | % | 32.81 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,009 | $ | 3,148 | $ | 9,610 | $ | 30,418 | $ | 18,677 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.34 | % | (0.04 | %) | (0.59 | %) | (0.86 | %) | (1.35 | %) | ||||||||||
| Total expenses | 1.77 | % | 1.75 | % | 1.76 | % | 1.78 | % | 1.77 | % | ||||||||||
| Portfolio turnover rate | 348 | % | 206 | % | 235 | % | 322 | % | 383 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
| PRECIOUS METALS FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 50.28 | $ | 64.21 | $ | 84.97 | $ | 60.63 | $ | 45.64 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .16 | .21 | (.22 | ) | (.45 | ) | (.59 | ) | ||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (15.52 | ) | (11.84 | ) | (20.25 | ) | 24.82 | 15.73 | ||||||||||||
| Total from investment operations | (15.36 | ) | (11.63 | ) | (20.47 | ) | 24.37 | 15.14 | ||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.17 | ) | (.10 | ) | (.29 | ) | (.03 | ) | — | |||||||||||
| Net realized gains | — | (2.20 | ) | — | — | (.08 | ) | |||||||||||||
| Return of capital | — | — | — | — | (.07 | ) | ||||||||||||||
| Total distributions | (.17 | ) | (2.30 | ) | (.29 | ) | (.03 | ) | (.15 | ) | ||||||||||
| Net asset value, end of period | $ | 34.75 | $ | 50.28 | $ | 64.21 | $ | 84.97 | $ | 60.63 | ||||||||||
| Total Returnb | (30.52 | %) | (18.80 | %) | (24.13 | %) | 40.21 | % | 33.14 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,235 | $ | 5,988 | $ | 6,412 | $ | 14,919 | $ | 8,422 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.45 | % | 0.35 | % | (0.30 | %) | (0.63 | %) | (1.04 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.51 | % | 1.53 | % | 1.52 | % | ||||||||||
| Portfolio turnover rate | 348 | % | 206 | % | 235 | % | 322 | % | 383 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.72 | $ | 59.02 | $ | 78.70 | $ | 56.58 | $ | 42.92 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.07 | ) | (.23 | ) | (.72 | ) | (.94 | ) | (.97 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (14.14 | ) | (10.77 | ) | (18.67 | ) | 23.09 | 14.78 | ||||||||||||
| Total from investment operations | (14.21 | ) | (11.00 | ) | (19.39 | ) | 22.15 | 13.81 | ||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.17 | ) | (.10 | ) | (.29 | ) | (.03 | ) | — | |||||||||||
| Net realized gains | — | (2.20 | ) | — | — | (.08 | ) | |||||||||||||
| Return of capital | — | — | — | — | (.07 | ) | ||||||||||||||
| Total distributions | (.17 | ) | (2.30 | ) | (.29 | ) | (.03 | ) | (.15 | ) | ||||||||||
| Net asset value, end of period | $ | 31.34 | $ | 45.72 | $ | 59.02 | $ | 78.70 | $ | 56.58 | ||||||||||
| Total Returnb | (31.05 | %) | (19.39 | %) | (24.68 | %) | 39.18 | % | 32.14 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 9,250 | $ | 18,608 | $ | 26,533 | $ | 39,650 | $ | 23,483 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.22 | %) | (0.42 | %) | (1.04 | %) | (1.37 | %) | (1.81 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.25 | % | 2.26 | % | 2.28 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 348 | % | 206 | % | 235 | % | 322 | % | 383 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 109 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Real Estate Fund H-Class gained 1.84%, compared to a gain of 4.28% for the MSCI U.S. REIT Index. The Fund maintained a daily correlation of over 98% to its benchmark.
The hotel & resorts REITs contributed most to the performance of the Fund, followed by residential REITs. Health care REITs and mortgage REITs were the largest detractors from performance.
The strongest performing holdings included Altisource Portfolio Solutions S.A., Howard Hughes Corp. and NorthStar Realty Finance Corp. The main detractors were Annaly Capital Management, Inc., American Capital Agency Corp. and HCP, 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 Dates: | |
| A-Class | September 1, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Simon Property Group, Inc. | 2.5 | % | ||
| American Tower Corp. — Class A | 2.0 | % | ||
| Public Storage | 1.8 | % | ||
| Crown Castle International Corp. | 1.7 | % | ||
| Equity Residential | 1.6 | % | ||
| Prologis, Inc. | 1.6 | % | ||
| General Growth Properties, Inc. | 1.5 | % | ||
| HCP, Inc. | 1.5 | % | ||
| Ventas, Inc. | 1.5 | % | ||
| Health Care REIT, Inc. | 1.5 | % | ||
| Top Ten Total | 17.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 110 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 | |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 1.09% | 22.80% | 3.50% | |||||||||
| C-Class Shares with CDSC‡ | 0.13% | 22.80% | 3.50% | |||||||||
| H-Class Shares | 1.84% | 23.77% | 4.28% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| MSCI U.S. REIT Index | 4.28% | 28.79% | 8.20% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 1.86% | 23.80% | 4.49% | |||||||||
| A-Class Shares with sales charge† | -2.98% | 22.60% | 3.96% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| MSCI U.S. REIT Index | 4.28% | 28.79% | 8.29% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the MSCI U.S. REIT are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. | |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. | |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 111 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| REAL ESTATE FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.3% | ||||||||
| REAL ESTATE INVESTMENT TRUSTS (REITs) - 90.1% | ||||||||
| SPECIALIZED REITs - 26.2% | ||||||||
| American Tower Corp. — Class A | 6,322 | $ | 517,582 | |||||
| Public Storage | 2,813 | 473,962 | ||||||
| HCP, Inc. | 10,295 | 399,343 | ||||||
| Ventas, Inc. | 6,469 | 391,827 | ||||||
| Health Care REIT, Inc. | 6,544 | 390,022 | ||||||
| Weyerhaeuser Co. | 12,849 | 377,118 | ||||||
| Host Hotels & Resorts, Inc. | 17,779 | 359,847 | ||||||
| Plum Creek Timber Company, Inc. | 5,902 | 248,120 | ||||||
| Rayonier, Inc. | 4,858 | 223,031 | ||||||
| Extra Space Storage, Inc. | 4,547 | 220,575 | ||||||
| Senior Housing Properties Trust | 8,535 | 191,781 | ||||||
| Hospitality Properties Trust | 6,633 | 190,500 | ||||||
| Omega Healthcare Investors, Inc. | 5,638 | 188,986 | ||||||
| Corrections Corporation of America | 5,469 | 171,289 | ||||||
| RLJ Lodging Trust | 6,110 | 163,381 | ||||||
| LaSalle Hotel Properties | 5,186 | 162,374 | ||||||
| Healthcare Trust of America, Inc. — Class A | 13,421 | 152,865 | ||||||
| EPR Properties | 2,789 | 148,905 | ||||||
| Sunstone Hotel Investors, Inc. | 10,531 | 144,591 | ||||||
| Healthcare Realty Trust, Inc. | 5,873 | 141,833 | ||||||
| Geo Group, Inc. | 4,390 | 141,534 | ||||||
| CubeSmart | 8,247 | 141,519 | ||||||
| DiamondRock Hospitality Co. | 11,863 | 139,390 | ||||||
| Sovran Self Storage, Inc. | 1,868 | 137,205 | ||||||
| Medical Properties Trust, Inc. | 10,719 | 137,096 | ||||||
| Pebblebrook Hotel Trust | 3,970 | 134,067 | ||||||
| Strategic Hotels & Resorts, Inc.* | 12,848 | 130,921 | ||||||
| Ryman Hospitality Properties, Inc. | 3,010 | 127,985 | ||||||
| National Health Investors, Inc. | 2,060 | 124,548 | ||||||
| Alexander & Baldwin, Inc. | 2,880 | 122,573 | ||||||
| Potlatch Corp. | 2,859 | 110,615 | ||||||
| LTC Properties, Inc. | 2,690 | 101,225 | ||||||
| Hersha Hospitality Trust — Class A | 16,940 | 98,760 | ||||||
| Total Specialized REITs | 6,905,370 | |||||||
| RETAIL REITs - 15.9% | ||||||||
| Simon Property Group, Inc. | 4,031 | 661,083 | ||||||
| General Growth Properties, Inc. | 18,468 | 406,296 | ||||||
| Macerich Co. | 4,420 | 275,499 | ||||||
| Kimco Realty Corp. | 12,565 | 274,922 | ||||||
| Realty Income Corp. | 6,589 | 269,227 | ||||||
| Federal Realty Investment Trust | 2,145 | 246,074 | ||||||
| DDR Corp. | 13,557 | 223,419 | ||||||
| Regency Centers Corp. | 3,965 | 202,453 | ||||||
| National Retail Properties, Inc. | 5,581 | 191,540 | ||||||
| Taubman Centers, Inc. | 2,663 | 188,514 | ||||||
| Weingarten Realty Investors | 5,923 | 177,690 | ||||||
| Tanger Factory Outlet Centers, Inc. | 4,776 | 167,160 | ||||||
| CBL & Associates Properties, Inc. | 9,297 | 165,022 | ||||||
| Retail Properties of America, Inc. — Class A | 12,010 | 162,615 | ||||||
| Equity One, Inc. | 6,923 | 154,660 | ||||||
| Acadia Realty Trust | 4,220 | 111,324 | ||||||
| Glimcher Realty Trust | 11,083 | 111,162 | ||||||
| Pennsylvania Real Estate Investment Trust | 5,750 | 103,788 | ||||||
| Rouse Properties, Inc. | 5,350 | 92,234 | ||||||
| Total Retail REITs | 4,184,682 | |||||||
| RESIDENTIAL REITs - 12.4% | ||||||||
| Equity Residential | 7,249 | 420,371 | ||||||
| AvalonBay Communities, Inc. | 2,775 | 364,413 | ||||||
| Essex Property Trust, Inc. | 1,428 | 242,831 | ||||||
| UDR, Inc. | 9,048 | 233,710 | ||||||
| Camden Property Trust | 3,130 | 210,774 | ||||||
| Mid-America Apartment Communities, Inc. | 2,924 | 199,621 | ||||||
| BRE Properties, Inc. | 3,105 | 194,932 | ||||||
| Apartment Investment & Management Co. — Class A | 6,314 | 190,809 | ||||||
| American Campus Communities, Inc. | 4,903 | 183,127 | ||||||
| Equity Lifestyle Properties, Inc. | 4,112 | 167,153 | ||||||
| Home Properties, Inc. | 2,729 | 164,067 | ||||||
| American Homes 4 Rent — Class A | 9,390 | 156,907 | ||||||
| Post Properties, Inc. | 2,943 | 144,501 | ||||||
| Sun Communities, Inc. | 2,650 | 119,489 | ||||||
| Starwood Waypoint Residential Trust* | 3,432 | 98,807 | ||||||
| Education Realty Trust, Inc. | 9,883 | 97,545 | ||||||
| Associated Estates Realty Corp. | 5,330 | 90,290 | ||||||
| Total Residential REITs | 3,279,347 | |||||||
| OFFICE REITs - 12.1% | ||||||||
| Boston Properties, Inc. | 3,326 | 380,926 | ||||||
| SL Green Realty Corp. | 2,746 | 276,302 | ||||||
| Digital Realty Trust, Inc.1 | 4,708 | 249,900 | ||||||
| Alexandria Real Estate Equities, Inc. | 2,769 | 200,919 | ||||||
| Kilroy Realty Corp. | 3,396 | 198,938 | ||||||
| BioMed Realty Trust, Inc. | 8,918 | 182,730 | ||||||
| Douglas Emmett, Inc. | 6,630 | 179,938 | ||||||
| Columbia Property Trust, Inc. | 6,310 | 171,948 | ||||||
| Highwoods Properties, Inc. | 4,440 | 170,540 | ||||||
| CommonWealth REIT | 6,022 | 158,379 | ||||||
| Piedmont Office Realty Trust, Inc. — Class A | 8,736 | 149,822 | ||||||
| Corporate Office Properties Trust | 5,354 | 142,631 | ||||||
| Brandywine Realty Trust | 9,574 | 138,440 | ||||||
| Mack-Cali Realty Corp. | 6,005 | 124,844 | ||||||
| Parkway Properties, Inc. | 6,730 | 122,823 | ||||||
| DuPont Fabros Technology, Inc. | 4,889 | 117,678 | ||||||
| Hudson Pacific Properties, Inc. | 4,850 | 111,890 | ||||||
| Government Properties Income Trust | 4,305 | 108,486 | ||||||
| Total Office REITs | 3,187,134 | |||||||
| MORTGAGE REITs - 8.9% | ||||||||
| Annaly Capital Management, Inc. | 26,555 | 291,307 | ||||||
| American Capital Agency Corp. | 11,653 | 250,423 | ||||||
| NorthStar Realty Finance Corp. | 12,850 | 207,399 | ||||||
| Starwood Property Trust, Inc. | 8,232 | 194,193 | ||||||
| Two Harbors Investment Corp. | 17,100 | 175,275 | ||||||
| MFA Financial, Inc. | 19,652 | 152,303 | ||||||
| Colony Financial, Inc. | 5,850 | 128,408 | ||||||
| Invesco Mortgage Capital, Inc. | 7,779 | 128,120 | ||||||
| Hatteras Financial Corp. | 6,407 | 120,772 | ||||||
| Redwood Trust, Inc. | 5,800 | 117,624 | ||||||
| 112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| REAL ESTATE FUND |
| Shares | Value | |||||||
| New Residential Investment Corp. | 17,400 | $ | 112,578 | |||||
| CYS Investments, Inc. | 12,676 | 104,704 | ||||||
| iStar Financial, Inc.* | 6,990 | 103,172 | ||||||
| Capstead Mortgage Corp. | 7,839 | 99,242 | ||||||
| Blackstone Mortgage Trust, Inc. — Class A | 3,230 | 92,863 | ||||||
| PennyMac Mortgage Investment Trust | 2,900 | 69,310 | ||||||
| Total Mortgage REITs | 2,347,693 | |||||||
| DIVERSIFED REITs - 8.3% | ||||||||
| Vornado Realty Trust | 3,941 | 388,424 | ||||||
| American Realty Capital Properties, Inc. | 21,724 | 304,570 | ||||||
| WP Carey, Inc. | 3,642 | 218,775 | ||||||
| Duke Realty Corp. | 12,943 | 218,478 | ||||||
| Liberty Property Trust | 5,796 | 214,220 | ||||||
| Spirit Realty Capital, Inc. | 16,823 | 184,717 | ||||||
| Lexington Realty Trust | 13,293 | 145,027 | ||||||
| Cousins Properties, Inc. | 12,200 | 139,934 | ||||||
| PS Business Parks, Inc. | 1,660 | 138,809 | ||||||
| Chambers Street Properties | 15,870 | 123,310 | ||||||
| Washington Real Estate Investment Trust | 4,860 | 116,057 | ||||||
| Total Diversifed REITs | 2,192,321 | |||||||
| INDUSTRIAL REITs - 3.1% | ||||||||
| Prologis, Inc. | 10,119 | 413,158 | ||||||
| DCT Industrial Trust, Inc. | 18,580 | 146,410 | ||||||
| First Industrial Realty Trust, Inc. | 7,140 | 137,945 | ||||||
| EastGroup Properties, Inc. | 1,950 | 122,675 | ||||||
| Total Industrial REITs | 820,188 | |||||||
| WIRELESS TELECOMMUNICATION SERVICES - 1.7% | ||||||||
| Crown Castle International Corp. | 6,110 | 450,796 | ||||||
| REAL ESTATE OPERATING COMPANIES - 0.8% | ||||||||
| Altisource Residential Corp. | 6,930 | 218,711 | ||||||
| CASINOS & GAMING - 0.7% | ||||||||
| Gaming and Leisure Properties, Inc. | 5,063 | 184,597 | ||||||
| Total Real Estate Investment Trusts (REITs) | 23,770,839 | |||||||
| REAL ESTATE MANAGEMENT & DEVELOPMENT - 9.2% | ||||||||
| REAL ESTATE SERVICES - 5.3% | ||||||||
| CBRE Group, Inc. — Class A* | 9,810 | 269,087 | ||||||
| Realogy Holdings Corp.* | 5,124 | 222,638 | ||||||
| Altisource Asset Management Corp.* | 200 | 214,930 | ||||||
| Jones Lang LaSalle, Inc. | 1,683 | 199,436 | ||||||
| Altisource Portfolio Solutions S.A.* | 1,632 | 198,549 | ||||||
| E-House China Holdings Ltd. ADR | 14,740 | 178,207 | ||||||
| Kennedy-Wilson Holdings, Inc. | 5,680 | 127,857 | ||||||
| Total Real Estate Services | 1,410,704 | |||||||
| REAL ESTATE OPERATING COMPANIES - 1.8% | ||||||||
| Brookfield Office Properties, Inc. | 14,656 | 283,594 | ||||||
| Forest City Enterprises, Inc. — Class A* | 9,382 | 179,196 | ||||||
| Total Real Estate Operating Companies | 462,790 | |||||||
| DIVERSIFIED REAL ESTATE ACTIVITIES - 1.3% | ||||||||
| Brookfield Asset Management, Inc. — Class A | 5,090 | 207,927 | ||||||
| St. Joe Co.* | 6,405 | 123,296 | ||||||
| Total Diversified Real Estate Activities | 331,223 | |||||||
| REAL ESTATE DEVELOPMENT - 0.8% | ||||||||
| Howard Hughes Corp.* | 1,482 | 211,496 | ||||||
| Total Real Estate Management & Development | 2,416,213 | |||||||
| Total Common Stocks | ||||||||
| (Cost $22,138,584) | 26,187,052 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.2% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 51,698 | 51,698 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $51,698) | 51,698 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.4% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 53,142 | 53,142 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 47,419 | 47,419 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 8,939 | 8,939 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $109,500) | 109,500 | |||||||
| Total Investments - 99.9% | ||||||||
| (Cost $22,299,782) | $ | 26,348,250 | ||||||
| Other Assets & Liabilities, net - 0.1% | 25,838 | |||||||
| Total Net Assets - 100.0% | $ | 26,374,088 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
REIT — Real Estate Investment Trust
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
| REAL ESTATE FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $106,160 | ||||
| of securities loaned | ||||
| (cost $22,138,584) | $ | 26,187,052 | ||
| Repurchase agreements, at value | ||||
| (cost $161,198) | 161,198 | |||
| Total investments | ||||
| (cost $22,299,782) | 26,348,250 | |||
| Receivables: | ||||
| Fund shares sold | 792,789 | |||
| Dividends | 147,066 | |||
| Securities lending income | 109 | |||
| Total assets | 27,288,214 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 726,969 | |||
| Upon return of securities loaned | 109,500 | |||
| Fund shares redeemed | 27,940 | |||
| Management fees | 21,327 | |||
| Distribution and service fees | 7,568 | |||
| Transfer agent and administrative fees | 6,273 | |||
| Portfolio accounting fees | 2,509 | |||
| Miscellaneous | 12,040 | |||
| Total liabilities | 914,126 | |||
| Net assets | $ | 26,374,088 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 39,370,575 | ||
| Undistributed net investment income | 179,827 | |||
| Accumulated net realized loss on investments | (17,224,782 | ) | ||
| Net unrealized appreciation on investments | 4,048,468 | |||
| Net assets | $ | 26,374,088 | ||
| A-Class: | ||||
| Net assets | $ | 4,123,569 | ||
| Capital shares outstanding | 123,207 | |||
| Net asset value per share | $ | 33.47 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 35.14 | ||
| C-Class: | ||||
| Net assets | $ | 2,497,424 | ||
| Capital shares outstanding | 81,508 | |||
| Net asset value per share | $ | 30.64 | ||
| H-Class: | ||||
| Net assets | $ | 19,753,095 | ||
| Capital shares outstanding | 591,436 | |||
| Net asset value per share | $ | 33.40 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $3,181) | $ | 554,944 | ||
| Income from securities lending, net | 2,134 | |||
| Interest | 7 | |||
| Total investment income | 557,085 | |||
| Expenses: | ||||
| Management fees | 145,005 | |||
| Transfer agent and administrative fees | 42,648 | |||
| Distribution and service fees: | ||||
| A-Class | 8,724 | |||
| C-Class | 21,224 | |||
| H-Class | 28,618 | |||
| Portfolio accounting fees | 17,059 | |||
| Tax expense | 3,562 | |||
| Trustees’ fees* | 2,386 | |||
| Custodian fees | 1,733 | |||
| Line of credit interest expense | 238 | |||
| Miscellaneous | 24,963 | |||
| Total expenses | 296,160 | |||
| Net investment income | 260,925 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 2,653,853 | |||
| Net realized gain | 2,653,853 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (2,954,093 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (2,954,093 | ) | ||
| Net realized and unrealized loss | (300,240 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (39,315 | ) |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| REAL ESTATE FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 260,925 | $ | 447,384 | ||||
| Net realized gain (loss) on investments | 2,653,853 | (718,672 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | (2,954,093 | ) | 855,154 | |||||
| Net increase (decrease) in net assets resulting from operations | (39,315 | ) | 583,866 | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | (69,328 | ) | (18,360 | ) | ||||
| C-Class | (67,311 | ) | (59,353 | ) | ||||
| H-Class | (200,042 | ) | (292,727 | ) | ||||
| Total distributions to shareholders | (336,681 | ) | (370,440 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 12,878,425 | 58,943,343 | ||||||
| C-Class | 28,309,538 | 43,646,934 | ||||||
| H-Class | 154,735,643 | 191,827,597 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 64,436 | 16,977 | ||||||
| C-Class | 64,791 | 57,394 | ||||||
| H-Class | 198,562 | 290,464 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (21,614,347 | ) | (48,200,407 | ) | ||||
| C-Class | (28,623,424 | ) | (42,855,707 | ) | ||||
| H-Class | (144,941,887 | ) | (195,933,585 | ) | ||||
| Net increase from capital share transactions | 1,071,737 | 7,793,010 | ||||||
| Net increase in net assets | 695,741 | 8,006,436 | ||||||
| Net assets: | ||||||||
| Beginning of year | 25,678,347 | 17,671,911 | ||||||
| End of year | $ | 26,374,088 | $ | 25,678,347 | ||||
| Undistributed net investment income at end of year | $ | 179,827 | $ | 238,366 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 388,565 | 1,864,738 | ||||||
| C-Class | 923,737 | 1,492,700 | ||||||
| H-Class | 4,583,841 | 6,095,718 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 2,095 | 557 | ||||||
| C-Class | 2,296 | 2,027 | ||||||
| H-Class | 6,468 | 9,539 | ||||||
| Shares redeemed | ||||||||
| A-Class | (630,360 | ) | (1,580,487 | ) | ||||
| C-Class | (935,775 | ) | (1,467,018 | ) | ||||
| H-Class | (4,297,722 | ) | (6,253,367 | ) | ||||
| Net increase in shares | 43,145 | 164,407 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 34.43 | $ | 30.27 | $ | 29.06 | $ | 24.24 | $ | 12.83 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .65 | .58 | .45 | .27 | .44 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (.14 | ) | 4.18 | 1.07 | 5.17 | 11.11 | ||||||||||||||
| Total from investment operations | .51 | 4.76 | 1.52 | 5.44 | 11.55 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Total distributions | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Net asset value, end of period | $ | 33.47 | $ | 34.43 | $ | 30.27 | $ | 29.06 | $ | 24.24 | ||||||||||
| Total Returnb | 1.86 | % | 16.03 | % | 5.42 | % | 22.72 | % | 90.16 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,124 | $ | 12,495 | $ | 2,364 | $ | 3,991 | $ | 4,303 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.92 | % | 1.82 | % | 1.59 | % | 1.07 | % | 2.15 | % | ||||||||||
| Total expenses | 1.65 | % | 1.61 | % | 1.61 | % | 1.63 | % | 1.65 | % | ||||||||||
| Portfolio turnover rate | 788 | % | 699 | % | 974 | % | 485 | % | 1,520 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 31.89 | $ | 28.29 | $ | 27.41 | $ | 23.11 | $ | 12.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .29 | .27 | .22 | .10 | .40 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (.07 | ) | 3.93 | .97 | 4.82 | 10.52 | ||||||||||||||
| Total from investment operations | .22 | 4.20 | 1.19 | 4.92 | 10.92 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Total distributions | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Net asset value, end of period | $ | 30.64 | $ | 31.89 | $ | 28.29 | $ | 27.41 | $ | 23.11 | ||||||||||
| Total Returnb | 1.09 | % | 15.12 | % | 4.57 | % | 21.58 | % | 88.70 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,497 | $ | 2,910 | $ | 1,798 | $ | 2,356 | $ | 2,143 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.93 | % | 0.92 | % | 0.83 | % | 0.42 | % | 2.06 | % | ||||||||||
| Total expenses | 2.38 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.41 | % | ||||||||||
| Portfolio turnover rate | 788 | % | 699 | % | 974 | % | 485 | % | 1,520 | % | ||||||||||
| 116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| REAL ESTATE FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 34.38 | $ | 30.23 | $ | 29.02 | $ | 24.22 | $ | 12.82 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .52 | .46 | .42 | .29 | .50 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (.03 | ) | 4.29 | 1.10 | 5.13 | 11.04 | ||||||||||||||
| Total from investment operations | .49 | 4.75 | 1.52 | 5.42 | 11.54 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Total distributions | (1.47 | ) | (.60 | ) | (.31 | ) | (.62 | ) | (.14 | ) | ||||||||||
| Net asset value, end of period | $ | 33.40 | $ | 34.38 | $ | 30.23 | $ | 29.02 | $ | 24.22 | ||||||||||
| Total Returnb | 1.84 | % | 15.95 | % | 5.42 | % | 22.70 | % | 90.15 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 19,753 | $ | 10,273 | $ | 13,511 | $ | 22,045 | $ | 34,926 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.52 | % | 1.45 | % | 1.48 | % | 1.13 | % | 2.41 | % | ||||||||||
| Total expenses | 1.64 | % | 1.60 | % | 1.61 | % | 1.63 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | 788 | % | 699 | % | 974 | % | 485 | % | 1,520 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Retailing Fund Investor Class returned 19.98%, compared with 24.00% for the S&P 500 Consumer Discretionary Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the specialty retail segment contributed most to Fund performance, followed by the internet & catalog retail industry. No industry detracted from return, but the distributors segment contributed least.
Fund performance for the period benefited most from priceline.com, Inc., CVS Caremark Corp. and Amazon.com, Inc. Aeropostale, Inc., J.C. Penney Company, Inc. and American Eagle Outfitters, 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 Dates: | |
| Investor Class | April 1, 1998 |
| Advisor Class | April 21, 1998 |
| A-Class | September 1, 2004 |
| C-Class | May 9, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Wal-Mart Stores, Inc. | 5.4 | % | ||
| Amazon.com, Inc. | 4.1 | % | ||
| Home Depot, Inc. | 3.6 | % | ||
| CVS Caremark Corp. | 3.2 | % | ||
| Walgreen Co. | 2.7 | % | ||
| Priceline Group, Inc. | 2.7 | % | ||
| Lowe’s Companies, Inc. | 2.4 | % | ||
| Costco Wholesale Corp. | 2.4 | % | ||
| TJX Companies, Inc. | 2.3 | % | ||
| Target Corp. | 2.1 | % | ||
| Top Ten Total | 30.9 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 118 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 19.98% | 22.44% | 7.23% | |||||||||
| Advisor Class Shares | 19.24% | 21.89% | 6.74% | |||||||||
| C-Class Shares | 18.62% | 21.19% | 6.18% | |||||||||
| C-Class Shares with CDSC‡ | 17.62% | 21.19% | 6.18% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Consumer Discretionary Index | 24.00% | 29.13% | 9.00% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 19.64% | 22.12% | 8.36% | |||||||||
| A-Class Shares with sales charge† | 13.94% | 20.95% | 7.81% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Consumer Discretionary Index | 24.00% | 29.13% | 9.88% | |||||||||
| * | 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. The graphs are based on investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. | |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. | |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
THE RYDEX FUNDS ANNUAL REPORT | 119
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| RETAILING FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.5% | ||||||||
| INTERNET RETAIL - 17.3% | ||||||||
| Amazon.com, Inc.* | 9,157 | $ | 3,081,513 | |||||
| Priceline Group, Inc.* | 1,688 | 2,011,909 | ||||||
| Netflix, Inc.* | 3,031 | 1,067,003 | ||||||
| Ctrip.com International Ltd. ADR* | 18,190 | 917,140 | ||||||
| TripAdvisor, Inc.* | 9,625 | 871,929 | ||||||
| Expedia, Inc. | 10,775 | 781,188 | ||||||
| Vipshop Holdings Ltd. ADR* | 4,380 | 653,934 | ||||||
| zulily, Inc. — Class A*,1 | 12,000 | 602,280 | ||||||
| Groupon, Inc. — Class A* | 73,439 | 575,762 | ||||||
| Liberty Ventures* | 4,220 | 549,993 | ||||||
| HomeAway, Inc.* | 12,350 | 465,225 | ||||||
| Qunar Cayman Islands Ltd. ADR* | 14,400 | 440,496 | ||||||
| E-Commerce China Dangdang, Inc. — Class A ADR*,1 | 29,500 | 423,620 | ||||||
| Shutterfly, Inc.* | 7,918 | 337,940 | ||||||
| RetailMeNot, Inc.* | 10,200 | 326,400 | ||||||
| Total Internet Retail | 13,106,332 | |||||||
| APPAREL RETAIL - 15.5% | ||||||||
| TJX Companies, Inc. | 28,102 | 1,704,385 | ||||||
| The Gap, Inc. | 27,059 | 1,083,984 | ||||||
| L Brands, Inc. | 18,317 | 1,039,856 | ||||||
| Ross Stores, Inc. | 14,060 | 1,005,993 | ||||||
| Foot Locker, Inc. | 14,223 | 668,197 | ||||||
| Urban Outfitters, Inc.* | 16,329 | 595,519 | ||||||
| DSW, Inc. — Class A | 12,950 | 464,387 | ||||||
| Abercrombie & Fitch Co. — Class A | 11,246 | 432,971 | ||||||
| Ascena Retail Group, Inc.* | 24,536 | 423,982 | ||||||
| Chico’s FAS, Inc. | 24,936 | 399,724 | ||||||
| Guess?, Inc. | 14,370 | 396,612 | ||||||
| American Eagle Outfitters, Inc. | 31,840 | 389,722 | ||||||
| Men’s Wearhouse, Inc. | 7,891 | 386,501 | ||||||
| Buckle, Inc.1 | 8,393 | 384,399 | ||||||
| ANN, Inc.* | 9,252 | 383,773 | ||||||
| Jos. A. Bank Clothiers, Inc.* | 5,403 | 347,413 | ||||||
| Genesco, Inc.* | 4,461 | 332,657 | ||||||
| Express, Inc.* | 18,240 | 289,651 | ||||||
| Finish Line, Inc. — Class A | 10,566 | 286,233 | ||||||
| Children’s Place Retail Stores, Inc. | 5,458 | 271,863 | ||||||
| Francesca’s Holdings Corp.* | 11,900 | 215,866 | ||||||
| Aeropostale, Inc.*,1 | 30,585 | 153,537 | ||||||
| Total Apparel Retail | 11,657,225 | |||||||
| SPECIALTY STORES - 11.7% | ||||||||
| Tiffany & Co. | 9,675 | 833,500 | ||||||
| Tractor Supply Co. | 11,022 | 778,484 | ||||||
| Signet Jewelers Ltd. | 7,088 | 750,336 | ||||||
| PetSmart, Inc. | 10,312 | 710,394 | ||||||
| Staples, Inc. | 62,015 | 703,250 | ||||||
| Dick’s Sporting Goods, Inc. | 12,147 | 663,348 | ||||||
| Ulta Salon Cosmetics & Fragrance, Inc.* | 6,115 | 596,090 | ||||||
| Cabela’s, Inc.* | 8,104 | 530,893 | ||||||
| GNC Holdings, Inc. — Class A | 12,051 | 530,485 | ||||||
| Sally Beauty Holdings, Inc.* | 19,276 | 528,162 | ||||||
| Five Below, Inc.* | 9,390 | 398,887 | ||||||
| Outerwall, Inc.*,1 | 5,000 | 362,500 | ||||||
| Container Store Group, Inc.*,1 | 9,500 | 322,525 | ||||||
| Vitamin Shoppe, Inc.* | 6,651 | 316,056 | ||||||
| Barnes & Noble, Inc.* | 14,144 | 295,610 | ||||||
| Hibbett Sports, Inc.* | 5,460 | 288,725 | ||||||
| Zale Corp.* | 10,200 | 213,282 | ||||||
| Total Specialty Stores | 8,822,527 | |||||||
| AUTOMOTIVE RETAIL - 9.4% | ||||||||
| AutoZone, Inc.* | 2,090 | 1,122,538 | ||||||
| O’Reilly Automotive, Inc.* | 6,973 | 1,034,722 | ||||||
| CarMax, Inc.* | 17,737 | 830,092 | ||||||
| Advance Auto Parts, Inc. | 6,231 | 788,222 | ||||||
| AutoNation, Inc.* | 12,364 | 658,136 | ||||||
| Penske Automotive Group, Inc. | 11,550 | 493,878 | ||||||
| CST Brands, Inc. | 12,950 | 404,558 | ||||||
| Murphy USA, Inc.* | 8,750 | 355,163 | ||||||
| Monro Muffler Brake, Inc. | 6,100 | 346,968 | ||||||
| Lithia Motors, Inc. — Class A | 5,100 | 338,946 | ||||||
| Asbury Automotive Group, Inc.* | 6,070 | 335,732 | ||||||
| Group 1 Automotive, Inc. | 4,877 | 320,224 | ||||||
| Total Automotive Retail | 7,029,179 | |||||||
| HYPERMARKETS & SUPER CENTERS - 9.0% | ||||||||
| Wal-Mart Stores, Inc. | 53,070 | 4,056,140 | ||||||
| Costco Wholesale Corp. | 16,167 | 1,805,531 | ||||||
| Cia Brasileira de Distribuicao Grupo Pao de Acucar ADR | 10,932 | 478,384 | ||||||
| PriceSmart, Inc. | 4,250 | 428,953 | ||||||
| Total Hypermarkets & Super Centers | 6,769,008 | |||||||
| DRUG RETAIL - 6.8% | ||||||||
| CVS Caremark Corp. | 32,578 | 2,438,789 | ||||||
| Walgreen Co. | 30,966 | 2,044,685 | ||||||
| Rite Aid Corp.* | 96,460 | 604,804 | ||||||
| Total Drug Retail | 5,088,278 | |||||||
| HOME IMPROVEMENT RETAIL - 6.6% | ||||||||
| Home Depot, Inc. | 34,033 | 2,693,031 | ||||||
| Lowe’s Companies, Inc. | 37,505 | 1,833,995 | ||||||
| Lumber Liquidators Holdings, Inc.* | 4,230 | 396,774 | ||||||
| Total Home Improvement Retail | 4,923,800 | |||||||
| DEPARTMENT STORES - 6.1% | ||||||||
| Macy’s, Inc. | 20,488 | 1,214,734 | ||||||
| Kohl’s Corp. | 16,159 | 917,831 | ||||||
| Nordstrom, Inc. | 14,305 | 893,347 | ||||||
| Sears Holdings Corp.*,1 | 11,640 | 555,926 | ||||||
| Dillard’s, Inc. — Class A | 5,779 | 533,980 | ||||||
| JC Penney Company, Inc.*,1 | 50,569 | 435,905 | ||||||
| Total Department Stores | 4,551,723 | |||||||
| GENERAL MERCHANDISE STORES - 6.0% | ||||||||
| Target Corp. | 26,504 | 1,603,757 | ||||||
| Dollar General Corp.* | 19,221 | 1,066,381 | ||||||
| Dollar Tree, Inc.* | 16,000 | 834,880 | ||||||
| Family Dollar Stores, Inc. | 11,180 | 648,552 | ||||||
| Big Lots, Inc.* | 10,038 | 380,139 | ||||||
| Total General Merchandise Stores | 4,533,709 |
| 120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| RETAILING FUND |
| Shares | Value | |||||||
| HOMEFURNISHING RETAIL - 4.2% | ||||||||
| Bed Bath & Beyond, Inc.* | 14,458 | $ | 994,709 | |||||
| Williams-Sonoma, Inc. | 9,728 | 648,274 | ||||||
| Restoration Hardware Holdings, Inc.* | 6,450 | 474,656 | ||||||
| Aaron’s, Inc. | 12,807 | 387,284 | ||||||
| Pier 1 Imports, Inc. | 18,808 | 355,095 | ||||||
| Select Comfort Corp.* | 14,697 | 265,722 | ||||||
| Total Homefurnishing Retail | 3,125,740 | |||||||
| COMPUTER & ELECTRONICS RETAIL - 2.7% | ||||||||
| Best Buy Company, Inc. | 29,873 | 788,945 | ||||||
| GameStop Corp. — Class A | 14,365 | 590,402 | ||||||
| Conn’s, Inc.*,1 | 8,290 | 322,067 | ||||||
| Rent-A-Center, Inc. — Class A | 11,639 | 309,597 | ||||||
| Total Computer & Electronics Retail | 2,011,011 | |||||||
| DISTRIBUTORS - 2.3% | ||||||||
| Genuine Parts Co. | 10,943 | 950,400 | ||||||
| LKQ Corp.* | 28,097 | 740,356 | ||||||
| Total Distributors | 1,690,756 | |||||||
| CATALOG RETAIL - 1.9% | ||||||||
| Liberty Interactive Corp. — Class A* | 34,163 | 986,286 | ||||||
| HSN, Inc. | 7,700 | 459,921 | ||||||
| Total Catalog Retail | 1,446,207 | |||||||
| Total Common Stocks | ||||||||
| (Cost $67,859,701) | 74,755,495 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.7% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 519,110 | 519,110 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $519,110) | 519,110 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 3.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,211,045 | 1,211,045 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,080,624 | 1,080,624 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 203,716 | 203,716 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $2,495,385) | 2,495,385 | |||||||
| Total Investments - 103.5% | ||||||||
| (Cost $70,874,196) | $ | 77,769,990 | ||||||
| Other Assets & Liabilities, net - (3.5)% | (2,631,664 | ) | ||||||
| Total Net Assets - 100.0% | $ | 75,138,326 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
| ADR — American Depositary Receipt |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
| RETAILING FUND |
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Investments, at value - including $2,420,686 of | ||||
| securities loaned | ||||
| (cost $67,859,701) | $ | 74,755,495 | ||
| Repurchase agreements, at value | ||||
| (cost $3,014,495) | 3,014,495 | |||
| Total investments | ||||
| (cost $70,874,196) | 77,769,990 | |||
| Receivables: | ||||
| Fund shares sold | 563,228 | |||
| Dividends | 33,673 | |||
| Securities lending income | 3,928 | |||
| Total assets | 78,370,819 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 2,495,385 | |||
| Securities purchased | 461,512 | |||
| Fund shares redeemed | 208,791 | |||
| Management fees | 30,653 | |||
| Transfer agent and administrative fees | 9,015 | |||
| Distribution and service fees | 4,472 | |||
| Portfolio accounting fees | 3,606 | |||
| Miscellaneous | 19,059 | |||
| Total liabilities | 3,232,493 | |||
| Net assets | $ | 75,138,326 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 76,771,336 | ||
| Accumulated net investment loss | (36,159 | ) | ||
| Accumulated net realized loss on investments | (8,492,645 | ) | ||
| Net unrealized appreciation on investments | 6,895,794 | |||
| Net assets | $ | 75,138,326 | ||
| Investor Class: | ||||
| Net assets | $ | 65,195,065 | ||
| Capital shares outstanding | 2,770,001 | |||
| Net asset value per share | $ | 23.54 | ||
| Advisor Class: | ||||
| Net assets | $ | 5,391,293 | ||
| Capital shares outstanding | 245,025 | |||
| Net asset value per share | $ | 22.00 | ||
| A-class: | ||||
| Net assets | $ | 2,049,095 | ||
| Capital shares outstanding | 91,159 | |||
| Net asset value per share | $ | 22.48 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 23.60 | ||
| C-class: | ||||
| Net assets | $ | 2,502,873 | ||
| Capital shares outstanding | 121,236 | |||
| Net asset value per share | $ | 20.64 |
STATEMENT OF
OPERATIONS
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $158) | $ | 445,055 | ||
| Income from securities lending, net | 17,955 | |||
| Interest | 22 | |||
| Total investment income | 463,032 | |||
| Expenses: | ||||
| Management fees | 295,849 | |||
| Transfer agent and administrative fees | 87,014 | |||
| Distribution and service fees: | ||||
| Advisor Class | 19,775 | |||
| A-Class | 10,329 | |||
| C-Class | 23,707 | |||
| Portfolio accounting fees | 34,805 | |||
| Custodian fees | 3,990 | |||
| Trustees’ fees* | 2,521 | |||
| Line of credit interest expense | 337 | |||
| Miscellaneous | 52,195 | |||
| Total expenses | 530,522 | |||
| Net investment loss | (67,490 | ) | ||
| Net Realized And Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (2,783,052 | ) | ||
| Net realized loss | (2,783,052 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 558,351 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 558,351 | |||
| Net realized and unrealized loss | (2,224,701 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (2,292,191 | ) |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| RETAILING FUND |
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | (67,490 | ) | $ | 101,139 | |||
| Net realized gain (loss) on investments | (2,783,052 | ) | 1,744,746 | |||||
| Net change in unrealized appreciation (depreciation) on investments | 558,351 | (331,652 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | (2,292,191 | ) | 1,514,233 | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 246,351,051 | 124,440,704 | ||||||
| Advisor Class | 32,015,902 | 34,065,876 | ||||||
| A-Class | 16,192,814 | 9,815,440 | ||||||
| C-Class | 25,676,530 | 28,702,196 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (192,663,560 | ) | (145,758,850 | ) | ||||
| Advisor Class | (29,499,902 | ) | (35,612,946 | ) | ||||
| A-Class | (15,667,077 | ) | (14,039,858 | ) | ||||
| C-Class | (25,431,108 | ) | (29,752,249 | ) | ||||
| Net increase (decrease) from capital share transactions | 56,974,650 | (28,139,687 | ) | |||||
| Net increase (decrease) in net assets | 54,682,459 | (26,625,454 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 20,455,867 | 47,081,321 | ||||||
| End of year | $ | 75,138,326 | $ | 20,455,867 | ||||
| Accumulated net investment loss/Undistributed net investment income at end of year | $ | (36,159 | ) | $ | — | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 10,597,354 | 6,997,301 | ||||||
| Advisor Class | 1,535,340 | 2,011,477 | ||||||
| A-Class | 747,562 | 575,762 | ||||||
| C-Class | 1,307,238 | 1,831,862 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (8,575,213 | ) | (8,243,663 | ) | ||||
| Advisor Class | (1,423,331 | ) | (2,120,335 | ) | ||||
| A-Class | (736,239 | ) | (835,701 | ) | ||||
| C-Class | (1,291,235 | ) | (1,893,223 | ) | ||||
| Net increase (decrease) in shares | 2,161,476 | (1,676,520 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 123 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.62 | $ | 17.45 | $ | 14.66 | $ | 12.75 | $ | 8.58 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | —b | .09 | .01 | .05 | .03 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.92 | 2.08 | 2.79 | 1.89 | 4.14 | |||||||||||||||
| Total from investment operations | 3.92 | 2.17 | 2.80 | 1.94 | 4.17 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Total distributions | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Net asset value, end of period | $ | 23.54 | $ | 19.62 | $ | 17.45 | $ | 14.66 | $ | 12.75 | ||||||||||
| Total Returnc | 19.98 | % | 12.44 | % | 19.14 | % | 15.20 | % | 48.60 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 65,195 | $ | 14,671 | $ | 34,802 | $ | 3,776 | $ | 12,060 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.01 | % | 0.51 | % | 0.04 | % | 0.34 | % | 0.28 | % | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.34 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 671 | % | 472 | % | 822 | % | 1,062 | % | 1,049 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 18.45 | $ | 16.45 | $ | 13.91 | $ | 12.14 | $ | 8.20 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.14 | ) | (.01 | ) | (.09 | ) | (.07 | ) | (.06 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.69 | 2.01 | 2.64 | 1.87 | 4.00 | |||||||||||||||
| Total from investment operations | 3.55 | 2.00 | 2.55 | 1.80 | 3.94 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Total distributions | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Net asset value, end of period | $ | 22.00 | $ | 18.45 | $ | 16.45 | $ | 13.91 | $ | 12.14 | ||||||||||
| Total Returnb,c | 19.24 | % | 12.16 | % | 18.38 | % | 14.81 | % | 48.05 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,391 | $ | 2,454 | $ | 3,979 | $ | 1,583 | $ | 2,350 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.64 | %) | (0.05 | %) | (0.66 | %) | (0.58 | %) | (0.57 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.84 | % | 1.89 | % | 1.87 | % | ||||||||||
| Portfolio turnover rate | 671 | % | 472 | % | 822 | % | 1,062 | % | 1,049 | % | ||||||||||
| 124 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| RETAILING FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 18.79 | $ | 16.77 | $ | 14.14 | $ | 12.31 | $ | 8.30 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.09 | ) | .03 | (.03 | ) | .18 | (.01 | ) | ||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.78 | 1.99 | 2.67 | 1.68 | 4.02 | |||||||||||||||
| Total from investment operations | 3.69 | 2.02 | 2.64 | 1.86 | 4.01 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Total distributions | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Net asset value, end of period | $ | 22.48 | $ | 18.79 | $ | 16.77 | $ | 14.14 | $ | 12.31 | ||||||||||
| Total Returnb,c | 19.64 | % | 12.05 | % | 18.71 | % | 15.09 | % | 48.31 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,049 | $ | 1,500 | $ | 5,697 | $ | 517 | $ | 395 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.42 | %) | 0.20 | % | (0.18 | %) | 1.42 | % | (0.12 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.59 | % | 1.58 | % | 1.64 | % | 1.62 | % | ||||||||||
| Portfolio turnover rate | 671 | % | 472 | % | 822 | % | 1,062 | % | 1,049 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.40 | $ | 15.62 | $ | 13.27 | $ | 11.65 | $ | 7.92 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.23 | ) | (.06 | ) | (.13 | ) | (.11 | ) | (.10 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.47 | 1.84 | 2.49 | 1.76 | 3.83 | |||||||||||||||
| Total from investment operations | 3.24 | 1.78 | 2.36 | 1.65 | 3.73 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Total distributions | — | — | (.01 | ) | (.03 | ) | — | |||||||||||||
| Net asset value, end of period | $ | 20.64 | $ | 17.40 | $ | 15.62 | $ | 13.27 | $ | 11.65 | ||||||||||
| Total Returnb,c | 18.62 | % | 11.40 | % | 17.83 | % | 14.14 | % | 47.10 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,503 | $ | 1,831 | $ | 2,603 | $ | 2,705 | $ | 1,709 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.16 | %) | (0.39 | %) | (0.96 | %) | (0.96 | %) | (1.08 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.35 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 671 | % | 472 | % | 822 | % | 1,062 | % | 1,049 | % |
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Net investment income is less than $0.01 per share.
c Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 125 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Technology Fund Investor Class returned 28.24%, compared with 25.59% for the S&P 500 Information Technology Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the semiconductors & semiconductor equipment industry was the largest contributor to return, followed by the internet software & services industry. The lightly weighted computers & peripherals industry was the only detractor from return.
Top-contributing holdings were Facebook, Inc. Class A, Microsoft Corp. and Google, Inc. Class A. BlackBerry Ltd., International Business Machines Corp. and Twitter, Inc. were the holdings detracting most from 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 Dates: | |
| Investor Class | April 14, 1998 |
| Advisor Class | April 29, 1998 |
| A-Class | September 1, 2004 |
| C-Class | April 18, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 3.5 | % | ||
| Google, Inc. — Class C | 2.9 | % | ||
| Microsoft Corp. | 2.8 | % | ||
| International Business Machines Corp. | 2.2 | % | ||
| Oracle Corp. | 2.2 | % | ||
| Visa, Inc. — Class A | 1.8 | % | ||
| Facebook, Inc. — Class A | 1.8 | % | ||
| QUALCOMM, Inc. | 1.8 | % | ||
| Intel Corp. | 1.7 | % | ||
| Cisco Systems, Inc. | 1.7 | % | ||
| Top Ten Total | 22.4 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 126 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 28.24% | 19.33% | 5.07% | |||||||||
| Advisor Class Shares | 27.60% | 18.76% | 4.53% | |||||||||
| C-Class Shares | 26.90% | 18.14% | 4.03% | |||||||||
| C-Class Shares with CDSC‡ | 25.90% | 18.14% | 4.03% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 7.69% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 27.79% | 19.01% | 6.89% | |||||||||
| A-Class Shares with sales charge† | 21.69% | 17.85% | 6.36% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Information Technology Index | 25.59% | 21.42% | 9.17% | |||||||||
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 127 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| TECHNOLOGY FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.8% | ||||||||
| INTERNET SOFTWARE & SERVICES - 19.1% | ||||||||
| Google, Inc. — Class C* | 1,281 | $ | 1,427,686 | |||||
| Facebook, Inc. — Class A* | 14,610 | 880,105 | ||||||
| eBay, Inc.* | 11,294 | 623,881 | ||||||
| Yahoo!, Inc.* | 12,420 | 445,878 | ||||||
| Baidu, Inc. ADR* | 2,826 | 430,626 | ||||||
| Twitter, Inc.*,1 | 8,090 | 377,560 | ||||||
| LinkedIn Corp. — Class A* | 1,815 | 335,666 | ||||||
| SINA Corp.* | 5,181 | 312,984 | ||||||
| NetEase, Inc. ADR | 4,650 | 312,945 | ||||||
| Yandex N.V. — Class A* | 10,257 | 309,659 | ||||||
| YY, Inc. ADR* | 4,010 | 306,204 | ||||||
| Qihoo 360 Technology Company Ltd. ADR* | 3,070 | 305,711 | ||||||
| Youku Tudou, Inc. ADR* | 10,670 | 299,187 | ||||||
| MercadoLibre, Inc.1 | 3,127 | 297,409 | ||||||
| SouFun Holdings Ltd. ADR | 3,960 | 270,943 | ||||||
| Sohu.com, Inc.*,1 | 4,140 | 269,473 | ||||||
| Akamai Technologies, Inc.* | 4,025 | 234,295 | ||||||
| Equinix, Inc.* | 1,265 | 233,823 | ||||||
| VeriSign, Inc.* | 3,803 | 205,020 | ||||||
| IAC/InterActiveCorp | 2,640 | 188,470 | ||||||
| Pandora Media, Inc.* | 5,930 | 179,798 | ||||||
| Yelp, Inc. — Class A* | 2,240 | 172,323 | ||||||
| CoStar Group, Inc.* | 900 | 168,066 | ||||||
| Rackspace Hosting, Inc.* | 4,990 | 163,772 | ||||||
| AOL, Inc.* | 3,070 | 134,374 | ||||||
| Zillow, Inc. — Class A*,1 | 1,520 | 133,912 | ||||||
| OpenTable, Inc.* | 1,360 | 104,625 | ||||||
| WebMD Health Corp. — Class A* | 2,340 | 96,876 | ||||||
| Trulia, Inc.*,1 | 2,296 | 76,227 | ||||||
| Total Internet Software & Services | 9,297,498 | |||||||
| SEMICONDUCTORS - 16.5% | ||||||||
| Intel Corp. | 32,644 | 842,541 | ||||||
| Texas Instruments, Inc. | 11,146 | 525,533 | ||||||
| Micron Technology, Inc.* | 15,736 | 372,313 | ||||||
| Taiwan Semiconductor | ||||||||
| Manufacturing Company Ltd. ADR | 18,364 | 367,646 | ||||||
| NXP Semiconductor N.V.* | 5,620 | 330,512 | ||||||
| Avago Technologies Ltd. | 5,016 | 323,081 | ||||||
| ARM Holdings plc ADR | 6,152 | 313,567 | ||||||
| Broadcom Corp. — Class A | 9,922 | 312,345 | ||||||
| Analog Devices, Inc. | 5,720 | 303,961 | ||||||
| Marvell Technology Group Ltd. | 19,056 | 300,132 | ||||||
| Xilinx, Inc. | 5,048 | 273,955 | ||||||
| Canadian Solar, Inc.*,1 | 8,540 | 273,622 | ||||||
| Linear Technology Corp. | 5,280 | 257,083 | ||||||
| Altera Corp. | 6,926 | 250,998 | ||||||
| JinkoSolar Holding Company Ltd. ADR* | 8,730 | 244,004 | ||||||
| Trina Solar Ltd. ADR*,1 | 17,770 | 239,007 | ||||||
| Maxim Integrated Products, Inc. | 7,032 | 232,900 | ||||||
| Himax Technologies, Inc. ADR1 | 20,080 | 231,322 | ||||||
| Microchip Technology, Inc. | 4,831 | 230,729 | ||||||
| NVIDIA Corp. | 12,712 | 227,672 | ||||||
| Freescale Semiconductor Ltd.* | 8,110 | 197,965 | ||||||
| Skyworks Solutions, Inc.* | 5,129 | 192,440 | ||||||
| Cree, Inc.* | 3,350 | 189,476 | ||||||
| LSI Corp. | 16,861 | 186,651 | ||||||
| First Solar, Inc.* | 2,479 | 173,009 | ||||||
| ON Semiconductor Corp.* | 16,040 | 150,776 | ||||||
| Atmel Corp.* | 16,460 | 137,606 | ||||||
| SunPower Corp. — Class A* | 4,260 | 137,428 | ||||||
| Synaptics, Inc.* | 1,880 | 112,838 | ||||||
| RF Micro Devices, Inc.* | 13,870 | 109,296 | ||||||
| Total Semiconductors | 8,040,408 | |||||||
| TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS – 11.1% | ||||||||
| Apple, Inc. | 3,136 | 1,683,217 | ||||||
| Hewlett-Packard Co. | 17,789 | 575,652 | ||||||
| EMC Corp. | 20,155 | 552,449 | ||||||
| Seagate Technology plc | 6,963 | 391,042 | ||||||
| Western Digital Corp. | 3,760 | 345,243 | ||||||
| SanDisk Corp. | 3,753 | 304,706 | ||||||
| Nokia Oyj ADR* | 40,740 | 299,032 | ||||||
| BlackBerry Ltd.* | 35,115 | 283,729 | ||||||
| NetApp, Inc. | 7,229 | 266,750 | ||||||
| NCR Corp.* | 5,130 | 187,502 | ||||||
| 3D Systems Corp.*,1 | 3,155 | 186,618 | ||||||
| Stratasys Ltd.* | 1,570 | 166,561 | ||||||
| Lexmark International, Inc. — Class A | 2,770 | 128,223 | ||||||
| Total Technology Hardware, | ||||||||
| Storage & Peripherals | 5,370,724 | |||||||
| SYSTEMS SOFTWARE - 10.7% | ||||||||
| Microsoft Corp. | 33,027 | 1,353,776 | ||||||
| Oracle Corp. | 25,615 | 1,047,909 | ||||||
| VMware, Inc. — Class A* | 4,706 | 508,342 | ||||||
| Check Point Software Technologies Ltd.* | 4,520 | 305,688 | ||||||
| CA, Inc. | 8,742 | 270,740 | ||||||
| Symantec Corp. | 13,434 | 268,277 | ||||||
| FireEye, Inc.* | 3,760 | 231,503 | ||||||
| Red Hat, Inc.* | 4,347 | 230,304 | ||||||
| ServiceNow, Inc.* | 3,410 | 204,327 | ||||||
| NetSuite, Inc.* | 1,950 | 184,919 | ||||||
| MICROS Systems, Inc.* | 2,800 | 148,204 | ||||||
| Tableau Software, Inc. — Class A* | 1,910 | 145,313 | ||||||
| Fortinet, Inc.* | 6,300 | 138,789 | ||||||
| CommVault Systems, Inc.* | 1,950 | 126,653 | ||||||
| Total Systems Software | 5,164,744 | |||||||
| DATA PROCESSING & OUTSOURCED SERVICES – 10.4% | ||||||||
| Visa, Inc. — Class A | 4,096 | 884,163 | ||||||
| MasterCard, Inc. — Class A | 9,140 | 682,758 | ||||||
| Automatic Data Processing, Inc. | 5,973 | 461,474 | ||||||
| Fidelity National Information Services, Inc. | 5,534 | 295,792 | ||||||
| Paychex, Inc. | 6,833 | 291,086 | ||||||
| Fiserv, Inc.* | 4,876 | 276,420 | ||||||
| Xerox Corp. | 24,354 | 275,200 | ||||||
| Alliance Data Systems Corp.* | 1,009 | 274,902 | ||||||
| FleetCor Technologies, Inc.* | 2,000 | 230,200 | ||||||
| Western Union Co. | 13,520 | 221,187 | ||||||
| Computer Sciences Corp. | 3,636 | 221,142 | ||||||
| Total System Services, Inc. | 5,910 | 179,723 | ||||||
| 128 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| TECHNOLOGY FUND | |
| Shares | Value | |||||||
| Vantiv, Inc. — Class A* | 5,810 | $ | 175,578 | |||||
| Global Payments, Inc. | 2,280 | 162,131 | ||||||
| Broadridge Financial Solutions, Inc. | 4,340 | 161,188 | ||||||
| VeriFone Systems, Inc.* | 4,190 | 141,706 | ||||||
| NeuStar, Inc. — Class A* | 3,110 | 101,106 | ||||||
| Total Data Processing & Outsourced Services | 5,035,756 | |||||||
| APPLICATION SOFTWARE - 8.7% | ||||||||
| Salesforce.com, Inc.* | 7,564 | 431,828 | ||||||
| Adobe Systems, Inc.* | 6,528 | 429,150 | ||||||
| Intuit, Inc. | 4,386 | 340,923 | ||||||
| SAP AG ADR | 3,828 | 311,255 | ||||||
| Workday, Inc. — Class A* | 3,150 | 288,005 | ||||||
| Autodesk, Inc.* | 5,048 | 248,261 | ||||||
| Citrix Systems, Inc.* | 4,091 | 234,946 | ||||||
| ANSYS, Inc.* | 2,780 | 214,116 | ||||||
| Splunk, Inc.* | 2,660 | 190,163 | ||||||
| Synopsys, Inc.* | 4,660 | 178,991 | ||||||
| Nuance Communications, Inc.* | 10,150 | 174,276 | ||||||
| Concur Technologies, Inc.* | 1,670 | 165,447 | ||||||
| FactSet Research Systems, Inc. | 1,500 | 161,715 | ||||||
| Cadence Design Systems, Inc.* | 10,080 | 156,643 | ||||||
| PTC, Inc.* | 4,320 | 153,058 | ||||||
| Ultimate Software Group, Inc.* | 1,100 | 150,700 | ||||||
| Informatica Corp.* | 3,978 | 150,289 | ||||||
| TIBCO Software, Inc.* | 6,544 | 132,974 | ||||||
| Qlik Technologies, Inc.* | 4,200 | 111,678 | ||||||
| Total Application Software | 4,224,418 | |||||||
| COMMUNICATIONS EQUIPMENT - 7.9% | ||||||||
| QUALCOMM, Inc. | 10,928 | 861,783 | ||||||
| Cisco Systems, Inc. | 36,152 | 810,166 | ||||||
| Motorola Solutions, Inc. | 4,510 | 289,948 | ||||||
| Juniper Networks, Inc.* | 10,052 | 258,940 | ||||||
| Harris Corp. | 2,930 | 214,359 | ||||||
| F5 Networks, Inc.* | 1,978 | 210,914 | ||||||
| Palo Alto Networks, Inc.* | 2,360 | 161,896 | ||||||
| Brocade Communications Systems, Inc.* | 14,920 | 158,301 | ||||||
| ARRIS Group, Inc.* | 5,130 | 144,563 | ||||||
| Riverbed Technology, Inc.* | 6,813 | 134,284 | ||||||
| JDS Uniphase Corp.* | 9,467 | 132,538 | ||||||
| Ubiquiti Networks, Inc.* | 2,830 | 128,680 | ||||||
| Finisar Corp.* | 4,410 | 116,909 | ||||||
| Ciena Corp.* | 4,856 | 110,425 | ||||||
| Aruba Networks, Inc.* | 5,540 | 103,875 | ||||||
| Total Communications Equipment | 3,837,581 | |||||||
| IT CONSULTING & OTHER SERVICES - 5.6% | ||||||||
| International Business Machines Corp. | 5,648 | 1,087,185 | ||||||
| Cognizant Technology Solutions | ||||||||
| Corp. — Class A* | 8,380 | 424,112 | ||||||
| Accenture plc — Class A | 4,767 | 380,025 | ||||||
| Infosys Ltd. ADR | 5,662 | 306,767 | ||||||
| Teradata Corp.* | 4,275 | 210,287 | ||||||
| Gartner, Inc.* | 2,610 | 181,238 | ||||||
| Leidos Holdings, Inc. | 3,344 | 118,277 | ||||||
| Total IT Consulting & Other Services | 2,707,891 | |||||||
| SEMICONDUCTOR EQUIPMENT - 3.1% | ||||||||
| Applied Materials, Inc. | 17,765 | 362,761 | ||||||
| ASML Holding N.V. — Class G | 3,168 | 295,764 | ||||||
| KLA-Tencor Corp. | 3,548 | 245,309 | ||||||
| Lam Research Corp.* | 3,864 | 212,520 | ||||||
| SunEdison, Inc.* | 8,018 | 151,059 | ||||||
| Teradyne, Inc.* | 7,330 | 145,794 | ||||||
| GT Advanced Technologies, Inc.* | 6,090 | 103,835 | ||||||
| Total Semiconductor Equipment | 1,517,042 | |||||||
| ELECTRONIC MANUFACTURING SERVICES - 1.9% | ||||||||
| TE Connectivity Ltd. | 5,627 | 338,801 | ||||||
| Trimble Navigation Ltd.* | 6,263 | 243,443 | ||||||
| Flextronics International Ltd.* | 18,770 | 173,435 | ||||||
| Jabil Circuit, Inc. | 8,130 | 146,340 | ||||||
| Total Electronic Manufacturing Services | 902,019 | |||||||
| ELECTRONIC COMPONENTS - 1.7% | ||||||||
| Corning, Inc. | 19,810 | 412,445 | ||||||
| Amphenol Corp. — Class A | 3,051 | 279,624 | ||||||
| InvenSense, Inc. — Class A* | 4,560 | 107,935 | ||||||
| Total Electronic Components | 800,004 | |||||||
| HOME ENTERTAINMENT SOFTWARE - 1.6% | ||||||||
| Activision Blizzard, Inc. | 13,850 | 283,093 | ||||||
| Electronic Arts, Inc.* | 7,555 | 219,171 | ||||||
| Zynga, Inc. — Class A* | 32,460 | 139,578 | ||||||
| Take-Two Interactive Software, Inc.* | 5,130 | 112,501 | ||||||
| Total Home Entertainment Software | 754,343 | |||||||
| TECHNOLOGY DISTRIBUTORS - 1.1% | ||||||||
| Avnet, Inc. | 4,170 | 194,030 | ||||||
| Arrow Electronics, Inc.* | 3,200 | 189,952 | ||||||
| Ingram Micro, Inc. — Class A* | 5,550 | 164,058 | ||||||
| Total Technology Distributors | 548,040 | |||||||
| ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4% | ||||||||
| FLIR Systems, Inc. | 4,860 | 174,960 | ||||||
| Total Common Stocks | ||||||||
| (Cost $35,969,799) | 48,375,428 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.3% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 140,996 | 140,996 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $140,996) | 140,996 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 3.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 751,557 | 751,557 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 670,620 | 670,620 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| TECHNOLOGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | $ | 126,423 | $ | 126,423 | ||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,548,600) | 1,548,600 | |||||||
| Total Investments - 103.3% | ||||||||
| (Cost $37,659,395) | $ | 50,065,024 | ||||||
| Other Assets & Liabilities, net - (3.3)% | (1,591,966 | ) | ||||||
| Total Net Assets - 100.0% | $ | 48,473,058 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| 130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| TECHNOLOGY FUND |
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Investments, at value - including $1,507,747 of | ||||
| securities loaned | ||||
| (cost $35,969,799) | $ | 48,375,428 | ||
| Repurchase agreements, at value | ||||
| (cost $1,689,596) | 1,689,596 | |||
| Total investments | ||||
| (cost $37,659,395) | 50,065,024 | |||
| Receivables: | ||||
| Fund shares sold | 892,220 | |||
| Dividends | 19,759 | |||
| Securities lending income | 2,276 | |||
| Total assets | 50,979,279 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 1,548,600 | |||
| Fund shares redeemed | 877,596 | |||
| Management fees | 35,015 | |||
| Transfer agent and administrative fees | 10,298 | |||
| Distribution and service fees | 6,606 | |||
| Portfolio accounting fees | 4,119 | |||
| Miscellaneous | 23,987 | |||
| Total liabilities | 2,506,221 | |||
| Net assets | $ | 48,473,058 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 44,391,567 | ||
| Accumulated net investment loss | (58,528 | ) | ||
| Accumulated net realized loss on investments | (8,265,610 | ) | ||
| Net unrealized appreciation on investments | 12,405,629 | |||
| Net assets | $ | 48,473,058 | ||
| Investor Class: | ||||
| Net assets | $ | 32,858,010 | ||
| Capital shares outstanding | 587,795 | |||
| Net asset value per share | $ | 55.90 | ||
| Advisor Class: | ||||
| Net assets | $ | 6,915,422 | ||
| Capital shares outstanding | 133,312 | |||
| Net asset value per share | $ | 51.87 | ||
| A-Class: | ||||
| Net assets | $ | 5,873,079 | ||
| Capital shares outstanding | 111,255 | |||
| Net asset value per share | $ | 52.79 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 55.42 | ||
| C-Class: | ||||
| Net assets | $ | 2,826,547 | ||
| Capital shares outstanding | 57,331 | |||
| Net asset value per share | $ | 49.30 |
STATEMENT OF
OPERATIONS
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $366) | $ | 352,527 | ||
| Income from securities lending, net | 11,465 | |||
| Interest | 18 | |||
| Total investment income | 364,010 | |||
| Expenses: | ||||
| Management fees | 257,373 | |||
| Transfer agent and administrative fees | 75,698 | |||
| Distribution and service fees: | ||||
| Advisor Class | 16,489 | |||
| A-Class | 10,833 | |||
| C-Class | 21,974 | |||
| Portfolio accounting fees | 30,279 | |||
| Custodian fees | 3,527 | |||
| Trustees’ fees* | 1,754 | |||
| Line of credit interest expense | 80 | |||
| Miscellaneous | 45,489 | |||
| Total expenses | 463,496 | |||
| Net investment loss | (99,486 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 1,519,835 | |||
| Net realized gain | 1,519,835 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 5,854,636 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 5,854,636 | |||
| Net realized and unrealized gain | 7,374,471 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 7,274,985 |
* 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 | 131 |
| TECHNOLOGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (99,486 | ) | $ | (14,414 | ) | ||
| Net realized gain on investments | 1,519,835 | 2,773,692 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 5,854,636 | (3,288,892 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 7,274,985 | (529,614 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 90,386,817 | 39,415,333 | ||||||
| Advisor Class | 19,872,814 | 407,615 | ||||||
| A-Class | 17,950,430 | 3,445,923 | ||||||
| C-Class | 25,610,311 | 23,663,292 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (70,456,671 | ) | (50,777,143 | ) | ||||
| Advisor Class | (15,430,118 | ) | (1,416,694 | ) | ||||
| A-Class | (15,058,469 | ) | (8,772,441 | ) | ||||
| C-Class | (25,000,548 | ) | (24,568,978 | ) | ||||
| Net increase (decrease) from capital share transactions | 27,874,566 | (18,603,093 | ) | |||||
| Net increase (decrease) in net assets | 35,149,551 | (19,132,707 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 13,323,507 | 32,456,214 | ||||||
| End of year | $ | 48,473,058 | $ | 13,323,507 | ||||
| Accumulated net investment loss at end of year | $ | (58,528 | ) | $ | (27,296 | ) | ||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| Investor Class | 1,785,118 | 975,914 | ||||||
| Advisor Class | 400,929 | 10,742 | ||||||
| A-Class | 363,346 | 88,872 | ||||||
| C-Class | 589,677 | 661,380 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (1,388,328 | ) | (1,250,551 | ) | ||||
| Advisor Class | (299,244 | ) | (37,818 | ) | ||||
| A-Class | (300,472 | ) | (221,203 | ) | ||||
| C-Class | (576,511 | ) | (688,195 | ) | ||||
| Net decrease in shares | 574,515 | (460,859 | ) | |||||
| * | Capital share activity for the periods presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014.See Note 9 in Notes to Financial Statements. |
| 132 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.58 | $ | 42.92 | $ | 41.81 | $ | 36.10 | $ | 23.09 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.09 | ) | .03 | (.03 | ) | (.18 | ) | (.15 | ) | |||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 12.41 | .63 | 1.14 | 5.89 | 13.16 | |||||||||||||||
| Total from investment operations | 12.32 | .66 | 1.11 | 5.71 | 13.01 | |||||||||||||||
| Net asset value, end of period | $ | 55.90 | $ | 43.58 | $ | 42.92 | $ | 41.81 | $ | 36.10 | ||||||||||
| Total Returnb | 28.24 | % | 1.54 | % | 2.65 | % | 15.88 | % | 56.23 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 32,858 | $ | 8,325 | $ | 19,985 | $ | 35,408 | $ | 37,391 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.18 | %) | 0.10 | % | (0.10 | %) | (0.48 | %) | (0.52 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.38 | % | ||||||||||
| Portfolio turnover rate | 321 | % | 324 | % | 487 | % | 393 | % | 335 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | c | 2013 | c | 2012 | c | 2011 | c | 2010 | c | ||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 40.65 | $ | 40.22 | $ | 39.39 | $ | 34.18 | $ | 21.97 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.27 | ) | (.12 | ) | (.33 | ) | (.33 | ) | (.33 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.49 | .55 | 1.16 | 5.54 | 12.54 | |||||||||||||||
| Total from investment operations | 11.22 | .43 | .83 | 5.21 | 12.21 | |||||||||||||||
| Net asset value, end of period | $ | 51.87 | $ | 40.65 | $ | 40.22 | $ | 39.39 | $ | 34.18 | ||||||||||
| Total Returnb | 27.60 | % | 1.04 | % | 2.13 | % | 15.28 | % | 55.60 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 6,915 | $ | 1,286 | $ | 2,361 | $ | 6,565 | $ | 17,969 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.54 | %) | (0.33 | %) | (0.87 | %) | (0.94 | %) | (1.04 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.85 | % | 1.85 | % | 1.88 | % | 1.87 | % | ||||||||||
| Portfolio turnover rate | 321 | % | 324 | % | 487 | % | 393 | % | 335 | % |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 133 |
| TECHNOLOGY FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.30 | $ | 40.76 | $ | 39.83 | $ | 34.47 | $ | 22.11 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.23 | ) | (.09 | ) | (.30 | ) | (.27 | ) | (.24 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.72 | .63 | 1.23 | 5.63 | 12.60 | |||||||||||||||
| Total from investment operations | 11.49 | .54 | .93 | 5.36 | 12.36 | |||||||||||||||
| Net asset value, end of period | $ | 52.79 | $ | 41.30 | $ | 40.76 | $ | 39.83 | $ | 34.47 | ||||||||||
| Total Returnb | 27.79 | % | 1.32 | % | 2.33 | % | 15.58 | % | 55.90 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,873 | $ | 1,998 | $ | 7,367 | $ | 1,725 | $ | 3,936 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.47 | %) | (0.27 | %) | (0.76 | %) | (0.73 | %) | (0.78 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.59 | % | 1.59 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 321 | % | 324 | % | 487 | % | 393 | % | 335 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | c | 2013 | c | 2012 | c | 2011 | c | 2010 | c | ||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.84 | $ | 38.65 | $ | 38.07 | $ | 33.15 | $ | 21.42 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.50 | ) | (.33 | ) | (.51 | ) | (.51 | ) | (.42 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 10.96 | .52 | 1.09 | 5.43 | 12.15 | |||||||||||||||
| Total from investment operations | 10.46 | .19 | .58 | 4.92 | 11.73 | |||||||||||||||
| Net asset value, end of period | $ | 49.30 | $ | 38.84 | $ | 38.65 | $ | 38.07 | $ | 33.15 | ||||||||||
| Total Returnb | 26.90 | % | 0.54 | % | 1.50 | % | 14.84 | % | 54.76 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,827 | $ | 1,715 | $ | 2,743 | $ | 2,618 | $ | 3,719 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.13 | %) | (0.90 | %) | (1.45 | %) | (1.53 | %) | (1.49 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.36 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 321 | % | 324 | % | 487 | % | 393 | % | 335 | % |
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 9 in Notes to Financial Statements. |
| 134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 135 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Telecommunications Fund Investor Class returned 13.12%, compared with 2.32% for the S&P 500 Telecommunications Services Index. The broader S&P 500 Index returned 21.86%.
The industry in the sector that contributed most to the Fund’s return was communications equipment, followed by wireless telecommunications services. The technology hardware storage & peripheral industry was the only detractor from return.
T-Mobile U.S., Inc., Spring Corp. and QUALCOMM, Inc. were the strongest performers for the period. BlackBerry Ltd., Ixia and Inter Digital, Inc. detracted most from performance during 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 Dates: | |
| Investor Class | April 1, 1998 |
| Advisor Class | April 1, 1998 |
| A-Class | September 1, 2004 |
| C-Class | April 18, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Verizon Communications, Inc. | 8.6 | % | ||
| AT&T, Inc. | 8.3 | % | ||
| QUALCOMM, Inc. | 7.1 | % | ||
| Cisco Systems, Inc. | 6.7 | % | ||
| Sprint Corp. | 3.6 | % | ||
| T-Mobile US, Inc. | 3.2 | % | ||
| Crown Castle International Corp. | 3.1 | % | ||
| CenturyLink, Inc. | 2.7 | % | ||
| Motorola Solutions, Inc. | 2.4 | % | ||
| Vodafone Group plc ADR | 2.3 | % | ||
| Top Ten Total | 48.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 136 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 13.12% | 10.31% | 1.49% | |||||||||
| Advisor Class Shares | 12.53% | 9.82% | 1.02% | |||||||||
| C-Class Shares | 12.49% | 9.48% | 0.60% | |||||||||
| C-Class Shares with CDSC‡ | 11.49% | 9.48% | 0.60% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Telecommunication Services Index | 2.32% | 14.46% | 7.66% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 12.80% | 10.06% | 2.40% | |||||||||
| A-Class Shares with sales charge† | 7.43% | 9.00% | 1.88% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Telecommunication Services Index | 2.32% | 14.46% | 7.51% | |||||||||
| * | 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 Telecommunications Services Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
† Fund returns are calculated using the maximum sales charge of 4.75%.
| THE RYDEX FUNDS ANNUAL REPORT | 137 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| TELECOMMUNICATIONS FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.5% | ||||||||
| COMMUNICATIONS EQUIPMENT - 41.5% | ||||||||
| QUALCOMM, Inc. | 5,131 | $ | 404,632 | |||||
| Cisco Systems, Inc. | 16,981 | 380,544 | ||||||
| Motorola Solutions, Inc. | 2,139 | 137,516 | ||||||
| Juniper Networks, Inc.* | 4,726 | 121,742 | ||||||
| Harris Corp. | 1,321 | 96,644 | ||||||
| F5 Networks, Inc.* | 883 | 94,154 | ||||||
| Brocade Communications Systems, Inc.* | 7,011 | 74,387 | ||||||
| Palo Alto Networks, Inc.* | 1,082 | 74,225 | ||||||
| Telefonaktiebolaget LM Ericsson ADR | 5,482 | 73,075 | ||||||
| EchoStar Corp. — Class A* | 1,498 | 71,245 | ||||||
| ARRIS Group, Inc.* | 2,434 | 68,590 | ||||||
| JDS Uniphase Corp.* | 4,442 | 62,188 | ||||||
| Riverbed Technology, Inc.* | 3,132 | 61,732 | ||||||
| Ubiquiti Networks, Inc.* | 1,347 | 61,248 | ||||||
| ViaSat, Inc.* | 882 | 60,893 | ||||||
| Sierra Wireless, Inc.* | 2,664 | 58,155 | ||||||
| Finisar Corp.* | 2,030 | 53,815 | ||||||
| Ciena Corp.* | 2,303 | 52,370 | ||||||
| Polycom, Inc.* | 3,564 | 48,898 | ||||||
| Aruba Networks, Inc.* | 2,548 | 47,775 | ||||||
| Plantronics, Inc. | 1,062 | 47,206 | ||||||
| InterDigital, Inc. | 1,245 | 41,222 | ||||||
| ADTRAN, Inc. | 1,661 | 40,545 | ||||||
| NETGEAR, Inc.* | 1,124 | 37,913 | ||||||
| Infinera Corp.* | 3,901 | 35,421 | ||||||
| CalAmp Corp.* | 1,231 | 34,308 | ||||||
| Ruckus Wireless, Inc.* | 2,680 | 32,589 | ||||||
| Total Communications Equipment | 2,373,032 | |||||||
| INTEGRATED TELECOMMUNICATION SERVICES - 26.1% | ||||||||
| Verizon Communications, Inc. | 10,319 | 490,875 | ||||||
| AT&T, Inc. | 13,457 | 471,937 | ||||||
| CenturyLink, Inc. | 4,727 | 155,235 | ||||||
| Frontier Communications Corp. | 14,662 | 83,573 | ||||||
| Windstream Holdings, Inc.1 | 9,323 | 76,822 | ||||||
| Telefonica Brasil S.A. ADR | 3,483 | 73,979 | ||||||
| BCE, Inc. | 1,563 | 67,428 | ||||||
| Telefonica S.A. ADR | 4,132 | 65,244 | ||||||
| Total Integrated Telecommunication Services | 1,485,093 | |||||||
| WIRELESS TELECOMMUNICATION SERVICES - 21.8% | ||||||||
| Sprint Corp.* | 22,591 | 207,610 | ||||||
| T-Mobile US, Inc. | 5,454 | 180,146 | ||||||
| Vodafone Group plc ADR | 3,637 | 133,878 | ||||||
| SBA Communications Corp. — Class A* | 1,312 | 119,340 | ||||||
| America Movil SAB de CV ADR | 4,877 | 96,955 | ||||||
| Mobile Telesystems OJSC ADR | 5,013 | 87,677 | ||||||
| China Mobile Ltd. ADR | 1,866 | 85,071 | ||||||
| Tim Participacoes S.A. ADR | 2,737 | 71,053 | ||||||
| VimpelCom Ltd. ADR | 7,827 | 70,678 | ||||||
| SK Telecom Company Ltd. ADR | 3,097 | 69,899 | ||||||
| Rogers Communications, Inc. — Class B | 1,628 | 67,464 | ||||||
| Telephone & Data Systems, Inc. | 2,227 | 58,370 | ||||||
| Total Wireless Telecommunication Services | 1,248,141 | |||||||
| ALTERNATIVE CARRIERS - 3.9% | ||||||||
| Level 3 Communications, Inc.* | 2,701 | 105,717 | ||||||
| tw telecom, Inc. — Class A* | 2,355 | 73,617 | ||||||
| Cogent Communications Group, Inc. | 1,283 | 45,585 | ||||||
| Total Alternative Carriers | 224,919 | |||||||
| TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 3.2% | ||||||||
| BlackBerry Ltd.* | 11,934 | 96,427 | ||||||
| Nokia Oyj ADR* | 11,713 | 85,973 | ||||||
| Total Technology Hardware, Storage & Peripherals | 182,400 | |||||||
| SPECIALIZED REITS - 3.0% | ||||||||
| Crown Castle International Corp. | 2,361 | 174,195 | ||||||
| Total Common Stocks | ||||||||
| (Cost $4,451,427) | 5,687,780 | |||||||
| RIGHTS†† - 0.1% | ||||||||
| Leap Wireless International | ||||||||
| Expires 03/17/15* | 1,848 | 4,657 | ||||||
| Total Rights | ||||||||
| (Cost $4,327) | 4,657 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.3% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 18,499 | 18,499 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $18,499) | 18,499 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.6% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 16,088 | 16,088 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 14,356 | 14,356 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 2,706 | 2,706 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $33,150) | 33,150 | |||||||
| Total Investments - 100.5% | ||||||||
| (Cost $4,507,403) | $ | 5,744,086 | ||||||
| Other Assets & Liabilities, net - (0.5)% | (28,698 | ) | ||||||
| Total Net Assets - 100.0% | $ | 5,715,388 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. ADR — American Depositary Receipt |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| 138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| TELECOMMUNICATIONS FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $32,136 of | ||||
| securities loaned | ||||
| (cost $4,455,754) | $ | 5,692,437 | ||
| Repurchase agreements, at value | ||||
| (cost $51,649) | 51,649 | |||
| Total investments | ||||
| (cost $4,507,403) | 5,744,086 | |||
| Receivables: | ||||
| Fund shares sold | 2,016,347 | |||
| Dividends | 4,156 | |||
| Securities lending income | 78 | |||
| Total assets | 7,764,667 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,564,173 | |||
| Fund shares redeemed | 444,450 | |||
| Upon return of securities loaned | 33,150 | |||
| Management fees | 2,926 | |||
| Transfer agent and administrative fees | 860 | |||
| Distribution and service fees | 688 | |||
| Portfolio accounting fees | 344 | |||
| Miscellaneous | 2,688 | |||
| Total liabilities | 2,049,279 | |||
| Net assets | $ | 5,715,388 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 9,561,716 | ||
| Undistributed net investment income | 98,119 | |||
| Accumulated net realized loss on investments | (5,181,130 | ) | ||
| Net unrealized appreciation on investments | 1,236,683 | |||
| Net assets | $ | 5,715,388 | ||
| Investor Class: | ||||
| Net assets | $ | 2,497,297 | ||
| Capital shares outstanding | 54,877 | |||
| Net asset value per share | $ | 45.51 | ||
| Advisor Class: | ||||
| Net assets | $ | 316,335 | ||
| Capital shares outstanding | 7,556 | |||
| Net asset value per share | $ | 41.86 | ||
| A-Class: | ||||
| Net assets | $ | 2,631,197 | ||
| Capital shares outstanding | 61,561 | |||
| Net asset value per share | $ | 42.74 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 44.87 | ||
| C-Class: | ||||
| Net assets | $ | 270,559 | ||
| Capital shares outstanding | 6,783 | |||
| Net asset value per share | $ | 39.89 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $2,570) | $ | 169,868 | ||
| Income from securities lending, net | 2,493 | |||
| Interest | 4 | |||
| Total investment income | 172,365 | |||
| Expenses: | ||||
| Management fees | 39,896 | |||
| Transfer agent and administrative fees | 11,734 | |||
| Distribution and service fees: | ||||
| Advisor Class | 1,483 | |||
| A-Class | 2,464 | |||
| C-Class | 5,593 | |||
| Portfolio accounting fees | 4,694 | |||
| Custodian fees | 536 | |||
| Trustees’ fees* | 442 | |||
| Tax expense | 285 | |||
| Line of credit interest expense | 152 | |||
| Miscellaneous | 6,967 | |||
| Total expenses | 74,246 | |||
| Net investment income | 98,119 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (73,912 | ) | ||
| Net realized loss | (73,912 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 134,687 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 134,687 | |||
| Net realized and unrealized gain | 60,775 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 158,894 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
| TELECOMMUNICATIONS FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 98,119 | $ | 103,133 | ||||
| Net realized loss on investments | (73,912 | ) | (923,019 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | 134,687 | (590,028 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 158,894 | (1,409,914 | ) | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (77,513 | ) | (44,154 | ) | ||||
| Advisor Class | (7,191 | ) | (3,198 | ) | ||||
| A-Class | (8,359 | ) | (13,939 | ) | ||||
| C-Class | (4,990 | ) | (31,745 | ) | ||||
| Total distributions to shareholders | (98,053 | ) | (93,036 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 40,052,105 | 47,071,590 | ||||||
| Advisor Class | 2,201,898 | 220,559 | ||||||
| A-Class | 7,692,352 | 939,223 | ||||||
| C-Class | 28,694,832 | 41,193,736 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 76,714 | 43,205 | ||||||
| Advisor Class | 6,218 | 1,603 | ||||||
| A-Class | 8,202 | 13,939 | ||||||
| C-Class | 4,877 | 31,619 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (40,533,973 | ) | (49,823,116 | ) | ||||
| Advisor Class | (2,014,866 | ) | (280,290 | ) | ||||
| A-Class | (5,702,771 | ) | (1,937,536 | ) | ||||
| C-Class | (29,271,944 | ) | (40,997,450 | ) | ||||
| Net increase (decrease) from capital share transactions | 1,213,644 | (3,522,918 | ) | |||||
| Net increase (decrease) in net assets | 1,274,485 | (5,025,868 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 4,440,903 | 9,466,771 | ||||||
| End of year | $ | 5,715,388 | $ | 4,440,903 | ||||
| Undistributed net investment income at end of year | $ | 98,119 | $ | 98,053 | ||||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| Investor Class | 934,805 | 1,185,904 | ||||||
| Advisor Class | 55,119 | 5,946 | ||||||
| A-Class | 186,923 | 25,932 | ||||||
| C-Class | 759,823 | 1,183,633 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 1,788 | 1,134 | ||||||
| Advisor Class | 157 | 45 | ||||||
| A-Class | 203 | 388 | ||||||
| C-Class | 129 | 941 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (954,582 | ) | (1,283,465 | ) | ||||
| Advisor Class | (51,252 | ) | (7,639 | ) | ||||
| A-Class | (139,957 | ) | (51,810 | ) | ||||
| C-Class | (774,952 | ) | (1,180,929 | ) | ||||
| Net decrease in shares | 18,204 | (119,920 | ) | |||||
| * | Capital share activity for the periods presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 9 in Notes to Financial Statements. |
| 140 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 40.76 | $ | 41.52 | $ | 47.13 | $ | 41.18 | $ | 30.86 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | 1.06 | .81 | 1.23 | .30 | .78 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.26 | (.67 | ) | (5.52 | ) | 5.89 | 10.56 | |||||||||||||
| Total from investment operations | 5.32 | .14 | (4.29 | ) | 6.19 | 11.34 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Total distributions | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Net asset value, end of period | $ | 45.51 | $ | 40.76 | $ | 41.52 | $ | 47.13 | $ | 41.18 | ||||||||||
| Total Returnb | 13.12 | % | 0.50 | % | (8.77 | %) | 15.06 | % | 36.88 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,497 | $ | 2,970 | $ | 7,028 | $ | 48,089 | $ | 4,677 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 2.47 | % | 2.06 | % | 2.86 | % | 0.73 | % | 2.03 | % | ||||||||||
| Total expenses | 1.38 | % | 1.35 | % | 1.36 | % | 1.39 | % | 1.39 | % | ||||||||||
| Portfolio turnover rate | 1,271 | % | 1,550 | % | 793 | % | 1,008 | % | 867 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 37.75 | $ | 38.69 | $ | 44.21 | $ | 38.82 | $ | 29.26 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .29 | .57 | .66 | .09 | .69 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.39 | (.61 | ) | (4.86 | ) | 5.54 | 9.89 | |||||||||||||
| Total from investment operations | 4.68 | (.04 | ) | (4.20 | ) | 5.63 | 10.58 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Total distributions | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Net asset value, end of period | $ | 41.86 | $ | 37.75 | $ | 38.69 | $ | 44.21 | $ | 38.82 | ||||||||||
| Total Returnb | 12.53 | % | (0.01 | %) | (9.15 | %) | 14.59 | % | 36.35 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 316 | $ | 133 | $ | 200 | $ | 695 | $ | 279 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.74 | % | 1.59 | % | 1.65 | % | 0.25 | % | 1.94 | % | ||||||||||
| Total expenses | 1.88 | % | 1.86 | % | 1.85 | % | 1.88 | % | 1.89 | % | ||||||||||
| Portfolio turnover rate | 1,271 | % | 1,550 | % | 793 | % | 1,008 | % | 867 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 141 |
| TELECOMMUNICATIONS FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.44 | $ | 39.27 | $ | 44.72 | $ | 39.21 | $ | 29.48 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .72 | .72 | .54 | .42 | .51 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.15 | (.65 | ) | (4.67 | ) | 5.33 | 10.24 | |||||||||||||
| Total from investment operations | 4.87 | .07 | (4.13 | ) | 5.75 | 10.75 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Total distributions | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Net asset value, end of period | $ | 42.74 | $ | 38.44 | $ | 39.27 | $ | 44.72 | $ | 39.21 | ||||||||||
| Total Returnb | 12.80 | % | 0.30 | % | (8.91 | %) | 14.75 | % | 36.57 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,631 | $ | 553 | $ | 1,566 | $ | 699 | $ | 1,093 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.79 | % | 1.98 | % | 1.41 | % | 1.01 | % | 1.45 | % | ||||||||||
| Total expenses | 1.63 | % | 1.61 | % | 1.60 | % | 1.64 | % | 1.63 | % | ||||||||||
| Portfolio turnover rate | 1,271 | % | 1,550 | % | 793 | % | 1,008 | % | 867 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 36.00 | $ | 37.04 | $ | 42.57 | $ | 37.49 | $ | 28.44 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .54 | .48 | .15 | (.03 | ) | .30 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.92 | (.62 | ) | (4.36 | ) | 5.35 | 9.77 | |||||||||||||
| Total from investment operations | 4.46 | (.14 | ) | (4.21 | ) | 5.32 | 10.07 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Total distributions | (.57 | ) | (.90 | ) | (1.32 | ) | (.24 | ) | (1.02 | ) | ||||||||||
| Net asset value, end of period | $ | 39.89 | $ | 36.00 | $ | 37.04 | $ | 42.57 | $ | 37.49 | ||||||||||
| Total Returnb | 12.49 | % | (0.24 | %) | (9.52 | %) | 14.22 | % | 35.59 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 271 | $ | 784 | $ | 672 | $ | 2,896 | $ | 1,141 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.42 | % | 1.41 | % | 0.39 | % | (0.07 | %) | 0.86 | % | ||||||||||
| Total expenses | 2.38 | % | 2.36 | % | 2.36 | % | 2.39 | % | 2.39 | % | ||||||||||
| Portfolio turnover rate | 1,271 | % | 1,550 | % | 793 | % | 1,008 | % | 867 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effec-tive February 7, 2014. See Note 9 in Notes to Financial Statements. |
| 142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 143 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, Transportation Fund Investor Class returned 39.16%, compared with 27.29% for the S&P 500 Industrials Index. The broader S&P 500 Index returned 21.86%.
The automobiles industry and the auto components industry were the largest contributors to return. No industry detracted, but the marine industry contributed least.
Tesla Motors, Inc., Delta Air Lines, Inc. and Union Pacific Corp. were the biggest contributors to performance for the period. UTi Worldwide, Inc., C.H. Robinson Worldwide, Inc. and Kandi Technologies Group, Inc. detracted most from performance during 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 Dates: | ||||
| Investor Class | April 2, 1998 | |||
| Advisor Class | June 9, 1998 | |||
| A-Class | September 1, 2004 | |||
| C-Class | May 14, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| United Parcel Service, Inc. — Class B | 5.0 | % | ||
| Union Pacific Corp. | 4.8 | % | ||
| Ford Motor Co. | 4.1 | % | ||
| General Motors Co. | 3.8 | % | ||
| FedEx Corp. | 3.4 | % | ||
| Johnson Controls, Inc. | 3.0 | % | ||
| Delta Air Lines, Inc. | 2.9 | % | ||
| Norfolk Southern Corp. | 2.9 | % | ||
| CSX Corp. | 2.9 | % | ||
| Tesla Motors, Inc. | 2.5 | % | ||
| Top Ten Total | 35.3 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 144 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 39.16% | 25.58% | 9.08% | |||||||||
| Advisor Class Shares | 38.51% | 25.00% | 8.55% | |||||||||
| C-Class Shares | 37.84% | 24.32% | 8.00% | |||||||||
| C-Class Shares with CDSC‡ | 36.84% | 24.32% | 8.00% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Industrials Index | 27.29% | 25.63% | 8.70% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 38.89% | 25.33% | 8.77% | |||||||||
| A-Class Shares with sales charge† | 32.31% | 24.11% | 8.22% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Industrials Index | 27.29% | 25.63% | 8.41% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the S&P 500 Industrial Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 145 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| TRANSPORTATION FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 100.0% | ||||||||
| AUTO PARTS & EQUIPMENT - 19.5% | ||||||||
| Johnson Controls, Inc. | 39,587 | $ | 1,873,256 | |||||
| BorgWarner, Inc. | 20,100 | 1,235,547 | ||||||
| Delphi Automotive plc | 17,800 | 1,207,908 | ||||||
| TRW Automotive Holdings Corp.* | 12,340 | 1,007,191 | ||||||
| Autoliv, Inc. | 9,180 | 921,213 | ||||||
| Magna International, Inc. | 9,540 | 918,797 | ||||||
| Lear Corp. | 10,337 | 865,414 | ||||||
| Allison Transmission Holdings, Inc. | 26,005 | 778,590 | ||||||
| Gentex Corp. | 22,760 | 717,623 | ||||||
| Visteon Corp.* | 7,935 | 701,771 | ||||||
| Dana Holding Corp. | 27,980 | 651,095 | ||||||
| Tenneco, Inc.* | 10,610 | 616,123 | ||||||
| Dorman Products, Inc.* | 8,300 | 490,198 | ||||||
| American Axle & Manufacturing | ||||||||
| Holdings, Inc.* | 20,930 | 387,624 | ||||||
| Total Auto Parts & Equipment | 12,372,350 | |||||||
| RAILROADS - 16.6% | ||||||||
| Union Pacific Corp. | 16,356 | 3,069,368 | ||||||
| Norfolk Southern Corp. | 18,842 | 1,830,877 | ||||||
| CSX Corp. | 62,875 | 1,821,489 | ||||||
| Kansas City Southern | 11,107 | 1,133,580 | ||||||
| Canadian Pacific Railway Ltd. | 6,968 | 1,048,196 | ||||||
| Canadian National Railway Co. | 16,100 | 905,142 | ||||||
| Genesee & Wyoming, Inc. — Class A* | 7,954 | 774,083 | ||||||
| Total Railroads | 10,582,735 | |||||||
| AIRLINES - 16.4% | ||||||||
| Delta Air Lines, Inc. | 53,497 | 1,853,672 | ||||||
| American Airlines Group, Inc.* | 38,194 | 1,397,900 | ||||||
| Southwest Airlines Co. | 57,466 | 1,356,772 | ||||||
| United Continental Holdings, Inc.* | 30,210 | 1,348,272 | ||||||
| Copa Holdings S.A. — Class A | 6,962 | 1,010,813 | ||||||
| Ryanair Holdings plc ADR* | 14,800 | 870,388 | ||||||
| Alaska Air Group, Inc. | 9,204 | 858,825 | ||||||
| Spirit Airlines, Inc.* | 11,300 | 671,220 | ||||||
| JetBlue Airways Corp.* | 61,600 | 535,304 | ||||||
| Allegiant Travel Co. — Class A | 4,300 | 481,299 | ||||||
| Total Airlines | 10,384,465 | |||||||
| AUTOMOBILE MANUFACTURERS - 14.4% | ||||||||
| Ford Motor Co. | 167,317 | 2,610,145 | ||||||
| General Motors Co. | 70,440 | 2,424,545 | ||||||
| Tesla Motors, Inc.*,1 | 7,618 | 1,587,972 | ||||||
| Tata Motors Ltd. ADR | 27,200 | 963,152 | ||||||
| Toyota Motor Corp. ADR | 8,190 | 924,651 | ||||||
| Thor Industries, Inc. | 9,980 | 609,379 | ||||||
| Total Automobile Manufacturers | 9,119,844 | |||||||
| AIR FREIGHT & LOGISTICS - 13.3% | ||||||||
| United Parcel Service, Inc. — Class B | 32,813 | 3,195,330 | ||||||
| FedEx Corp. | 16,120 | 2,136,867 | ||||||
| Expeditors International of Washington, Inc. | 24,331 | 964,238 | ||||||
| CH Robinson Worldwide, Inc. | 18,293 | 958,370 | ||||||
| Hub Group, Inc. — Class A* | 10,300 | 411,897 | ||||||
| XPO Logistics, Inc.* | 13,600 | 399,976 | ||||||
| UTI Worldwide, Inc. | 32,000 | 338,880 | ||||||
| Total Air Freight & Logistics | 8,405,558 | |||||||
| TRUCKING - 12.3% | ||||||||
| Hertz Global Holdings, Inc.* | 43,839 | 1,167,871 | ||||||
| J.B. Hunt Transport Services, Inc. | 13,912 | 1,000,551 | ||||||
| Old Dominion Freight Line, Inc.* | 13,160 | 746,698 | ||||||
| Avis Budget Group, Inc.* | 15,274 | 743,844 | ||||||
| Ryder System, Inc. | 8,691 | 694,585 | ||||||
| Swift Transportation Co. — Class A* | 25,280 | 625,680 | ||||||
| Landstar System, Inc. | 9,448 | 559,511 | ||||||
| Con-way, Inc. | 12,542 | 515,225 | ||||||
| Heartland Express, Inc. | 21,100 | 478,759 | ||||||
| Knight Transportation, Inc. | 20,300 | 469,539 | ||||||
| Werner Enterprises, Inc. | 18,030 | 459,945 | ||||||
| Arkansas Best Corp. | 8,900 | 328,855 | ||||||
| Total Trucking | 7,791,063 | |||||||
| MOTORCYCLE MANUFACTURERS - 3.2% | ||||||||
| Harley-Davidson, Inc. | 19,081 | 1,270,985 | ||||||
| Kandi Technologies Group, Inc.*,1 | 45,000 | 738,000 | ||||||
| Total Motorcycle Manufacturers | 2,008,985 | |||||||
| TIRES & RUBBER - 2.0% | ||||||||
| Goodyear Tire & Rubber Co. | 32,142 | 839,870 | ||||||
| Cooper Tire & Rubber Co. | 17,370 | 422,091 | ||||||
| Total Tires & Rubber | 1,261,961 | |||||||
| MARINE - 1.3% | ||||||||
| Kirby Corp.* | 7,825 | 792,281 | ||||||
| AIRPORT SERVICES - 1.0% | ||||||||
| Macquarie Infrastructure Company LLC | 10,700 | 612,789 | ||||||
| Total Common Stocks | ||||||||
| (Cost $43,563,369) | 63,332,031 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 318,280 | 318,280 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $318,280) | 318,280 | |||||||
| 146 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| TRANSPORTATION FUND |
| Face | ||||||||
| Amount | Value | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 2.9% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | $ | 877,629 | $ | 877,629 | ||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 783,115 | 783,115 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 147,631 | 147,631 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,808,375) | 1,808,375 | |||||||
| Total Investments - 103.4% | ||||||||
| (Cost $45,690,024) | $ | 65,458,686 | ||||||
| Other Assets & Liabilities, net - (3.4)% | (2,181,975 | ) | ||||||
| Total Net Assets - 100.0% | $ | 63,276,711 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 147 |
| TRANSPORTATION FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $1,740,845 of | ||||
| securities loaned | ||||
| (cost $43,563,369) | $ | 63,332,031 | ||
| Repurchase agreements, at value | ||||
| (cost $2,126,655) | 2,126,655 | |||
| Total investments | ||||
| (cost $45,690,024) | 65,458,686 | |||
| Receivables: | ||||
| Fund shares sold | 458,883 | |||
| Dividends | 38,593 | |||
| Securities lending income | 1,050 | |||
| Total assets | 65,957,212 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 1,808,375 | |||
| Fund shares redeemed | 763,455 | |||
| Management fees | 43,062 | |||
| Transfer agent and administrative fees | 12,665 | |||
| Distribution and service fees | 6,815 | |||
| Portfolio accounting fees | 5,066 | |||
| Miscellaneous | 41,063 | |||
| Total liabilities | 2,680,501 | |||
| Net assets | $ | 63,276,711 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 65,380,277 | ||
| Accumulated net investment loss | (53,657 | ) | ||
| Accumulated net realized loss on investments | (21,818,571 | ) | ||
| Net unrealized appreciation on investments | 19,768,662 | |||
| Net assets | $ | 63,276,711 | ||
| Investor Class: | ||||
| Net assets | $ | 44,021,471 | ||
| Capital shares outstanding | 986,407 | |||
| Net asset value per share | $ | 44.63 | ||
| Advisor Class: | ||||
| Net assets | $ | 2,583,239 | ||
| Capital shares outstanding | 63,614 | |||
| Net asset value per share | $ | 40.61 | ||
| A-Class: | ||||
| Net assets | $ | 12,937,570 | ||
| Capital shares outstanding | 310,949 | |||
| Net asset value per share | $ | 41.61 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 43.69 | ||
| C-Class: | ||||
| Net assets | $ | 3,734,431 | ||
| Capital shares outstanding | 94,496 | |||
| Net asset value per share | $ | 39.52 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $10,372) | $ | 843,444 | ||
| Income from securities lending, net | 35,131 | |||
| Interest | 48 | |||
| Total investment income | 878,623 | |||
| Expenses: | ||||
| Management fees | 578,629 | |||
| Transfer agent and administrative fees | 170,184 | |||
| Distribution and service fees: | ||||
| Advisor Class | 15,777 | |||
| A-Class | 25,197 | |||
| C-Class | 27,640 | |||
| Portfolio accounting fees | 68,073 | |||
| Custodian fees | 7,978 | |||
| Trustees’ fees* | 4,343 | |||
| Line of credit interest expense | 307 | |||
| Miscellaneous | 102,071 | |||
| Total expenses | 1,000,199 | |||
| Net investment loss | (121,576 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 2,214,194 | |||
| Net realized gain | 2,214,194 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 12,043,472 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 12,043,472 | |||
| Net realized and unrealized gain | 14,257,666 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 14,136,090 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 148 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| TRANSPORTATION FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (121,576 | ) | $ | (63,909 | ) | ||
| Net realized gain on investments | 2,214,194 | 770,675 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 12,043,472 | 4,497,858 | ||||||
| Net increase in net assets resulting from operations | 14,136,090 | 5,204,624 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 442,197,154 | 248,140,687 | ||||||
| Advisor Class | 15,406,895 | 4,891,678 | ||||||
| A-Class | 35,299,972 | 7,566,962 | ||||||
| C-Class | 20,204,027 | 22,790,129 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (486,392,760 | ) | (181,778,255 | ) | ||||
| Advisor Class | (18,129,650 | ) | (2,990,536 | ) | ||||
| A-Class | (29,905,841 | ) | (5,068,884 | ) | ||||
| C-Class | (19,951,182 | ) | (23,059,267 | ) | ||||
| Net increase (decrease) from capital share transactions | (41,271,385 | ) | 70,492,514 | |||||
| Net increase (decrease) in net assets | (27,135,295 | ) | 75,697,138 | |||||
| Net assets: | ||||||||
| Beginning of year | 90,412,006 | 14,714,868 | ||||||
| End of year | $ | 63,276,711 | $ | 90,412,006 | ||||
| Accumulated net investment loss at end of year | $ | (53,657 | ) | $ | (62,130 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 11,397,922 | 8,684,455 | ||||||
| Advisor Class | 430,435 | 178,143 | ||||||
| A-Class | 957,561 | 294,246 | ||||||
| C-Class | 587,228 | 942,271 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (12,864,102 | ) | (6,529,753 | ) | ||||
| Advisor Class | (519,741 | ) | (120,319 | ) | ||||
| A-Class | (798,761 | ) | (205,475 | ) | ||||
| C-Class | (587,841 | ) | (959,277 | ) | ||||
| Net increase (decrease) in shares | (1,397,299 | ) | 2,284,291 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 149 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.07 | $ | 26.96 | $ | 27.85 | $ | 23.79 | $ | 14.38 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.04 | ) | (.07 | ) | (.06 | ) | —c | (.15 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 12.60 | 5.18 | (.83 | ) | 4.06 | 9.70 | ||||||||||||||
| Total from investment operations | 12.56 | 5.11 | (.89 | ) | 4.06 | 9.55 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.14 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.14 | ) | ||||||||||||||
| Net asset value, end of period | $ | 44.63 | $ | 32.07 | $ | 26.96 | $ | 27.85 | $ | 23.79 | ||||||||||
| Total Returnc | 39.16 | % | 18.95 | % | (3.20 | %) | 17.07 | % | 66.51 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 44,021 | $ | 78,644 | $ | 8,031 | $ | 5,320 | $ | 22,292 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.09 | %) | (0.25 | %) | (0.22 | %) | 0.02 | % | (0.68 | %) | ||||||||||
| Total expenses | 1.37 | % | 1.37 | % | 1.35 | % | 1.38 | % | 1.37 | % | ||||||||||
| Portfolio turnover rate | 593 | % | 737 | % | 1,082 | % | 1,217 | % | 1,073 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 29.32 | $ | 24.76 | $ | 25.70 | $ | 22.05 | $ | 13.40 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.18 | ) | (.15 | ) | (.14 | ) | (.17 | ) | (.18 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 11.47 | 4.71 | (.80 | ) | 3.82 | 8.97 | ||||||||||||||
| Total from investment operations | 11.29 | 4.56 | (.94 | ) | 3.65 | 8.79 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.14 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.14 | ) | ||||||||||||||
| Net asset value, end of period | $ | 40.61 | $ | 29.32 | $ | 24.76 | $ | 25.70 | $ | 22.05 | ||||||||||
| Total Returnb | 38.51 | % | 18.42 | % | (3.66 | %) | 16.55 | % | 65.70 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,583 | $ | 4,483 | $ | 2,355 | $ | 2,902 | $ | 2,795 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.50 | %) | (0.57 | %) | (0.55 | %) | (0.74 | %) | (0.95 | %) | ||||||||||
| Total expenses | 1.87 | % | 1.86 | % | 1.86 | % | 1.89 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 593 | % | 737 | % | 1,082 | % | 1,217 | % | 1,073 | % | ||||||||||
| 150 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| TRANSPORTATION FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 29.96 | $ | 25.25 | $ | 26.15 | $ | 22.37 | $ | 13.55 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.11 | ) | (.01 | ) | (.12 | ) | (.10 | ) | (.04 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 11.76 | 4.72 | (.78 | ) | 3.88 | 9.00 | ||||||||||||||
| Total from investment operations | 11.65 | 4.71 | (.90 | ) | 3.78 | 8.96 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.14 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.14 | ) | ||||||||||||||
| Net asset value, end of period | $ | 41.61 | $ | 29.96 | $ | 25.25 | $ | 26.15 | $ | 22.37 | ||||||||||
| Total Returnb | 38.89 | % | 18.70 | % | (3.48 | %) | 16.90 | % | 66.22 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 12,938 | $ | 4,558 | $ | 1,600 | $ | 1,239 | $ | 1,842 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.28 | %) | (0.05 | %) | (0.51 | %) | (0.42 | %) | (0.22 | %) | ||||||||||
| Total expenses | 1.62 | % | 1.60 | % | 1.61 | % | 1.64 | % | 1.62 | % | ||||||||||
| Portfolio turnover rate | 593 | % | 737 | % | 1,082 | % | 1,217 | % | 1,073 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 28.67 | $ | 24.34 | $ | 25.38 | $ | 21.87 | $ | 13.40 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.37 | ) | (.26 | ) | (.29 | ) | (.24 | ) | (.24 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 11.22 | 4.59 | (.75 | ) | 3.75 | 8.85 | ||||||||||||||
| Total from investment operations | 10.85 | 4.33 | (1.04 | ) | 3.51 | 8.61 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.14 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.14 | ) | ||||||||||||||
| Net asset value, end of period | $ | 39.52 | $ | 28.67 | $ | 24.34 | $ | 25.38 | $ | 21.87 | ||||||||||
| Total Returnb | 37.84 | % | 17.79 | % | (4.10 | %) | 16.05 | % | 64.35 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,734 | $ | 2,727 | $ | 2,729 | $ | 2,069 | $ | 3,375 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.07 | %) | (1.06 | %) | (1.24 | %) | (1.04 | %) | (1.31 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.35 | % | 2.35 | % | 2.39 | % | 2.38 | % | ||||||||||
| Portfolio turnover rate | 593 | % | 737 | % | 1,082 | % | 1,217 | % | 1,073 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Net investment income is less than $0.01 per share. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 151 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
OBJECTIVE: Seeks to provide capital appreciation by investing in companies that operate public utilities (“Utilities Companies”).
For the one-year period ended March 31, 2014, Utilities Fund Investor Class returned 8.88%, compared with 10.28% for the S&P 500 Utilities Index. The broader S&P 500 Index returned 21.86%.
Within the sector, the multi-utilities segment provided the largest contribution to return, followed by the electric utilities segment. The water utilities industry was the only detractor from return.
NextEra Energy, Inc., Dominion Resources, Inc. and ONEOK, Inc. were the best-performing holdings over the period, while FirstEnergy Corp., Cia de Saneamento Basico do Estado de Sao Paulo ADR and Consolidated Edison, Inc. were the main detractors.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | ||||
| Investor Class | April 3, 2000 | |||
| Advisor Class | April 3, 2000 | |||
| A-Class | September 1, 2004 | |||
| C-Class | April 27, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Duke Energy Corp. | 3.8 | % | ||
| NextEra Energy, Inc. | 3.4 | % | ||
| Dominion Resources, Inc. | 3.4 | % | ||
| Southern Co. | 3.3 | % | ||
| Exelon Corp. | 2.9 | % | ||
| American Electric Power Company, Inc. | 2.7 | % | ||
| Sempra Energy | 2.5 | % | ||
| PPL Corp. | 2.4 | % | ||
| Public Service Enterprise Group, Inc. | 2.4 | % | ||
| Edison International | 2.3 | % | ||
| Top Ten Total | 29.1 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 152 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 8.88% | 15.34% | 8.18% | |||||||||
| Advisor Class Shares | 8.29% | 14.77% | 7.65% | |||||||||
| C-Class Shares | 7.83% | 14.19% | 7.10% | |||||||||
| C-Class Shares with CDSC‡ | 6.83% | 14.19% | 7.10% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.42% | |||||||||
| S&P 500 Utilities Index | 10.28% | 14.90% | 9.73% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 8.64% | 15.07% | 7.97% | |||||||||
| A-Class Shares with sales charge† | 3.49% | 13.95% | 7.42% | |||||||||
| S&P 500 Index | 21.86% | 21.16% | 7.88% | |||||||||
| S&P 500 Utilities Index | 10.28% | 14.90% | 9.66% | |||||||||
| * | 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 Utilities Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| THE RYDEX FUNDS ANNUAL REPORT | 153 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| UTILITIES FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.5% | ||||||||
| ELECTRIC UTILITIES - 45.2% | ||||||||
| Duke Energy Corp. | 63,035 | $ | 4,489,352 | |||||
| NextEra Energy, Inc. | 42,260 | 4,040,900 | ||||||
| Southern Co. | 89,490 | 3,932,191 | ||||||
| Exelon Corp. | 101,026 | 3,390,433 | ||||||
| American Electric Power Company, Inc. | 62,372 | 3,159,766 | ||||||
| PPL Corp. | 86,753 | 2,874,994 | ||||||
| Edison International | 48,817 | 2,763,530 | ||||||
| Xcel Energy, Inc. | 81,010 | 2,459,464 | ||||||
| Northeast Utilities | 52,577 | 2,392,254 | ||||||
| FirstEnergy Corp. | 70,246 | 2,390,471 | ||||||
| Entergy Corp. | 32,380 | 2,164,603 | ||||||
| OGE Energy Corp. | 46,206 | 1,698,533 | ||||||
| Pinnacle West Capital Corp. | 28,384 | 1,551,469 | ||||||
| ITC Holdings Corp. | 40,715 | 1,520,705 | ||||||
| Pepco Holdings, Inc. | 70,199 | 1,437,676 | ||||||
| Westar Energy, Inc. | 38,235 | 1,344,343 | ||||||
| Cia Energetica de Minas Gerais ADR | 191,735 | 1,303,798 | ||||||
| Great Plains Energy, Inc. | 47,742 | 1,290,944 | ||||||
| Cleco Corp. | 21,861 | 1,105,729 | ||||||
| Enersis S.A. ADR | 68,279 | 1,060,373 | ||||||
| IDACORP, Inc. | 18,963 | 1,051,878 | ||||||
| Hawaiian Electric Industries, Inc.1 | 39,620 | 1,007,140 | ||||||
| Portland General Electric Co. | 30,573 | 988,731 | ||||||
| UNS Energy Corp. | 16,248 | 975,367 | ||||||
| ALLETE, Inc. | 18,375 | 963,218 | ||||||
| PNM Resources, Inc. | 34,285 | 926,724 | ||||||
| UIL Holdings Corp. | 24,530 | 902,949 | ||||||
| Total Electric Utilities | 53,187,535 | |||||||
| MULTI-UTILITIES - 33.6% | ||||||||
| Dominion Resources, Inc. | 56,461 | 4,008,167 | ||||||
| Sempra Energy | 31,057 | 3,005,076 | ||||||
| Public Service Enterprise Group, Inc. | 73,049 | 2,786,089 | ||||||
| PG&E Corp. | 62,581 | 2,703,499 | ||||||
| Consolidated Edison, Inc. | 46,665 | 2,503,577 | ||||||
| DTE Energy Co. | 30,995 | 2,302,619 | ||||||
| NiSource, Inc. | 58,790 | 2,088,809 | ||||||
| Wisconsin Energy Corp. | 44,044 | 2,050,248 | ||||||
| Ameren Corp. | 48,426 | 1,995,151 | ||||||
| CenterPoint Energy, Inc. | 83,545 | 1,979,181 | ||||||
| CMS Energy Corp. | 60,296 | 1,765,467 | ||||||
| SCANA Corp. | 33,134 | 1,700,437 | ||||||
| Alliant Energy Corp. | 28,256 | 1,605,223 | ||||||
| MDU Resources Group, Inc. | 46,669 | 1,601,213 | ||||||
| Integrys Energy Group, Inc. | 23,099 | 1,377,855 | ||||||
| TECO Energy, Inc. | 71,326 | 1,223,241 | ||||||
| National Grid plc ADR | 17,010 | 1,169,267 | ||||||
| Vectren Corp. | 29,037 | 1,143,767 | ||||||
| Black Hills Corp. | 17,401 | 1,003,168 | ||||||
| NorthWestern Corp. | 17,765 | 842,594 | ||||||
| Avista Corp. | 26,198 | 802,969 | ||||||
| Total Multi-Utilities | 39,657,617 | |||||||
| GAS UTILITIES - 11.3% | ||||||||
| National Fuel Gas Co. | 21,817 | 1,528,062 | ||||||
| AGL Resources, Inc. | 30,968 | 1,516,192 | ||||||
| UGI Corp. | 31,469 | 1,435,301 | ||||||
| Atmos Energy Corp. | 28,867 | 1,360,502 | ||||||
| Questar Corp. | 53,077 | 1,262,171 | ||||||
| Piedmont Natural Gas Company, Inc. | 29,015 | 1,026,841 | ||||||
| Southwest Gas Corp. | 18,280 | 977,066 | ||||||
| New Jersey Resources Corp. | 18,359 | 914,278 | ||||||
| WGL Holdings, Inc. | 22,431 | 898,586 | ||||||
| South Jersey Industries, Inc. | 15,050 | 844,155 | ||||||
| ONE Gas, Inc.* | 23,420 | 841,481 | ||||||
| Laclede Group, Inc. | 16,451 | 775,665 | ||||||
| Total Gas Utilities | 13,380,300 | |||||||
| INDEPENDENT POWER PRODUCERS & | ||||||||
| ENERGY TRADERS - 5.8% | ||||||||
| NRG Energy, Inc. | 62,778 | 1,996,340 | ||||||
| AES Corp. | 139,647 | 1,994,159 | ||||||
| Calpine Corp.* | 88,493 | 1,850,389 | ||||||
| Dynegy, Inc.* | 39,835 | 993,485 | ||||||
| Total Independent Power | ||||||||
| Producers & Energy Traders | 6,834,373 | |||||||
| WATER UTILITIES - 3.6% | ||||||||
| American Water Works Company, Inc. | 39,137 | 1,776,820 | ||||||
| Aqua America, Inc. | 52,101 | 1,306,172 | ||||||
| Cia de Saneamento Basico do Estado | ||||||||
| de Sao Paulo ADR | 126,355 | 1,170,047 | ||||||
| Total Water Utilities | 4,253,039 | |||||||
| Total Common Stocks | ||||||||
| (Cost $103,617,793) | 117,312,864 | |||||||
| 154 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| UTILITIES FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,2 - 0.5% | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 561,288 | $ | 561,288 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $561,288) | 561,288 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.5% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 304,437 | 304,437 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 271,652 | 271,652 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 51,211 | 51,211 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $627,300) | 627,300 | |||||||
| Total Investments - 100.5% | ||||||||
| (Cost $104,806,381) | $ | 118,501,452 | ||||||
| Other Assets & Liabilities, net - (0.5)% | (573,751 | ) | ||||||
| Total Net Assets - 100.0% | $ | 117,927,701 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 6. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Securities lending collateral — See Note 6. |
ADR — American Depositary Receipt.
plc — Public Limited Company.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 155 |
| UTILITIES FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $625,332 of | ||||
| securities loaned | ||||
| (cost $103,617,793) | $ | 117,312,864 | ||
| Repurchase agreements, at value | ||||
| (cost $1,188,588) | 1,188,588 | |||
| Total investments | ||||
| (cost $104,806,381) | 118,501,452 | |||
| Receivables: | ||||
| Fund shares sold | 3,152,548 | |||
| Dividends | 225,436 | |||
| Securities lending income | 48 | |||
| Total assets | 121,879,484 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 3,030,461 | |||
| Upon return of securities loaned | 627,300 | |||
| Fund shares redeemed | 158,782 | |||
| Management fees | 66,262 | |||
| Transfer agent and administrative fees | 19,489 | |||
| Distribution and service fees | 8,656 | |||
| Portfolio accounting fees | 7,795 | |||
| Miscellaneous | 33,038 | |||
| Total liabilities | 3,951,783 | |||
| Net assets | $ | 117,927,701 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 109,324,591 | ||
| Undistributed net investment income | 414,609 | |||
| Accumulated net realized loss on investments | (5,506,570 | ) | ||
| Net unrealized appreciation on investments | 13,695,071 | |||
| Net assets | $ | 117,927,701 | ||
| Investor Class: | ||||
| Net assets | $ | 95,854,196 | ||
| Capital shares outstanding | 2,818,036 | |||
| Net asset value per share | $ | 34.01 | ||
| Advisor Class: | ||||
| Net assets | $ | 2,269,363 | ||
| Capital shares outstanding | 72,999 | |||
| Net asset value per share | $ | 31.09 | ||
| A-Class: | ||||
| Net assets | $ | 11,417,370 | ||
| Capital shares outstanding | 356,587 | |||
| Net asset value per share | $ | 32.02 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 33.62 | ||
| C-Class: | ||||
| Net assets | $ | 8,386,772 | ||
| Capital shares outstanding | 293,800 | |||
| Net asset value per share | $ | 28.55 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $10,815) | $ | 1,989,241 | ||
| Income from securities lending, net | 198 | |||
| Interest | 50 | |||
| Total investment income | 1,989,489 | |||
| Expenses: | ||||
| Management fees | 447,824 | |||
| Transfer agent and administrative fees | 131,712 | |||
| Distribution and service fees: | ||||
| Advisor Class | 23,909 | |||
| A-Class | 17,127 | |||
| C-Class | 65,852 | |||
| Portfolio accounting fees | 52,685 | |||
| Tax expense | 8,018 | |||
| Custodian fees | 6,284 | |||
| Trustees’ fees* | 5,690 | |||
| Line of credit interest expense | 679 | |||
| Miscellaneous | 79,294 | |||
| Total expenses | 839,074 | |||
| Net investment income | 1,150,415 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,726,063 | |||
| Net realized gain | 3,726,063 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (345,635 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (345,635 | ) | ||
| Net realized and unrealized gain | 3,380,428 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 4,530,843 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 156 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| UTILITIES FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,150,415 | $ | 1,279,361 | ||||
| Net realized gain on investments | 3,726,063 | 3,942,459 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (345,635 | ) | 4,376,227 | |||||
| Net increase in net assets resulting from operations | 4,530,843 | 9,598,047 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (653,403 | ) | (490,500 | ) | ||||
| Advisor Class | (166,669 | ) | (163,320 | ) | ||||
| A-Class | (161,160 | ) | (300,120 | ) | ||||
| C-Class | (302,460 | ) | (331,318 | ) | ||||
| Total distributions to shareholders | (1,283,692 | ) | (1,285,258 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 273,458,616 | 272,473,598 | ||||||
| Advisor Class | 89,095,236 | 61,233,923 | ||||||
| A-Class | 23,091,679 | 19,625,033 | ||||||
| C-Class | 36,830,999 | 43,779,661 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 639,026 | 475,143 | ||||||
| Advisor Class | 162,897 | 159,179 | ||||||
| A-Class | 143,241 | 193,096 | ||||||
| C-Class | 277,036 | 315,126 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (224,424,635 | ) | (274,125,536 | ) | ||||
| Advisor Class | (91,124,222 | ) | (65,066,231 | ) | ||||
| A-Class | (19,091,917 | ) | (21,375,093 | ) | ||||
| C-Class | (36,035,250 | ) | (44,719,733 | ) | ||||
| Net increase (decrease) from capital share transactions | 53,022,706 | (7,031,834 | ) | |||||
| Net increase in net assets | 56,269,857 | 1,280,955 | ||||||
| Net assets: | ||||||||
| Beginning of year | 61,657,844 | 60,376,889 | ||||||
| End of year | $ | 117,927,701 | $ | 61,657,844 | ||||
| Undistributed net investment income at end of year | $ | 414,609 | $ | 544,396 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 8,321,501 | 8,971,171 | ||||||
| Advisor Class | 2,982,830 | 2,173,723 | ||||||
| A-Class | 747,486 | 683,472 | ||||||
| C-Class | 1,344,893 | 1,682,949 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 20,594 | 16,855 | ||||||
| Advisor Class | 5,732 | 6,108 | ||||||
| A-Class | 4,900 | 7,235 | ||||||
| C-Class | 10,603 | 13,033 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (6,835,762 | ) | (8,962,441 | ) | ||||
| Advisor Class | (3,074,956 | ) | (2,317,009 | ) | ||||
| A-Class | (619,975 | ) | (752,222 | ) | ||||
| C-Class | (1,312,120 | ) | (1,720,566 | ) | ||||
| Net increase (decrease) in shares | 1,595,726 | (197,692 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 157 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.71 | $ | 29.13 | $ | 27.00 | $ | 24.80 | $ | 20.56 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .78 | .74 | .73 | .86 | .61 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.98 | 3.96 | 1.80 | 2.96 | 4.85 | |||||||||||||||
| Total from investment operations | 2.76 | 4.70 | 2.53 | 3.82 | 5.46 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Total distributions | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Net asset value, end of period | $ | 34.01 | $ | 32.71 | $ | 29.13 | $ | 27.00 | $ | 24.80 | ||||||||||
| Total Returnb | 8.88 | % | 16.75 | % | 9.44 | % | 15.94 | % | 26.58 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 95,854 | $ | 42,907 | $ | 37,469 | $ | 9,328 | $ | 9,912 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 2.38 | % | 2.45 | % | 2.59 | % | 3.35 | % | 2.49 | % | ||||||||||
| Total expenses | 1.40 | % | 1.35 | % | 1.35 | % | 1.37 | % | 1.39 | % | ||||||||||
| Portfolio turnover rate | 508 | % | 534 | % | 549 | % | 800 | % | 758 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 30.19 | $ | 27.10 | $ | 25.26 | $ | 23.40 | $ | 19.56 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .69 | .48 | .56 | .62 | .47 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.67 | 3.73 | 1.68 | 2.86 | 4.59 | |||||||||||||||
| Total from investment operations | 2.36 | 4.21 | 2.24 | 3.48 | 5.06 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Total distributions | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Net asset value, end of period | $ | 31.09 | $ | 30.19 | $ | 27.10 | $ | 25.26 | $ | 23.40 | ||||||||||
| Total Returnb | 8.29 | % | 16.23 | % | 8.90 | % | 15.43 | % | 25.89 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,269 | $ | 4,812 | $ | 8,036 | $ | 1,240 | $ | 1,184 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 2.30 | % | 1.70 | % | 2.11 | % | 2.53 | % | 2.07 | % | ||||||||||
| Total expenses | 1.88 | % | 1.85 | % | 1.84 | % | 1.87 | % | 1.88 | % | ||||||||||
| Portfolio turnover rate | 508 | % | 534 | % | 549 | % | 800 | % | 758 | % | ||||||||||
| 158 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| UTILITIES FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 30.95 | $ | 27.69 | $ | 25.75 | $ | 23.77 | $ | 19.80 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .63 | .65 | .67 | .54 | .65 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.90 | 3.73 | 1.67 | 3.06 | 4.54 | |||||||||||||||
| Total from investment operations | 2.53 | 4.38 | 2.34 | 3.60 | 5.19 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Total distributions | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Net asset value, end of period | $ | 32.02 | $ | 30.95 | $ | 27.69 | $ | 25.75 | $ | 23.77 | ||||||||||
| Total Returnb | 8.64 | % | 16.46 | % | 9.16 | % | 15.70 | % | 26.24 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 11,417 | $ | 6,938 | $ | 7,912 | $ | 3,289 | $ | 1,721 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 2.05 | % | 2.26 | % | 2.47 | % | 2.23 | % | 2.81 | % | ||||||||||
| Total expenses | 1.63 | % | 1.61 | % | 1.60 | % | 1.63 | % | 1.64 | % | ||||||||||
| Portfolio turnover rate | 508 | % | 534 | % | 549 | % | 800 | % | 758 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 27.96 | $ | 25.31 | $ | 23.76 | $ | 22.21 | $ | 18.71 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .34 | .42 | .42 | .39 | .39 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.71 | 3.35 | 1.53 | 2.78 | 4.33 | |||||||||||||||
| Total from investment operations | 2.05 | 3.77 | 1.95 | 3.17 | 4.72 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Total distributions | (1.46 | ) | (1.12 | ) | (.40 | ) | (1.62 | ) | (1.22 | ) | ||||||||||
| Net asset value, end of period | $ | 28.55 | $ | 27.96 | $ | 25.31 | $ | 23.76 | $ | 22.21 | ||||||||||
| Total Returnb | 7.83 | % | 15.58 | % | 8.28 | % | 14.85 | % | 25.24 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 8,387 | $ | 7,001 | $ | 6,961 | $ | 4,751 | $ | 7,306 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.22 | % | 1.62 | % | 1.70 | % | 1.72 | % | 1.77 | % | ||||||||||
| Total expenses | 2.38 | % | 2.36 | % | 2.35 | % | 2.38 | % | 2.39 | % | ||||||||||
| Portfolio turnover rate | 508 | % | 534 | % | 549 | % | 800 | % | 758 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 159 |
| NOTES TO FINANCIAL STATEMENTS |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers the Sector Funds (the “Funds”), while the other funds are contained in separate reports. Only Investor Class, Advisor Class, A-Class, C-Class and H-Class shares had been issued by the Funds.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
The Funds invest in specific industry sectors. 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.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Funds’ securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Funds and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date.
Repurchase agreements are valued at amortized cost, which approximates market value.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and
| 160 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
assets trade; and (ii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer.
C. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain and loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
D. Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
E. The Funds may leave cash overnight in their cash account with the custodian, U.S. Bank. 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.
F. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution fees relating to A-Class shares and H-Class shares and service and distribution fees related to Advisor Class shares and C-Class shares, are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.
G. 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.
2. Fees and Other Transactions with Affiliates
Under the terms of an investment advisory contract, the Fund, pays GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds.
| Management Fees | ||||
| Fund | (as a % of Net Assets) | |||
| 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 | % | ||
RFS provides transfer agent and administrative services to the Trust for fees calculated at an annual percentage rate of 0.25% of the average daily net assets of each Fund.
RFS also provides accounting services to the Funds for fees calculated at annualized rates below, based on the average daily net assets of each Fund.
| THE RYDEX FUNDS ANNUAL REPORT | 161 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| Fund Accounting Fees | (as a % of net assets) | |||
| On the first $250 million | 0.10 | % | ||
| On the next $250 million | 0.075 | % | ||
| On the next $250 million | 0.05 | % | ||
| Over $750 million | 0.03 | % | ||
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution and Shareholder Services Plan applicable to its Advisor Class shares and a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services. With regard to Advisor Class shares only, if a Service Provider provides shareholder services, GFD will receive shareholder servicing fees from the Funds 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 shareholder services it performs.
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2014, GFD retained sales charges of $333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
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 distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
| 162 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| Banking Fund | $ | 1,538,286 | ||
| Basic Materials Fund | 3,212,314 | |||
| Electronics Fund | 3,352,649 | |||
| Energy Fund | 7,532,068 | |||
| Energy Services Fund | 8,255,251 | |||
| Financial Services Fund | 2,487,697 | |||
| Health Care Fund | 3,885,963 | |||
| Leisure Fund | 3,823,438 | |||
| Real Estate Fund | 221,888 | |||
| Technology Fund | 3,582,117 | |||
| Telecommunications Fund | 52,966 | |||
| Transportation Fund | 3,785,166 | |||
| Utilities Fund | 3,376,640 | |||
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Return of | Total | |||||||||||||
| Fund | Income | Capital Gain | Capital | Distributions | ||||||||||||
| Banking Fund | $ | 206,728 | $ | — | $ | — | $ | 206,728 | ||||||||
| Basic Materials Fund | 299,181 | — | — | 299,181 | ||||||||||||
| Biotechnology Fund | — | — | — | — | ||||||||||||
| Consumer Products Fund | 1,720,103 | 5,668,936 | — | 7,389,039 | ||||||||||||
| Electronics Fund | 2,979 | — | — | 2,979 | ||||||||||||
| Energy Fund | — | — | — | — | ||||||||||||
| Energy Services Fund | — | — | — | — | ||||||||||||
| Financial Services Fund | 145,547 | — | — | 145,547 | ||||||||||||
| Health Care Fund | 113,186 | 4,763,132 | — | 4,876,318 | ||||||||||||
| Internet Fund | — | 185,111 | — | 185,111 | ||||||||||||
| Leisure Fund | 200,095 | — | — | 200,095 | ||||||||||||
| Precious Metals Fund | 303,331 | — | — | 303,331 | ||||||||||||
| Real Estate Fund | 336,681 | — | — | 336,681 | ||||||||||||
| Retailing Fund | — | — | — | — | ||||||||||||
| Technology Fund | — | — | — | — | ||||||||||||
| Telecommunications Fund | 98,053 | — | — | 98,053 | ||||||||||||
| Transportation Fund | — | — | — | — | ||||||||||||
| Utilities Fund | 1,283,692 | — | — | 1,283,692 | ||||||||||||
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Return of | Total | |||||||||||||
| Fund | Income | Capital Gain | Capital | Distributions | ||||||||||||
| Banking Fund | $ | 82,876 | $ | — | $ | — | $ | 82,876 | ||||||||
| Basic Materials Fund | 227,655 | — | — | 227,655 | ||||||||||||
| Biotechnology Fund | — | — | — | — | ||||||||||||
| Consumer Products Fund | 440,666 | — | — | 440,666 | ||||||||||||
| Electronics Fund | — | — | — | — | ||||||||||||
| Energy Fund | 170,975 | — | 983,306 | 1,154,281 | ||||||||||||
| Energy Services Fund | — | — | — | — | ||||||||||||
| Financial Services Fund | 103,876 | — | — | 103,876 | ||||||||||||
| Health Care Fund | 251,797 | — | — | 251,797 | ||||||||||||
| Internet Fund | — | 113,384 | — | 113,384 | ||||||||||||
| Leisure Fund | 24,145 | — | — | 24,145 | ||||||||||||
| Precious Metals Fund | 257,614 | 5,526,266 | — | 5,783,880 | ||||||||||||
| Real Estate Fund | 370,440 | — | — | 370,440 | ||||||||||||
| Retailing Fund | — | — | — | — | ||||||||||||
| Technology Fund | — | — | — | — | ||||||||||||
| Telecommunications Fund | 93,036 | — | — | 93,036 | ||||||||||||
| Transportation Fund | — | — | — | — | ||||||||||||
| Utilities Fund | 1,285,258 | — | — | 1,285,258 | ||||||||||||
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
| THE RYDEX FUNDS ANNUAL REPORT | 163 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | Depreciation | Carryforward1 | ||||||||||||
| Banking Fund | $ | 104,722 | $ | — | $ | 1,610,453 | $ | (20,356,106 | ) | |||||||
| Basic Materials Fund | 230,996 | — | 8,442,924 | (17,739,012 | ) | |||||||||||
| Biotechnology Fund | 16,555,696 | — | 160,522,174 | — | ||||||||||||
| Consumer Products Fund | 3,077,032 | — | 43,100,194 | — | ||||||||||||
| Electronics Fund | — | — | 1,203,072 | (16,771,163 | ) | |||||||||||
| Energy Fund | 200,733 | — | 20,392,921 | (3,472,546 | ) | |||||||||||
| Energy Services Fund | — | — | 20,344,001 | (24,034,550 | ) | |||||||||||
| Financial Services Fund | 149,519 | — | 3,222,305 | (1,081,485 | ) | |||||||||||
| Health Care Fund | 498,400 | 2,095,865 | 28,529,809 | — | ||||||||||||
| Internet Fund | 399,239 | — | 4,884,484 | — | ||||||||||||
| Leisure Fund | 94,646 | — | 7,954,184 | (1,238,160 | ) | |||||||||||
| Precious Metals Fund | 1,329,325 | — | (12,693,959 | ) | (13,952,713 | ) | ||||||||||
| Real Estate Fund | 179,827 | — | 1,147,992 | (14,324,306 | ) | |||||||||||
| Retailing Fund | — | — | 4,041,449 | (5,638,300 | ) | |||||||||||
| Technology Fund | — | — | 9,217,209 | (5,077,190 | ) | |||||||||||
| Telecommunications Fund | 98,119 | — | (27,924 | ) | (3,916,523 | ) | ||||||||||
| Transportation Fund | — | — | 16,145,148 | (17,784,222 | ) | |||||||||||
| Utilities Fund | 414,609 | — | 9,557,520 | (1,369,019 | ) | |||||||||||
Capital Loss Carryforward amounts may be limited due to Federal income tax regulations.
1A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Total | ||||||||||||||||||||||||||||||||||||
| Expires in | Expires in | Expires in | Expires in | Expires in | Expires in | Unlimited | Unlimited | Capital Loss | ||||||||||||||||||||||||||||
| Fund | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | Short–Term | Long–Term | Carryforward | |||||||||||||||||||||||||||
| Banking Fund | $ | — | $ | (311,892 | ) | $ | (1,809,926 | ) | $ | (16,385,824 | ) | $ | (912,723 | ) | $ | — | $ | (270,866 | ) | $ | (664,875 | ) | $ | (20,356,106 | ) | |||||||||||
| Basic Materials Fund | — | — | (6,151,760 | ) | (8,009,421 | ) | — | — | (3,577,831 | ) | — | (17,739,012 | ) | |||||||||||||||||||||||
| Biotechnology Fund | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Consumer Products Fund | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Electronics Fund | (5,495,145 | ) | (1,900,883 | ) | (6,118,835 | ) | — | (3,055,204 | ) | — | (201,096 | ) | — | (16,771,163 | ) | |||||||||||||||||||||
| Energy Fund | — | — | — | (3,472,546 | ) | — | — | — | — | (3,472,546 | ) | |||||||||||||||||||||||||
| Energy Services Fund | — | — | (18,331,721 | ) | (5,702,829 | ) | — | — | — | — | (24,034,550 | ) | ||||||||||||||||||||||||
| Financial Services Fund | — | — | (663,756 | ) | (417,729 | ) | — | — | — | — | (1,081,485 | ) | ||||||||||||||||||||||||
| Health Care Fund | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Internet Fund | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Leisure Fund | — | — | (652,027 | ) | (586,133 | ) | — | — | — | — | (1,238,160 | ) | ||||||||||||||||||||||||
| Precious Metals Fund | — | — | — | — | — | — | (4,788,925 | ) | (9,163,788 | ) | (13,952,713 | ) | ||||||||||||||||||||||||
| Real Estate Fund | — | — | (2,247,435 | ) | (4,305,317 | ) | — | — | (7,771,554 | ) | — | (14,324,306 | ) | |||||||||||||||||||||||
| Retailing Fund | — | — | (1,564,877 | ) | — | — | — | (3,852,334 | ) | (221,089 | ) | (5,638,300 | ) | |||||||||||||||||||||||
| Technology Fund | — | — | (5,077,190 | ) | — | — | — | — | — | (5,077,190 | ) | |||||||||||||||||||||||||
| Telecommunications Fund | — | — | (1,745,552 | ) | — | — | — | (1,652,123 | ) | (518,848 | ) | (3,916,523 | ) | |||||||||||||||||||||||
| Transportation Fund | — | — | — | (10,917,767 | ) | (6,866,455 | ) | — | — | — | (17,784,222 | ) | ||||||||||||||||||||||||
| Utilities Fund | — | — | — | — | (1,369,019 | ) | — | — | — | (1,369,019 | ) | |||||||||||||||||||||||||
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 typically due to post-October losses, losses deferred due to wash sales, tax treatment of payments from credit default swaps, utilization of earnings and profits on shareholder redemptions, foreign currency gains and losses, and the “mark-to-market” of certain passive foreign investment companies (PFICs) for tax purposes. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
| 164 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
On the Statements of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| Banking Fund | $ | (214,478 | ) | $ | 34,446 | $ | 180,032 | |||||
| Basic Materials Fund | (1,493 | ) | 22,225 | (20,732 | ) | |||||||
| Biotechnology Fund | 7,102,411 | 4,857,759 | (11,960,170 | ) | ||||||||
| Consumer Products Fund | 8,249,537 | 14,845 | (8,264,382 | ) | ||||||||
| Electronics Fund | (2,407,114 | ) | 11,254 | 2,395,860 | ||||||||
| Energy Fund | — | — | — | |||||||||
| Energy Services Fund | (206,640 | ) | 206,640 | — | ||||||||
| Financial Services Fund | — | 8,971 | (8,971 | ) | ||||||||
| Health Care Fund | 7,255,822 | 254,241 | (7,510,063 | ) | ||||||||
| Internet Fund | 952,941 | 403,960 | (1,356,901 | ) | ||||||||
| Leisure Fund | (689,082 | ) | — | 689,082 | ||||||||
| Precious Metals Fund | — | 221,105 | (221,105 | ) | ||||||||
| Real Estate Fund | (1,794 | ) | 17,217 | (15,423 | ) | |||||||
| Retailing Fund | (31,331 | ) | 31,331 | — | ||||||||
| Technology Fund | (1,151,148 | ) | 68,254 | 1,082,894 | ||||||||
| Telecommunications Fund | — | — | — | |||||||||
| Transportation Fund | (130,049 | ) | 130,049 | — | ||||||||
| Utilities Fund | (3,490 | ) | 3,490 | — | ||||||||
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain/(Loss) | ||||||||||||
| Banking Fund | $ | 23,336,217 | $ | 1,697,897 | $ | (87,444 | ) | $ | 1,610,453 | |||||||
| Basic Materials Fund | 48,430,590 | 8,780,706 | (337,782 | ) | 8,442,924 | |||||||||||
| Biotechnology Fund | 317,476,962 | 172,508,996 | (11,986,822 | ) | 160,522,174 | |||||||||||
| Consumer Products Fund | 127,024,712 | 43,615,880 | (515,686 | ) | 43,100,194 | |||||||||||
| Electronics Fund | 19,468,196 | 1,421,467 | (218,395 | ) | 1,203,072 | |||||||||||
| Energy Fund | 36,700,917 | 20,645,895 | (252,974 | ) | 20,392,921 | |||||||||||
| Energy Services Fund | 36,709,961 | 20,537,440 | (193,439 | ) | 20,344,001 | |||||||||||
| Financial Services Fund | 27,708,834 | 3,352,152 | (129,847 | ) | 3,222,305 | |||||||||||
| Health Care Fund | 125,511,803 | 30,737,651 | (2,207,842 | ) | 28,529,809 | |||||||||||
| Internet Fund | 54,252,503 | 6,501,833 | (1,617,349 | ) | 4,884,484 | |||||||||||
| Leisure Fund | 22,562,913 | 8,188,696 | (234,512 | ) | 7,954,184 | |||||||||||
| Precious Metals Fund | 80,665,903 | — | (12,693,955 | ) | (12,693,955 | ) | ||||||||||
| Real Estate Fund | 25,200,258 | 1,252,883 | (104,891 | ) | 1,147,992 | |||||||||||
| Retailing Fund | 73,728,541 | 6,373,430 | (2,331,981 | ) | 4,041,449 | |||||||||||
| Technology Fund | 40,847,815 | 9,936,594 | (719,385 | ) | 9,217,209 | |||||||||||
| Telecommunications Fund | 5,772,010 | — | (27,924 | ) | (27,924 | ) | ||||||||||
| Transportation Fund | 49,313,538 | 16,571,140 | (425,992 | ) | 16,145,148 | |||||||||||
| Utilities Fund | 108,943,932 | 9,729,450 | (171,930 | ) | 9,557,520 | |||||||||||
Pursuant to Federal income tax regulations applicable to investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2014:
| Fund | Ordinary | Capital | ||||||
| Electronics Fund | $ | (12,414 | ) | $ | — | |||
| Energy Services Fund | (5,592 | ) | — | |||||
| Retailing Fund | (36,159 | ) | — | |||||
| Technology Fund | (58,528 | ) | — | |||||
| Transportation Fund | (53,657 | ) | (410,835 | ) | ||||
| THE RYDEX FUNDS ANNUAL REPORT | 165 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
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 following table summarizes the inputs used to value the Funds’ net assets at March 31, 2014:
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Investments | Investments | Investments | ||||||||||||||
| In Securities | In Securities | In Securities | Total | |||||||||||||
| Assets | ||||||||||||||||
| Banking Fund | $ | 24,373,086 | $ | 573,584 | $ | — | $ | 24,946,670 | ||||||||
| Basic Materials Fund | 54,402,806 | 2,470,708 | — | 56,873,514 | ||||||||||||
| Biotechnology Fund | 428,977,648 | 49,021,488 | — | 477,999,136 | ||||||||||||
| Consumer Products Fund | 167,493,785 | 2,631,121 | — | 170,124,906 | ||||||||||||
| Electronics Fund | 19,651,350 | 1,019,918 | — | 20,671,268 | ||||||||||||
| Energy Fund | 55,015,070 | 2,078,768 | — | 57,093,838 | ||||||||||||
| Energy Services Fund | 53,763,235 | 3,290,727 | — | 57,053,962 | ||||||||||||
| Financial Services Fund | 30,810,631 | 120,508 | — | 30,931,139 | ||||||||||||
| Health Care Fund | 151,835,043 | 2,206,569 | — | 154,041,612 | ||||||||||||
| Internet Fund | 55,547,661 | 3,589,326 | — | 59,136,987 | ||||||||||||
| Leisure Fund | 30,298,482 | 218,615 | — | 30,517,097 | ||||||||||||
| Precious Metals Fund | 61,490,121 | 6,481,827 | — | 67,971,948 | ||||||||||||
| Real Estate Fund | 26,187,052 | 161,198 | — | 26,348,250 | ||||||||||||
| Retailing Fund | 74,755,495 | 3,014,495 | — | 77,769,990 | ||||||||||||
| Technology Fund | 48,375,428 | 1,689,596 | — | 50,065,024 | ||||||||||||
| Telecommunications Fund | 5,687,780 | 56,306 | — | 5,744,086 | ||||||||||||
| Transportation Fund | 63,332,031 | 2,126,655 | — | 65,458,686 | ||||||||||||
| Utilities Fund | 117,312,864 | 1,188,588 | — | 118,501,452 | ||||||||||||
For the year ended March 31, 2014, there were no transfers between levels.
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.
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 U.S. Government Agencies. 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.
| 166 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Bills | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 23,845,045 | $ | 23,845,052 | 02/05/15 - 03/05/15 | $ | 24,346,900 | $ | 24,321,966 | |||||||||
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. 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, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies and cash. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
At March 31, 2014, the Funds participated in securities lending as follows:
| Cash | ||||||||
| Value of | Collateral | |||||||
| Fund | Securities Loaned | Received | ||||||
| Banking Fund | $ | 564,476 | $ | 573,160 | ||||
| Basic Materials Fund | 2,129,025 | 2,198,750 | ||||||
| Biotechnology Fund | 48,074,600 | 47,910,635 | * | |||||
| Consumer Products Fund | 1,858,892 | 1,859,476 | ||||||
| Electronics Fund | 987,249 | 1,019,500 | ||||||
| Energy Fund | 1,479,229 | 1,509,850 | ||||||
| Energy Services Fund | 2,893,111 | 2,936,475 | ||||||
| Health Care Fund | 1,972,673 | 1,972,250 | * | |||||
| Internet Fund | 3,322,822 | 3,444,800 | ||||||
| Leisure Fund | 65,780 | 67,375 | ||||||
| Precious Metals Fund | 5,657,182 | 6,196,358 | ||||||
| Real Estate Fund | 106,160 | 109,500 | ||||||
| Retailing Fund | 2,420,686 | 2,495,385 | ||||||
| Technology Fund | 1,507,747 | 1,548,600 | ||||||
| Telecommunications Fund | 32,136 | 33,150 | ||||||
| Transportation Fund | 1,740,845 | 1,808,375 | ||||||
| Utilities Fund | 625,332 | 627,300 | ||||||
* Subsequent to March 31, 2014, additional collateral was received.
| THE RYDEX FUNDS ANNUAL REPORT | 167 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
Cash collateral received was invested in the following joint repurchase agreements at March 31, 2014:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| BNP Paribas Securities Corp. | U.S. TIP Bond | |||||||||||||||||
| 0.05% | 0.75% | |||||||||||||||||
| Due 04/01/14 | $ | 37,034,739 | $ | 37,034,791 | 02/15/42 | $ | 41,679,142 | $ | 37,774,409 | |||||||||
| HSBC Securities, Inc. | Fannie Mae Strips | |||||||||||||||||
| 0.05% | 0.00% | |||||||||||||||||
| Due 04/01/14 | 33,046,385 | 33,046,431 | 07/15/14 - 01/15/30 | 41,696,518 | 33,706,405 | |||||||||||||
| Deutsche Bank Securities, Inc. | U.S. Treasury Note/Bond | |||||||||||||||||
| 0.05% - 0.08% | 1.75% - 8.75% | |||||||||||||||||
| Due 04/01/14 | 6,229,817 | 6,229,825 | 05/15/17 - 05/15/23 | 6,011,251 | 5,773,155 | |||||||||||||
| Fannie Mae Strip | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 05/15/30 | 1,118,986 | 581,370 | ||||||||||||||||
7. Securities Transactions
For the year ended March 31, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities and short-term investments, were as follows:
| Fund | Purchases | Sales | ||||||
| Banking Fund | $ | 89,672,064 | $ | 87,002,097 | ||||
| Basic Materials Fund | 159,260,742 | 162,532,043 | ||||||
| Biotechnology Fund | 521,924,553 | 433,429,349 | ||||||
| Consumer Products Fund | 207,862,337 | 283,262,995 | ||||||
| Electronics Fund | 135,289,334 | 122,512,393 | ||||||
| Energy Fund | 143,419,098 | 166,112,204 | ||||||
| Energy Services Fund | 162,575,402 | 164,249,451 | ||||||
| Financial Services Fund | 103,099,441 | 102,088,593 | ||||||
| Health Care Fund | 334,272,114 | 325,844,355 | ||||||
| Internet Fund | 187,077,269 | 145,053,312 | ||||||
| Leisure Fund | 85,413,686 | 86,112,163 | ||||||
| Precious Metals Fund | 264,921,758 | 262,431,604 | ||||||
| Real Estate Fund | 144,398,468 | 143,235,018 | ||||||
| Retailing Fund | 285,353,462 | 228,612,810 | ||||||
| Technology Fund | 122,721,829 | 94,913,883 | ||||||
| Telecommunications Fund | 63,761,010 | 62,530,948 | ||||||
| Transportation Fund | 416,105,142 | 457,146,781 | ||||||
| Utilities Fund | 320,956,319 | 268,383,028 | ||||||
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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Funds did not have any other borrowings under this agreement at March 31, 2014.
| 168 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Average Daily Balance | |||
| Banking Fund | $ | 28,485 | ||
| Basic Materials Fund | 23,490 | |||
| Biotechnology Fund | 305,482 | |||
| Consumer Products Fund | 28,786 | |||
| Electronics Fund | 8,507 | |||
| Energy Fund | 10,370 | |||
| Energy Services Fund | 12,244 | |||
| Financial Services Fund | 19,753 | |||
| Health Care Fund | 43,956 | |||
| Internet Fund | 15,748 | |||
| Leisure Fund | 8,411 | |||
| Precious Metals Fund | 17,069 | |||
| Real Estate Fund | 18,751 | |||
| Retailing Fund | 26,571 | |||
| Technology Fund | 6,342 | |||
| Telecommunications Fund | 11,981 | |||
| Transportation Fund | 24,197 | |||
| Utilities Fund | 53,592 | |||
9. Reverse Share Splits
A reverse share split occurred for the following Funds at the close of business:
| Fund | Effective date | Split Type | ||
| Technology Fund | February 7, 2014 | One-for-Three-Reverse Split | ||
| Telecommunications Fund | February 7, 2014 | One-for-Three-Reverse Split |
The effect of these transactions was to divide the number of outstanding shares of the Funds by the respective split ratio, resulting in a corresponding increase in the NAV. The share transactions presented in the statements of changes in net assets and the per share data in the financial highlights for each of the periods presented through February 7, 2014 have been restated to reflect these reverse share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
10. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds 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 the Tribune Company 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 Series Funds, 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 Series Funds 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 RYDEX FUNDS ANNUAL REPORT | 169 |
| NOTES TO FINANCIAL STATEMENTS (concluded) |
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168; U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
| 170 | THE RYDEX FUNDS ANNUAL REPORT |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, 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 (eighteen of the series constituting the Rydex Series Funds) (the “Funds”) as of March 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at March 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
May 22, 2014
| THE RYDEX FUNDS ANNUAL REPORT | 171 |
| OTHER INFORMATION (Unaudited) |
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.
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
| Fund | % Qualifying | |||
| Banking Fund | 100 | % | ||
| Basic Materials Fund | 100 | % | ||
| Consumer Products Fund | 93 | % | ||
| Electronics Fund | 100 | % | ||
| Financial Services Fund | 100 | % | ||
| Health Care Fund | 100 | % | ||
| Leisure Fund | 100 | % | ||
| Precious Metals Fund | 100 | % | ||
| Real Estate Fund | 1 | % | ||
| Telecommunications Fund | 97 | % | ||
| Utilities Fund | 100 | % | ||
Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:
| Fund | % Qualifying | |||
| Banking Fund | 100 | % | ||
| Basic Materials Fund | 100 | % | ||
| Consumer Products Fund | 100 | % | ||
| Electronics Fund | 100 | % | ||
| Financial Services Fund | 100 | % | ||
| Health Care Fund | 100 | % | ||
| Leisure Fund | 100 | % | ||
| Precious Metals Fund | 100 | % | ||
| Real Estate Fund | 1 | % | ||
| Telecommunications Fund | 100 | % | ||
| Utilities Fund | 100 | % | ||
With respect to the taxable year ended March 31, 2014, 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:
| Biotechnology | Consumer | Health | Internet | |||||||||||||
| Fund | Products Fund | Care Fund | Fund | |||||||||||||
| From long-term capital gains, subject to the 15% rate gains category: | $ | — | $ | 5,668,936 | $ | 4,763,132 | $ | 185,111 | ||||||||
| From long-term capital gains, using proceeds from shareholder redemptions: | 4,529,054 | 4,357,067 | 7,257,009 | 36,575 | ||||||||||||
For the fiscal year ending March 31, 2014, Precious Metals Fund earned gross income derived from foreign sources totaling $468,036. The Precious Metals Fund paid foreign taxes totaling $51,438 for the fiscal year and may pass these taxes through to shareholders, who may be able to claim them as a foreign tax credit. A final determination will be made at the end of the calendar year. The Funds will notify shareholders of amounts for use in preparing 2014 income tax forms in January 2015.
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.
| 172 | THE RYDEX FUNDS ANNUAL REPORT |
| OTHER INFORMATION (Unaudited)(concluded) |
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
| THE RYDEX FUNDS ANNUAL REPORT | 173 |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEE
| Number of | ||||||||
| Portfolios in | Other | |||||||
| Position(s) Held with the | Fund Complex | Directorships | ||||||
| Name and Year | Trust, Term of Office and | Principal Occupation(s) | Overseen | Held by | ||||
| of Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Donald C. Cacciapaglia* | Trustee from 2012 to present. | Current: President and Chief | 214 | Delaware Life | ||||
| (1951) | Executive Officer, certain other | (2013–present); | ||||||
| funds in the Fund Complex | Guggenheim | |||||||
| (2012–present); Vice Chairman, | Life and Annuity | |||||||
| Guggenheim Investments | Company | |||||||
| (2010–present). | (2011–present); | |||||||
| Paragon Life | ||||||||
| Former: Chairman and Chief | Insurance | |||||||
| Executive Officer, Channel | Company | |||||||
| Capital Group, Inc. (2002–2010). | of Indiana | |||||||
| (2011–present). | ||||||||
| INDEPENDENT TRUSTEES | ||||||||
| Corey A. Colehour | Trustee and Member of the | Retired. | 131 | None. | ||||
| (1945) | Audit, Governance, and | |||||||
| Nominating Committees from | ||||||||
| 1998 to present. | ||||||||
| J. Kenneth Dalton | Trustee, Member and Chairman | Retired. | 131 | Trustee of | ||||
| (1941) | of the Audit Committee, and | Epiphany | ||||||
| Member of the Governance | Funds (4) | |||||||
| and Nominating Committees | (2009–present). | |||||||
| from 1998 to present; and | ||||||||
| Member of the Risk Oversight | ||||||||
| Committee from 2010 to | ||||||||
| present. | ||||||||
| John O. Demaret | Trustee from 1998 to present | Retired. | 131 | None. | ||||
| (1940) | and Chairman of the Board | |||||||
| from 2006 to present; | ||||||||
| Member and Chairman of the | ||||||||
| Audit Committee from 1998 | ||||||||
| to present; and Member of | ||||||||
| the Risk Oversight Committee | ||||||||
| from 2010 to present. | ||||||||
| Werner E. Keller | Vice Chairman of the Board | Current: Founder and President, | 131 | None. | ||||
| (1940) | of Trustees from 2010 to | Keller Partners, LLC (investment | ||||||
| present; Trustee and Member | research firm) (2005–present). | |||||||
| of the Audit, Governance, | ||||||||
| and Nominating Committees | ||||||||
| from 2005 to present; and | ||||||||
| Chairman and Member of the | ||||||||
| Risk Oversight Committee | ||||||||
| from 2010 to present. |
| 174 | THE RYDEX FUNDS ANNUAL REPORT |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
INDEPENDENT TRUSTEES - concluded
| Number of | ||||||||
| Portfolios in | Other | |||||||
| Position(s) Held with the | Fund Complex | Directorships | ||||||
| Name and Year | Trust, Term of Office and | Principal Occupation(s) | Overseen | Held by | ||||
| of Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Thomas F. Lydon, Jr. | Trustee and Member of the | Current: President, Global | 131 | Board of | ||||
| (1960) | Audit, Governance, and | Trends Investments (registered | Directors of US | |||||
| Nominating Committees from | investment adviser) | Global Investors | ||||||
| 2005 to present. | (1996–present). | (GROW) | ||||||
| (1995–present). | ||||||||
| Patrick T. McCarville | Trustee, Member of the Audit | Retired. | 131 | None. | ||||
| (1942) | Committee, and Chairman and | |||||||
| Member of the Governance | Former: Chief Executive Officer, | |||||||
| and Nominating Committees | Par Industries, Inc., d/b/a Par | |||||||
| from 1998 to present. | Leasing (1977–2010). | |||||||
| Current: Founder and Chief | ||||||||
| Executive Officer, Arrow | ||||||||
| Roger Somers | Trustee and Member of the | Limousine (1962–present). | 131 | None. | ||||
| (1944) | Audit, Governance, and | |||||||
| Nominating Committees from | ||||||||
| 1998 to present. |
OFFICERS
| Name, Address | Position(s) Held with | |||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | ||
| Birth of Officer | Length of Time Served | During Past 5 Years | ||
| Donald C. Cacciapaglia | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the | ||
| (1951) | Fund Complex (2012–present); Vice Chairman, Guggenheim Investments | |||
| (2010–present). | ||||
| Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. | ||||
| (2002–2010). | ||||
| Michael P. Byrum | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010-present); | ||
| (1970) | President and Chief Investment Officer, Rydex Holdings, LLC | |||
| (2008–present); Director and Chairman, Advisory Research Center, | ||||
| Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC | ||||
| (2005–present). | ||||
| Former: Vice President, Guggenheim Distributors, LLC (2009); Director | ||||
| (2009–2010) and Secretary (2002–2010), Rydex Fund Services, LLC; | ||||
| Director (2008–2010), Chief Investment Officer (2006–2010), President | ||||
| (2004–2010) and Secretary (2002–2010), Rydex Advisors, LLC; Director | ||||
| (2008–2010), Chief Investment Officer (2006–2010), President | ||||
| (2004–2010) and Secretary (2002–2010), Rydex Advisors II, LLC. | ||||
| Nikolaos Bonos | Vice President and Treasurer | Current: Treasurer and Vice President, certain other funds in the Fund | ||
| (1963) | (2003–present). | Complex (2003–present); Senior Vice President, Security Investors, | ||
| LLC (2010–present); Chief Executive Officer, Guggenheim Specialized | ||||
| Products, LLC (2009–present); President and Chief Executive Officer, | ||||
| Rydex Fund Services, LLC (2009–present); Vice President, Rydex | ||||
| Holdings, LLC (2008–present). | ||||
| Former: Senior Vice President, Security Global Investors, LLC | ||||
| (2010–2011); Senior Vice President, Rydex Advisors, LLC (2006–2011); | ||||
| Senior Vice President, Rydex Advisors II, LLC (2006–2011). |
| THE RYDEX FUNDS ANNUAL REPORT | 175 |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
OFFICERS - concluded
| Name, Address | Position(s) Held with | |||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | ||
| Birth of Officer | Length of Time Served | During Past 5 Years | ||
| Elisabeth Miller | Chief Compliance Officer | Current: Chief Compliance Officer, certain other funds in the Fund | ||
| (1968) | (2012–present). | Complex (2012–present); Chief Compliance Officer, Security Investors, | ||
| LLC (2012–present); Chief Compliance Officer, Guggenheim Funds | ||||
| Investment Advisors, LLC (2012–present); Vice President, Guggenheim | ||||
| Funds Distributors, LLC (2014–present). | ||||
| Former: Chief Compliance Officer, Guggenheim Distributors, LLC | ||||
| (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); | ||||
| Senior Manager, Guggenheim Distributors, LLC (2004–2009). | ||||
| Joseph M. Arruda | Assistant Treasurer | Current: Assistant Treasurer, certain other funds in the Fund Complex | ||
| (1966) | (2006–present). | (2006–present); Vice President, Security Investors, LLC (2010–present); | ||
| Chief Financial Officer and Manager, Guggenheim Specialized Products, | ||||
| LLC (2009–present). | ||||
| Former: Vice President, Security Global Investors, LLC (2010–2011); Vice | ||||
| President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, | ||||
| LLC (2010). | ||||
| Amy J. Lee | Vice President (2009–present) | Current: Chief Legal Officer, certain other funds in the Fund Complex | ||
| (1961) | and Secretary (2012–present). | (2013–present); Senior Managing Director, Guggenheim Investments | ||
| (2012–present). | ||||
| Former: Vice President, Associate General Counsel and Assistant | ||||
| Secretary, Security Benefit Life Insurance Company and Security Benefit | ||||
| Corporation (2004–2012). |
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
| 176 | THE RYDEX FUNDS ANNUAL REPORT |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
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In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
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We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
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Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
| THE RYDEX FUNDS ANNUAL REPORT | 177 |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)(concluded) |
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
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As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| 178 | THE RYDEX FUNDS ANNUAL REPORT |
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3.31.2014
Rydex Funds Annual Report
| Domestic Equity Funds |
| Nova Fund |
| S&P 500® Fund |
| Inverse S&P 500® Strategy Fund |
| Inverse NASDAQ-100® Strategy Fund |
| Mid-Cap 1.5x Strategy Fund |
| Inverse Mid-Cap Strategy Fund |
| Russell 2000® 1.5x Strategy Fund |
| Russell 2000® Fund |
| Inverse Russell 2000® Strategy Fund |
| Fixed Income Funds |
| Government Long Bond 1.2x Strategy Fund |
| High Yield Strategy Fund |
| Inverse High Yield Strategy Fund |
| Money Market Fund |
| U.S. Government Money Market Fund |
| RTB1-ANN-0314x0315 | guggenheiminvestments.com |
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With Guggenheim Investments eDelivery you can:
| ■ | View online confirmations and statements at your convenience. |
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| ■ | Access prospectuses, annual reports and semiannual reports online. |
If you have questions about the Guggenheim Investments eDelivery service, contact one of our Shareholder Service Representatives at 800.820.0888.
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604
TABLE OF CONTENTS
| THE RYDEX FUNDS ANNUAL REPORT | 1 |
| March 31, 2014 |
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for a selection of our Rydex Funds ("the Funds"). This report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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,
Donald C. Cacciapaglia
President
April 30, 2014
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.
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 |
| March 31, 2014 |
The Fixed Income Funds may not be suitable for all investors. • The Funds' market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. • You may have a gain or loss when you sell your shares. • It is important to note that the Funds are not guaranteed by the U.S. government. • The Funds may have exposure to high yield securities, municipal securities, floating rate securities, foreign securities, derivative instruments, real estate, commodity markets and other fixed income securities. • Exposure to high yield securities may subject a Fund to greater volatility. • Investments in municipal securities can be affected by events that affect the municipal bond market. • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • Investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in derivative instruments can be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. • Investments in real estate securities subjects a Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • When market conditions are deemed appropriate, the Funds may use leverage to the full extent permitted by their investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund‘s portfolio. • Please see each Fund’s prospectus for more information on these and other risks.
The U.S. Government Money Market Fund may not be suitable for all investors. • An investment in the U.S. Government Money Market 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.
| THE RYDEX FUNDS ANNUAL REPORT | 3 |
| ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
| 4 | THE RYDEX FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
Barclays Long Treasury Bond 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 non convertible. The Long U.S. Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
Russell 2000® Index measures the performance of the small-cap value segment of the U.S. equity universe.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
S&P MidCap 400® Index provides investors with a benchmark for mid-sized companies. The index covers approximately 7% of the U.S. equity market, and seeks to remain an accurate measure of mid-sized companies, reflecting the risk and return characteristics of the broader mid-cap universe on an on-going basis.
| THE RYDEX FUNDS ANNUAL REPORT | 5 |
| A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period. 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 | |||||||||||||||||||
| Level | Performance | Expectation | Fund NAV | Performance | Assessment | |||||||||||||||||
| Start | 100 | $ | 10.00 | |||||||||||||||||||
| Day 1 | 106 | 6.0 | % | 9.0 | % | $ | 10.90 | 9.0 | % | In line | ||||||||||||
| Day 2 | 99 | -6.6 | % | -9.9 | % | $ | 9.82 | -9.9 | % | In line | ||||||||||||
| Cumulative | -1.0 | % | -1.5 | % | -1.8 | % | -0.3% | |||||||||||||||
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
| 6 | THE RYDEX FUNDS ANNUAL REPORT |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a Fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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 FUNDS ANNUAL REPORT | 7 |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| Nova Fund | ||||||||||||||||||||
| Investor Class | 1.28 | % | 18.03 | % | $1,000.00 | $1,180.30 | $ 6.96 | |||||||||||||
| Advisor Class | 1.78 | % | 17.80 | % | 1,000.00 | 1,178.00 | 9.67 | |||||||||||||
| A-Class | 1.53 | % | 17.89 | % | 1,000.00 | 1,178.90 | 8.31 | |||||||||||||
| C-Class | 2.28 | % | 17.48 | % | 1,000.00 | 1,174.80 | 12.36 | |||||||||||||
| S&P 500® Fund | ||||||||||||||||||||
| A-Class | 1.59 | % | 11.56 | % | 1,000.00 | 1,115.60 | 8.39 | |||||||||||||
| C-Class | 2.34 | % | 11.20 | % | 1,000.00 | 1,112.00 | 12.32 | |||||||||||||
| H-Class | 1.58 | % | 11.56 | % | 1,000.00 | 1,115.60 | 8.33 | |||||||||||||
| Inverse S&P 500® Strategy Fund | ||||||||||||||||||||
| Investor Class | 1.42 | % | (12.08 | %) | 1,000.00 | 879.20 | 6.65 | |||||||||||||
| Advisor Class | 1.92 | % | (12.38 | %) | 1,000.00 | 876.20 | 8.98 | |||||||||||||
| A-Class | 1.67 | % | (12.19 | %) | 1,000.00 | 878.10 | 7.82 | |||||||||||||
| C-Class | 2.42 | % | (12.56 | %) | 1,000.00 | 874.40 | 11.31 | |||||||||||||
| Inverse NASDAQ-100® Strategy Fund | ||||||||||||||||||||
| Investor Class | 1.46 | % | (12.23 | %) | 1,000.00 | 877.70 | 6.83 | |||||||||||||
| Advisor Class | 1.95 | % | (12.80 | %) | 1,000.00 | 872.00 | 9.10 | |||||||||||||
| A-Class | 1.72 | % | (12.57 | %) | 1,000.00 | 874.30 | 8.04 | |||||||||||||
| C-Class | 2.46 | % | (12.85 | %) | 1,000.00 | 871.50 | 11.48 | |||||||||||||
| Mid-Cap 1.5x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.67 | % | 16.35 | % | 1,000.00 | 1,163.50 | 9.01 | |||||||||||||
| C-Class | 2.42 | % | 15.93 | % | 1,000.00 | 1,159.30 | 13.03 | |||||||||||||
| H-Class | 1.68 | % | 16.40 | % | 1,000.00 | 1,164.00 | 9.06 | |||||||||||||
| Inverse Mid-Cap Strategy Fund | ||||||||||||||||||||
| A-Class | 1.67 | % | (11.76 | %) | 1,000.00 | 882.40 | 7.84 | |||||||||||||
| C-Class | 2.42 | % | (12.09 | %) | 1,000.00 | 879.10 | 11.34 | |||||||||||||
| H-Class | 1.67 | % | (11.78 | %) | 1,000.00 | 882.20 | 7.84 | |||||||||||||
| 8 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Russell 2000® 1.5x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | 13.42 | % | $1,000.00 | $1,134.20 | $ 9.15 | |||||||||||||
| C-Class | 2.47 | % | 13.00 | % | 1,000.00 | 1,130.00 | 13.12 | |||||||||||||
| H-Class | 1.72 | % | 13.43 | % | 1,000.00 | 1,134.30 | 9.15 | |||||||||||||
| Russell 2000® Fund | ||||||||||||||||||||
| A-Class | 1.60 | % | 8.98 | % | 1,000.00 | 1,089.80 | 8.34 | |||||||||||||
| C-Class | 2.37 | % | 8.53 | % | 1,000.00 | 1,085.30 | 12.32 | |||||||||||||
| H-Class | 1.59 | % | 8.97 | % | 1,000.00 | 1,089.70 | 8.28 | |||||||||||||
| Inverse Russell 2000® Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | (11.26 | %) | 1,000.00 | 887.40 | 8.09 | |||||||||||||
| C-Class | 2.47 | % | (11.49 | %) | 1,000.00 | 885.10 | 11.61 | |||||||||||||
| H-Class | 1.72 | % | (11.14 | %) | 1,000.00 | 888.60 | 8.10 | |||||||||||||
| Government Long Bond 1.2x Strategy Fund | ||||||||||||||||||||
| Investor Class | 0.97 | % | 5.59 | % | 1,000.00 | 1,055.90 | 4.97 | |||||||||||||
| Advisor Class | 1.46 | % | 5.70 | % | 1,000.00 | 1,057.00 | 7.49 | |||||||||||||
| A-Class | 1.22 | % | 5.57 | % | 1,000.00 | 1,055.70 | 6.25 | |||||||||||||
| C-Class | 1.97 | % | 5.12 | % | 1,000.00 | 1,051.20 | 10.07 | |||||||||||||
| High Yield Strategy Fund | ||||||||||||||||||||
| A-Class | 1.54 | % | 4.91 | % | 1,000.00 | 1,049.10 | 7.87 | |||||||||||||
| C-Class | 2.30 | % | 4.50 | % | 1,000.00 | 1,045.00 | 11.73 | |||||||||||||
| H-Class | 1.55 | % | 4.90 | % | 1,000.00 | 1,049.00 | 7.92 | |||||||||||||
| Inverse High Yield Strategy Fund | ||||||||||||||||||||
| A-Class | 1.57 | % | (6.87 | %) | 1,000.00 | 931.30 | 7.56 | |||||||||||||
| C-Class | 2.36 | % | (7.20 | %) | 1,000.00 | 928.00 | 11.34 | |||||||||||||
| H-Class | 1.55 | % | (6.80 | %) | 1,000.00 | 932.00 | 7.47 | |||||||||||||
| U.S. Government Money Market Fund | 0.09 | % | 0.00 | % | 1,000.00 | 1,000.00 | 0.45 | |||||||||||||
| THE RYDEX FUNDS ANNUAL REPORT | 9 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 2. Based on hypothetical 5% return (before expenses) | ||||||||||||||||||||
| Nova Fund | ||||||||||||||||||||
| Investor Class | 1.28 | % | 5.00 | % | $1,000.00 | $1,018.55 | $ 6.44 | |||||||||||||
| Advisor Class | 1.78 | % | 5.00 | % | 1,000.00 | 1,016.06 | 8.95 | |||||||||||||
| A-Class | 1.53 | % | 5.00 | % | 1,000.00 | 1,017.30 | 7.70 | |||||||||||||
| C-Class | 2.28 | % | 5.00 | % | 1,000.00 | 1,013.56 | 11.45 | |||||||||||||
| S&P 500® Fund | ||||||||||||||||||||
| A-Class | 1.59 | % | 5.00 | % | 1,000.00 | 1,017.00 | 8.00 | |||||||||||||
| C-Class | 2.34 | % | 5.00 | % | 1,000.00 | 1,013.26 | 11.75 | |||||||||||||
| H-Class | 1.58 | % | 5.00 | % | 1,000.00 | 1,017.05 | 7.95 | |||||||||||||
| Inverse S&P 500® Strategy Fund | ||||||||||||||||||||
| Investor Class | 1.42 | % | 5.00 | % | 1,000.00 | 1,017.85 | 7.14 | |||||||||||||
| Advisor Class | 1.92 | % | 5.00 | % | 1,000.00 | 1,015.36 | 9.65 | |||||||||||||
| A-Class | 1.67 | % | 5.00 | % | 1,000.00 | 1,016.60 | 8.40 | |||||||||||||
| C-Class | 2.42 | % | 5.00 | % | 1,000.00 | 1,012.86 | 12.14 | |||||||||||||
| Inverse NASDAQ-100® Strategy Fund | ||||||||||||||||||||
| Investor Class | 1.46 | % | 5.00 | % | 1,000.00 | 1,017.65 | 7.34 | |||||||||||||
| Advisor Class | 1.95 | % | 5.00 | % | 1,000.00 | 1,015.21 | 9.80 | |||||||||||||
| A-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| C-Class | 2.46 | % | 5.00 | % | 1,000.00 | 1,012.67 | 12.34 | |||||||||||||
| Mid-Cap 1.5x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.67 | % | 5.00 | % | 1,000.00 | 1,016.60 | 8.40 | |||||||||||||
| C-Class | 2.42 | % | 5.00 | % | 1,000.00 | 1,012.86 | 12.14 | |||||||||||||
| H-Class | 1.68 | % | 5.00 | % | 1,000.00 | 1,016.55 | 8.45 | |||||||||||||
| Inverse Mid-Cap Strategy Fund | ||||||||||||||||||||
| A-Class | 1.67 | % | 5.00 | % | 1,000.00 | 1,016.60 | 8.40 | |||||||||||||
| C-Class | 2.42 | % | 5.00 | % | 1,000.00 | 1,012.86 | 12.14 | |||||||||||||
| H-Class | 1.67 | % | 5.00 | % | 1,000.00 | 1,016.60 | 8.40 | |||||||||||||
| 10 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Russell 2000® 1.5x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | 5.00 | % | $1,000.00 | $1,016.36 | $ 8.65 | |||||||||||||
| C-Class | 2.47 | % | 5.00 | % | 1,000.00 | 1,012.62 | 12.39 | |||||||||||||
| H-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| Russell 2000® Fund | ||||||||||||||||||||
| A-Class | 1.60 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.05 | |||||||||||||
| C-Class | 2.37 | % | 5.00 | % | 1,000.00 | 1,012.62 | 11.90 | |||||||||||||
| H-Class | 1.59 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.00 | |||||||||||||
| Inverse Russell 2000® Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| C-Class | 2.47 | % | 5.00 | % | 1,000.00 | 1,012.62 | 12.39 | |||||||||||||
| H-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| Government Long Bond 1.2x Strategy Fund | ||||||||||||||||||||
| Investor Class | 0.97 | % | 5.00 | % | 1,000.00 | 1,020.09 | 4.89 | |||||||||||||
| Advisor Class | 1.46 | % | 5.00 | % | 1,000.00 | 1,017.65 | 7.34 | |||||||||||||
| A-Class | 1.22 | % | 5.00 | % | 1,000.00 | 1,018.85 | 6.14 | |||||||||||||
| C-Class | 1.97 | % | 5.00 | % | 1,000.00 | 1,015.11 | 9.90 | |||||||||||||
| High Yield Strategy Fund | ||||||||||||||||||||
| A-Class | 1.54 | % | 5.00 | % | 1,000.00 | 1,017.25 | 7.75 | |||||||||||||
| C-Class | 2.30 | % | 5.00 | % | 1,000.00 | 1,013.46 | 11.55 | |||||||||||||
| H-Class | 1.55 | % | 5.00 | % | 1,000.00 | 1,017.20 | 7.80 | |||||||||||||
| Inverse High Yield Strategy Fund | ||||||||||||||||||||
| A-Class | 1.57 | % | 5.00 | % | 1,000.00 | 1,017.10 | 7.90 | |||||||||||||
| C-Class | 2.36 | % | 5.00 | % | 1,000.00 | 1,013.16 | 11.85 | |||||||||||||
| H-Class | 1.55 | % | 5.00 | % | 1,000.00 | 1,017.20 | 7.80 | |||||||||||||
| U.S. Government Money Market Fund | 0.09 | % | 5.00 | % | 1,000.00 | 1,020.29 | 0.45 | |||||||||||||
| 1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. |
| 2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
| THE RYDEX FUNDS ANNUAL REPORT | 11 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, 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 Investor Class returned 31.51%, while the S&P 500 Index returned 21.86% over the same period.
Sectors contributing most to performance of the underlying index were Financials and Information Technology. The sector contributing least was Telecommunication Services, followed by Utilities. No sector detracted from return.
Microsoft Corp., Apple, Inc. and Google, Inc. — Class A were the holdings contributing the most to performance of the underlying index for the period. International Business Machines Corp., Philip Morris International, Inc. and Newmont Mining 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, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | |
| Investor Class | July 12, 1993 |
| Advisor Class | October 15, 1998 |
| A-Class | March 31, 2004 |
| C-Class | March 14, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 2.2 | % | ||
| Exxon Mobil Corp. | 1.9 | % | ||
| Google, Inc. — Class A | 1.4 | % | ||
| Microsoft Corp. | 1.4 | % | ||
| Johnson & Johnson | 1.3 | % | ||
| General Electric Co. | 1.2 | % | ||
| Wells Fargo & Co. | 1.1 | % | ||
| JPMorgan Chase & Co. | 1.1 | % | ||
| Chevron Corp. | 1.0 | % | ||
| Berkshire Hathaway, Inc. — Class B | 1.0 | % | ||
| Top Ten Total | 13.6 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 12 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||
| 1 Year | 5 Year | 10 Year | ||||
| Investor Class Shares | 31.51% | 30.16% | 7.14% | |||
| Advisor Class Shares | 30.94% | 29.49% | 6.59% | |||
| A-Class Shares | 31.23% | 29.81% | 6.86% | |||
| A-Class Shares with sales charge† | 24.98% | 28.56% | 6.34% | |||
| C-Class Shares | 30.27% | 28.87% | 6.08% | |||
| C-Class Shares with CDSC‡ | 29.27% | 28.87% | 6.08% | |||
| S&P 500 Index | 21.86% | 21.16% | 7.42% |
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 13 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| NOVA FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 76.9% | ||||||||
| INFORMATION TECHNOLOGY - 14.2% | ||||||||
| Apple, Inc. | 5,059 | $ | 2,715,369 | |||||
| Google, Inc. — Class A* | 1,597 | 1,779,872 | ||||||
| Microsoft Corp. | 42,861 | 1,756,872 | ||||||
| International Business Machines Corp. | 5,556 | 1,069,474 | ||||||
| Oracle Corp. | 19,655 | 804,086 | ||||||
| QUALCOMM, Inc. | 9,597 | 756,820 | ||||||
| Intel Corp. | 28,219 | 728,331 | ||||||
| Cisco Systems, Inc. | 29,235 | 655,156 | ||||||
| Visa, Inc. — Class A | 2,873 | 620,166 | ||||||
| Facebook, Inc. — Class A* | 9,693 | 583,906 | ||||||
| MasterCard, Inc. — Class A | 5,788 | 432,364 | ||||||
| eBay, Inc.* | 6,615 | 365,413 | ||||||
| Hewlett-Packard Co. | 10,756 | 348,064 | ||||||
| EMC Corp. | 11,495 | 315,078 | ||||||
| Texas Instruments, Inc. | 6,151 | 290,020 | ||||||
| Accenture plc — Class A | 3,612 | 287,948 | ||||||
| Automatic Data Processing, Inc. | 2,731 | 210,997 | ||||||
| Yahoo!, Inc.* | 5,331 | 191,383 | ||||||
| Salesforce.com, Inc.* | 3,182 | 181,661 | ||||||
| Cognizant Technology Solutions Corp. — Class A* | 3,444 | 174,301 | ||||||
| Adobe Systems, Inc.* | 2,634 | 173,159 | ||||||
| Corning, Inc. | 7,901 | 164,499 | ||||||
| Micron Technology, Inc.* | 6,015 | 142,315 | ||||||
| Applied Materials, Inc. | 6,875 | 140,387 | ||||||
| TE Connectivity Ltd. | 2,329 | 140,229 | ||||||
| Intuit, Inc. | 1,611 | 125,223 | ||||||
| Western Digital Corp. | 1,197 | 109,909 | ||||||
| Seagate Technology plc | 1,864 | 104,682 | ||||||
| SanDisk Corp. | 1,276 | 103,598 | ||||||
| Broadcom Corp. — Class A | 3,133 | 98,627 | ||||||
| Analog Devices, Inc. | 1,776 | 94,377 | ||||||
| Fidelity National Information Services, Inc. | 1,652 | 88,299 | ||||||
| Alliance Data Systems Corp.* | 304 | 82,825 | ||||||
| Motorola Solutions, Inc. | 1,286 | 82,677 | ||||||
| Amphenol Corp. — Class A | 900 | 82,485 | ||||||
| Xilinx, Inc. | 1,515 | 82,219 | ||||||
| Fiserv, Inc.* | 1,447 | 82,030 | ||||||
| Symantec Corp. | 3,924 | 78,362 | ||||||
| Paychex, Inc. | 1,837 | 78,256 | ||||||
| Juniper Networks, Inc.* | 2,841 | 73,184 | ||||||
| Xerox Corp. | 6,321 | 71,427 | ||||||
| NetApp, Inc. | 1,881 | 69,409 | ||||||
| Altera Corp. | 1,806 | 65,449 | ||||||
| Linear Technology Corp. | 1,337 | 65,099 | ||||||
| KLA-Tencor Corp. | 940 | 64,992 | ||||||
| Autodesk, Inc.* | 1,291 | 63,491 | ||||||
| Citrix Systems, Inc.* | 1,041 | 59,785 | ||||||
| Akamai Technologies, Inc.* | 1,010 | 58,792 | ||||||
| Red Hat, Inc.* | 1,073 | 56,848 | ||||||
| CA, Inc. | 1,829 | 56,644 | ||||||
| NVIDIA Corp. | 3,148 | 56,381 | ||||||
| Microchip Technology, Inc. | 1,128 | 53,873 | ||||||
| Electronic Arts, Inc.* | 1,759 | 51,029 | ||||||
| Western Union Co. | 3,113 | 50,929 | ||||||
| Lam Research Corp.* | 925 | 50,875 | ||||||
| Computer Sciences Corp. | 826 | 50,237 | ||||||
| F5 Networks, Inc.* | 423 | 45,104 | ||||||
| Harris Corp. | 610 | 44,628 | ||||||
| Teradata Corp.* | 905 | 44,517 | ||||||
| VeriSign, Inc.* | 711 | 38,330 | ||||||
| LSI Corp. | 3,170 | 35,092 | ||||||
| FLIR Systems, Inc. | 798 | 28,728 | ||||||
| Total System Services, Inc. | 934 | 28,403 | ||||||
| First Solar, Inc.* | 398 | 27,776 | ||||||
| Jabil Circuit, Inc. | 1,060 | 19,080 | ||||||
| Total Information Technology | 17,651,541 | |||||||
| FINANCIALS - 12.7% | ||||||||
| Wells Fargo & Co. | 27,176 | 1,351,734 | ||||||
| JPMorgan Chase & Co. | 21,487 | 1,304,475 | ||||||
| Berkshire Hathaway, Inc. — Class B* | 10,218 | 1,276,942 | ||||||
| Bank of America Corp. | 59,974 | 1,031,552 | ||||||
| Citigroup, Inc. | 17,231 | 820,196 | ||||||
| American Express Co. | 5,183 | 466,626 | ||||||
| U.S. Bancorp | 10,339 | 443,130 | ||||||
| American International Group, Inc. | 8,307 | 415,433 | ||||||
| Goldman Sachs Group, Inc. | 2,391 | 391,765 | ||||||
| MetLife, Inc. | 6,380 | 336,864 | ||||||
| Simon Property Group, Inc. | 1,778 | 291,592 | ||||||
| PNC Financial Services Group, Inc. | 3,028 | 263,436 | ||||||
| Capital One Financial Corp. | 3,246 | 250,461 | ||||||
| Morgan Stanley | 7,962 | 248,176 | ||||||
| Bank of New York Mellon Corp. | 6,437 | 227,161 | ||||||
| BlackRock, Inc. — Class A | 711 | 223,595 | ||||||
| Prudential Financial, Inc. | 2,624 | 222,122 | ||||||
| ACE Ltd. | 1,911 | 189,304 | ||||||
| American Tower Corp. — Class A | 2,246 | 183,880 | ||||||
| Charles Schwab Corp. | 6,633 | 181,280 | ||||||
| State Street Corp. | 2,447 | 170,189 | ||||||
| Travelers Companies, Inc. | 1,996 | 169,860 | ||||||
| Aflac, Inc. | 2,586 | 163,021 | ||||||
| BB&T Corp. | 4,032 | 161,965 | ||||||
| Discover Financial Services | 2,673 | 155,542 | ||||||
| Marsh & McLennan Companies, Inc. | 3,109 | 153,273 | ||||||
| Aon plc | 1,709 | 144,035 | ||||||
| Allstate Corp. | 2,540 | 143,713 | ||||||
| Crown Castle International Corp. | 1,891 | 139,518 | ||||||
| Public Storage | 819 | 137,993 | ||||||
| CME Group, Inc. — Class A | 1,788 | 132,330 | ||||||
| IntercontinentalExchange Group, Inc. | 655 | 129,579 | ||||||
| Chubb Corp. | 1,395 | 124,574 | ||||||
| Franklin Resources, Inc. | 2,288 | 123,964 | ||||||
| T. Rowe Price Group, Inc. | 1,490 | 122,702 | ||||||
| SunTrust Banks, Inc. | 3,037 | 120,842 | ||||||
| Ameriprise Financial, Inc. | 1,085 | 119,426 | ||||||
| McGraw Hill Financial, Inc. | 1,538 | 117,349 | ||||||
| Prologis, Inc. | 2,835 | 115,753 | ||||||
| Fifth Third Bancorp | 4,827 | 110,780 | ||||||
| Equity Residential | 1,910 | 110,761 | ||||||
| Ventas, Inc. | 1,668 | 101,031 | ||||||
| 14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| NOVA FUND |
| Shares | Value | |||||||
| HCP, Inc. | 2,590 | $ | 100,466 | |||||
| Boston Properties, Inc. | 867 | 99,298 | ||||||
| Health Care REIT, Inc. | 1,643 | 97,923 | ||||||
| Weyerhaeuser Co. | 3,314 | 97,266 | ||||||
| Vornado Realty Trust | 986 | 97,180 | ||||||
| Invesco Ltd. | 2,454 | 90,798 | ||||||
| AvalonBay Communities, Inc. | 690 | 90,611 | ||||||
| M&T Bank Corp. | 745 | 90,369 | ||||||
| Regions Financial Corp. | 8,051 | 89,447 | ||||||
| Hartford Financial Services Group, Inc. | 2,531 | 89,268 | ||||||
| Host Hotels & Resorts, Inc. | 4,298 | 86,992 | ||||||
| Moody’s Corp. | 1,062 | 84,238 | ||||||
| Northern Trust Corp. | 1,263 | 82,802 | ||||||
| Loews Corp. | 1,741 | 76,691 | ||||||
| Lincoln National Corp. | 1,491 | 75,549 | ||||||
| Progressive Corp. | 3,112 | 75,373 | ||||||
| Principal Financial Group, Inc. | 1,563 | 71,882 | ||||||
| KeyCorp | 5,047 | 71,869 | ||||||
| General Growth Properties, Inc. | 2,962 | 65,164 | ||||||
| SLM Corp. | 2,433 | 59,560 | ||||||
| Comerica, Inc. | 1,033 | 53,509 | ||||||
| Unum Group | 1,475 | 52,082 | ||||||
| Kimco Realty Corp. | 2,326 | 50,893 | ||||||
| Macerich Co. | 801 | 49,926 | ||||||
| Genworth Financial, Inc. — Class A* | 2,808 | 49,786 | ||||||
| Leucadia National Corp. | 1,775 | 49,700 | ||||||
| XL Group plc — Class A | 1,569 | 49,031 | ||||||
| Huntington Bancshares, Inc. | 4,721 | 47,068 | ||||||
| CBRE Group, Inc. — Class A* | 1,578 | 43,285 | ||||||
| Plum Creek Timber Company, Inc. | 1,007 | 42,334 | ||||||
| Cincinnati Financial Corp. | 832 | 40,485 | ||||||
| Torchmark Corp. | 505 | 39,744 | ||||||
| E*TRADE Financial Corp.* | 1,638 | 37,707 | ||||||
| Zions Bancorporation | 1,048 | 32,467 | ||||||
| Legg Mason, Inc. | 597 | 29,277 | ||||||
| Assurant, Inc. | 410 | 26,634 | ||||||
| Hudson City Bancorp, Inc. | 2,696 | 26,502 | ||||||
| People’s United Financial, Inc. | 1,761 | 26,186 | ||||||
| Apartment Investment & Management Co. — Class A | 828 | 25,022 | ||||||
| NASDAQ OMX Group, Inc. | 664 | 24,528 | ||||||
| Total Financials | 15,576,836 | |||||||
| HEALTH CARE - 10.3% | ||||||||
| Johnson & Johnson | 16,049 | 1,576,492 | ||||||
| Pfizer, Inc. | 36,220 | 1,163,386 | ||||||
| Merck & Company, Inc. | 16,686 | 947,264 | ||||||
| Gilead Sciences, Inc.* | 8,729 | 618,537 | ||||||
| Amgen, Inc. | 4,279 | 527,772 | ||||||
| Bristol-Myers Squibb Co. | 9,327 | 484,538 | ||||||
| AbbVie, Inc. | 9,012 | 463,217 | ||||||
| UnitedHealth Group, Inc. | 5,610 | 459,965 | ||||||
| Biogen Idec, Inc.* | 1,343 | 410,783 | ||||||
| Medtronic, Inc. | 5,679 | 349,486 | ||||||
| Abbott Laboratories | 8,754 | 337,117 | ||||||
| Express Scripts Holding Co.* | 4,400 | 330,396 | ||||||
| Eli Lilly & Co. | 5,592 | 329,145 | ||||||
| Celgene Corp.* | 2,300 | 321,080 | ||||||
| Thermo Fisher Scientific, Inc. | 2,218 | 266,693 | ||||||
| McKesson Corp. | 1,306 | 230,601 | ||||||
| Baxter International, Inc. | 3,079 | 226,553 | ||||||
| Allergan, Inc. | 1,690 | 209,729 | ||||||
| Actavis plc* | 984 | 202,556 | ||||||
| Covidien plc | 2,562 | 188,717 | ||||||
| Alexion Pharmaceuticals, Inc.* | 1,120 | 170,386 | ||||||
| WellPoint, Inc. | 1,599 | 159,180 | ||||||
| Aetna, Inc. | 2,060 | 154,438 | ||||||
| Stryker Corp. | 1,673 | 136,299 | ||||||
| Cardinal Health, Inc. | 1,945 | 136,111 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 443 | 133,024 | ||||||
| Cigna Corp. | 1,547 | 129,530 | ||||||
| Becton Dickinson and Co. | 1,095 | 128,203 | ||||||
| Forest Laboratories, Inc.* | 1,349 | 124,472 | ||||||
| Perrigo Company plc | 757 | 117,078 | ||||||
| Agilent Technologies, Inc. | 1,893 | 105,857 | ||||||
| St. Jude Medical, Inc. | 1,606 | 105,016 | ||||||
| Mylan, Inc.* | 2,113 | 103,178 | ||||||
| Boston Scientific Corp.* | 7,509 | 101,522 | ||||||
| Humana, Inc. | 875 | 98,630 | ||||||
| Intuitive Surgical, Inc.* | 221 | 96,796 | ||||||
| Cerner Corp.* | 1,680 | 94,500 | ||||||
| Vertex Pharmaceuticals, Inc.* | 1,335 | 94,411 | ||||||
| Zimmer Holdings, Inc. | 963 | 91,081 | ||||||
| AmerisourceBergen Corp. — Class A | 1,297 | 85,070 | ||||||
| Zoetis, Inc. | 2,837 | 82,103 | ||||||
| DaVita HealthCare Partners, Inc.* | 999 | 68,781 | ||||||
| CR Bard, Inc. | 438 | 64,815 | ||||||
| Waters Corp.* | 479 | 51,928 | ||||||
| Varian Medical Systems, Inc.* | 591 | 49,638 | ||||||
| CareFusion Corp.* | 1,183 | 47,580 | ||||||
| Laboratory Corporation of America Holdings* | 484 | 47,534 | ||||||
| Quest Diagnostics, Inc. | 819 | 47,436 | ||||||
| Edwards Lifesciences Corp.* | 608 | 45,095 | ||||||
| Hospira, Inc.* | 940 | 40,655 | ||||||
| DENTSPLY International, Inc. | 802 | 36,924 | ||||||
| PerkinElmer, Inc. | 638 | 28,748 | ||||||
| Tenet Healthcare Corp.* | 550 | 23,546 | ||||||
| Patterson Companies, Inc. | 469 | 19,585 | ||||||
| Total Health Care | 12,663,177 | |||||||
| CONSUMER DISCRETIONARY - 9.3% | ||||||||
| Walt Disney Co. | 9,245 | 740,246 | ||||||
| Comcast Corp. — Class A | 14,795 | 740,046 | ||||||
| Amazon.com, Inc.* | 2,111 | 710,394 | ||||||
| Home Depot, Inc. | 7,990 | 632,249 | ||||||
| McDonald’s Corp. | 5,614 | 550,341 | ||||||
| Priceline Group, Inc.* | 299 | 356,375 | ||||||
| Twenty-First Century Fox, Inc. — Class A | 11,012 | 352,054 | ||||||
| Ford Motor Co. | 22,384 | 349,190 | ||||||
| Time Warner, Inc. | 5,063 | 330,766 | ||||||
| Starbucks Corp. | 4,290 | 314,800 | ||||||
| NIKE, Inc. — Class B | 4,219 | 311,615 | ||||||
| Lowe’s Companies, Inc. | 5,930 | 289,977 | ||||||
| General Motors Co. | 7,397 | 254,605 | ||||||
| TJX Companies, Inc. | 4,031 | 244,480 | ||||||
| Target Corp. | 3,584 | 216,868 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| NOVA FUND |
| Shares | Value | |||||||
| Time Warner Cable, Inc. | 1,576 | $ | 216,196 | |||||
| DIRECTV* | 2,692 | 205,723 | ||||||
| CBS Corp. — Class B | 3,127 | 193,248 | ||||||
| Viacom, Inc. — Class B | 2,260 | 192,077 | ||||||
| Yum! Brands, Inc. | 2,510 | 189,229 | ||||||
| Johnson Controls, Inc. | 3,769 | 178,349 | ||||||
| Macy’s, Inc. | 2,089 | 123,857 | ||||||
| VF Corp. | 1,994 | 123,389 | ||||||
| Netflix, Inc.* | 334 | 117,578 | ||||||
| Delphi Automotive plc | 1,582 | 107,355 | ||||||
| Omnicom Group, Inc. | 1,468 | 106,577 | ||||||
| Discovery Communications, Inc. — Class A* | 1,265 | 104,616 | ||||||
| Wynn Resorts Ltd. | 458 | 101,745 | ||||||
| AutoZone, Inc.* | 188 | 100,975 | ||||||
| Chipotle Mexican Grill, Inc. — Class A* | 177 | 100,545 | ||||||
| Michael Kors Holdings Ltd.* | 1,013 | 94,483 | ||||||
| Carnival Corp. | 2,482 | 93,969 | ||||||
| Dollar General Corp.* | 1,671 | 92,707 | ||||||
| O’Reilly Automotive, Inc.* | 604 | 89,628 | ||||||
| Ross Stores, Inc. | 1,219 | 87,219 | ||||||
| Starwood Hotels & Resorts Worldwide, Inc. | 1,085 | 86,366 | ||||||
| Bed Bath & Beyond, Inc.* | 1,210 | 83,248 | ||||||
| Harley-Davidson, Inc. | 1,244 | 82,863 | ||||||
| BorgWarner, Inc. | 1,294 | 79,542 | ||||||
| L Brands, Inc. | 1,388 | 78,797 | ||||||
| Coach, Inc. | 1,576 | 78,264 | ||||||
| Mattel, Inc. | 1,933 | 77,532 | ||||||
| Genuine Parts Co. | 874 | 75,907 | ||||||
| Marriott International, Inc. — Class A | 1,258 | 70,473 | ||||||
| Whirlpool Corp. | 437 | 65,314 | ||||||
| Kohl’s Corp. | 1,140 | 64,752 | ||||||
| Dollar Tree, Inc.* | 1,181 | 61,625 | ||||||
| The Gap, Inc. | 1,501 | 60,130 | ||||||
| CarMax, Inc.* | 1,268 | 59,342 | ||||||
| PVH Corp. | 467 | 58,268 | ||||||
| TripAdvisor, Inc.* | 626 | 56,709 | ||||||
| Tractor Supply Co. | 787 | 55,586 | ||||||
| Ralph Lauren Corp. — Class A | 340 | 54,716 | ||||||
| Tiffany & Co. | 622 | 53,585 | ||||||
| Wyndham Worldwide Corp. | 728 | 53,311 | ||||||
| Nordstrom, Inc. | 813 | 50,772 | ||||||
| News Corp. — Class A* | 2,826 | 48,664 | ||||||
| Mohawk Industries, Inc.* | 349 | 47,457 | ||||||
| Newell Rubbermaid, Inc. | 1,582 | 47,302 | ||||||
| H&R Block, Inc. | 1,560 | 47,096 | ||||||
| Scripps Networks Interactive, Inc. — Class A | 619 | 46,988 | ||||||
| Expedia, Inc. | 581 | 42,123 | ||||||
| Staples, Inc. | 3,695 | 41,901 | ||||||
| Interpublic Group of Companies, Inc. | 2,409 | 41,290 | ||||||
| Best Buy Company, Inc. | 1,552 | 40,988 | ||||||
| PetSmart, Inc. | 591 | 40,714 | ||||||
| Harman International Industries, Inc. | 381 | 40,539 | ||||||
| Lennar Corp. — Class A | 998 | 39,541 | ||||||
| Garmin Ltd. | 701 | 38,737 | ||||||
| Darden Restaurants, Inc. | 745 | 37,816 | ||||||
| PulteGroup, Inc. | 1,942 | 37,267 | ||||||
| Goodyear Tire & Rubber Co. | 1,412 | 36,896 | ||||||
| Hasbro, Inc. | 656 | 36,487 | ||||||
| Gannett Company, Inc. | 1,292 | 35,659 | ||||||
| DR Horton, Inc. | 1,614 | 34,943 | ||||||
| Family Dollar Stores, Inc. | 543 | 31,499 | ||||||
| Fossil Group, Inc.* | 268 | 31,251 | ||||||
| GameStop Corp. — Class A | 659 | 27,085 | ||||||
| Leggett & Platt, Inc. | 789 | 25,753 | ||||||
| Urban Outfitters, Inc.* | 615 | 22,429 | ||||||
| Cablevision Systems Corp. — Class A | 1,215 | 20,497 | ||||||
| International Game Technology | 1,400 | 19,684 | ||||||
| Graham Holdings Co. — Class B | 27 | 19,001 | ||||||
| AutoNation, Inc.* | 354 | 18,843 | ||||||
| Total Consumer Discretionary | 11,419,023 | |||||||
| INDUSTRIALS - 8.2% | ||||||||
| General Electric Co. | 56,938 | 1,474,125 | ||||||
| United Technologies Corp. | 4,781 | 558,611 | ||||||
| Boeing Co. | 3,883 | 487,277 | ||||||
| 3M Co. | 3,575 | 484,985 | ||||||
| Union Pacific Corp. | 2,578 | 483,788 | ||||||
| Honeywell International, Inc. | 4,453 | 413,060 | ||||||
| United Parcel Service, Inc. — Class B | 4,029 | 392,345 | ||||||
| Caterpillar, Inc. | 3,615 | 359,223 | ||||||
| Emerson Electric Co. | 3,991 | 266,599 | ||||||
| Danaher Corp. | 3,405 | 255,376 | ||||||
| Lockheed Martin Corp. | 1,536 | 250,737 | ||||||
| FedEx Corp. | 1,572 | 208,384 | ||||||
| Precision Castparts Corp. | 824 | 208,274 | ||||||
| Eaton Corporation plc | 2,697 | 202,599 | ||||||
| General Dynamics Corp. | 1,842 | 200,631 | ||||||
| Deere & Co. | 2,093 | 190,044 | ||||||
| Illinois Tool Works, Inc. | 2,213 | 179,983 | ||||||
| Raytheon Co. | 1,786 | 176,439 | ||||||
| Norfolk Southern Corp. | 1,753 | 170,339 | ||||||
| Delta Air Lines, Inc. | 4,817 | 166,909 | ||||||
| CSX Corp. | 5,718 | 165,650 | ||||||
| Northrop Grumman Corp. | 1,228 | 151,511 | ||||||
| Cummins, Inc. | 983 | 146,457 | ||||||
| PACCAR, Inc. | 2,008 | 135,420 | ||||||
| Tyco International Ltd. | 2,613 | 110,791 | ||||||
| Waste Management, Inc. | 2,450 | 103,072 | ||||||
| Parker Hannifin Corp. | 844 | 101,035 | ||||||
| Rockwell Automation, Inc. | 788 | 98,145 | ||||||
| Southwest Airlines Co. | 3,981 | 93,991 | ||||||
| Pentair Ltd. | 1,116 | 88,543 | ||||||
| WW Grainger, Inc. | 350 | 88,431 | ||||||
| Ingersoll-Rand plc | 1,471 | 84,200 | ||||||
| Dover Corp. | 964 | 78,807 | ||||||
| Fastenal Co. | 1,550 | 76,446 | ||||||
| Roper Industries, Inc. | 569 | 75,967 | ||||||
| Nielsen Holdings N.V. | 1,612 | 71,943 | ||||||
| Stanley Black & Decker, Inc. | 885 | 71,897 | ||||||
| AMETEK, Inc. | 1,390 | 71,571 | ||||||
| Fluor Corp. | 910 | 70,734 | ||||||
| Kansas City Southern | 623 | 63,583 | ||||||
| Textron, Inc. | 1,604 | 63,021 | ||||||
| Flowserve Corp. | 782 | 61,262 | ||||||
| 16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| NOVA FUND |
| Shares | Value | |||||||
| Rockwell Collins, Inc. | 765 | $ | 60,948 | |||||
| L-3 Communications Holdings, Inc. | 487 | 57,539 | ||||||
| Pall Corp. | 621 | 55,561 | ||||||
| Stericycle, Inc.* | 484 | 54,992 | ||||||
| Republic Services, Inc. — Class A | 1,532 | 52,333 | ||||||
| Jacobs Engineering Group, Inc.* | 750 | 47,625 | ||||||
| Equifax, Inc. | 694 | 47,213 | ||||||
| Expeditors International of Washington, Inc. | 1,151 | 45,614 | ||||||
| Quanta Services, Inc.* | 1,231 | 45,424 | ||||||
| Masco Corp. | 2,022 | 44,909 | ||||||
| CH Robinson Worldwide, Inc. | 844 | 44,217 | ||||||
| Xylem, Inc. | 1,048 | 38,168 | ||||||
| Snap-on, Inc. | 326 | 36,994 | ||||||
| Cintas Corp. | 571 | 34,037 | ||||||
| Robert Half International, Inc. | 782 | 32,805 | ||||||
| Joy Global, Inc. | 565 | 32,770 | ||||||
| ADT Corp. | 1,043 | 31,238 | ||||||
| Pitney Bowes, Inc. | 1,144 | 29,733 | ||||||
| Iron Mountain, Inc. | 966 | 26,633 | ||||||
| Allegion plc | 510 | 26,607 | ||||||
| Ryder System, Inc. | 304 | 24,296 | ||||||
| Dun & Bradstreet Corp. | 208 | 20,665 | ||||||
| Total Industrials | 10,092,526 | |||||||
| ENERGY - 7.8% | ||||||||
| Exxon Mobil Corp. | 24,519 | 2,395,015 | ||||||
| Chevron Corp. | 10,832 | 1,288,033 | ||||||
| Schlumberger Ltd. | 7,419 | 723,353 | ||||||
| ConocoPhillips | 6,957 | 489,425 | ||||||
| Occidental Petroleum Corp. | 4,508 | 429,567 | ||||||
| EOG Resources, Inc. | 1,554 | 304,848 | ||||||
| Halliburton Co. | 4,824 | 284,085 | ||||||
| Phillips 66 | 3,336 | 257,072 | ||||||
| Anadarko Petroleum Corp. | 2,858 | 242,244 | ||||||
| National Oilwell Varco, Inc. | 2,436 | 189,691 | ||||||
| Apache Corp. | 2,237 | 185,559 | ||||||
| Baker Hughes, Inc. | 2,483 | 161,445 | ||||||
| Valero Energy Corp. | 3,025 | 160,628 | ||||||
| Williams Companies, Inc. | 3,880 | 157,450 | ||||||
| Pioneer Natural Resources Co. | 813 | 152,145 | ||||||
| Devon Energy Corp. | 2,168 | 145,104 | ||||||
| Marathon Petroleum Corp. | 1,667 | 145,096 | ||||||
| Noble Energy, Inc. | 2,039 | 144,851 | ||||||
| Marathon Oil Corp. | 3,957 | 140,553 | ||||||
| Spectra Energy Corp. | 3,804 | 140,520 | ||||||
| Hess Corp. | 1,546 | 128,132 | ||||||
| Kinder Morgan, Inc. | 3,802 | 123,527 | ||||||
| Southwestern Energy Co.* | 2,007 | 92,342 | ||||||
| Equities Corp. | 859 | 83,297 | ||||||
| Cabot Oil & Gas Corp. | 2,394 | 81,109 | ||||||
| Transocean Ltd. | 1,926 | 79,620 | ||||||
| Range Resources Corp. | 930 | 77,162 | ||||||
| Cameron International Corp.* | 1,228 | 75,854 | ||||||
| Chesapeake Energy Corp. | 2,876 | 73,683 | ||||||
| FMC Technologies, Inc.* | 1,339 | 70,016 | ||||||
| ONEOK, Inc. | 1,178 | 69,797 | ||||||
| Ensco plc — Class A | 1,322 | 69,775 | ||||||
| Helmerich & Payne, Inc. | 610 | 65,612 | ||||||
| Murphy Oil Corp. | 976 | 61,351 | ||||||
| CONSOL Energy, Inc. | 1,297 | 51,815 | ||||||
| Noble Corporation plc | 1,438 | 47,080 | ||||||
| Tesoro Corp. | 744 | 37,639 | ||||||
| Nabors Industries Ltd. | 1,483 | 36,556 | ||||||
| Denbury Resources, Inc. | 2,018 | 33,095 | ||||||
| QEP Resources, Inc. | 1,022 | 30,088 | ||||||
| Peabody Energy Corp. | 1,543 | 25,213 | ||||||
| Newfield Exploration Co.* | 774 | 24,273 | ||||||
| Rowan Companies plc — Class A* | 707 | 23,812 | ||||||
| Diamond Offshore Drilling, Inc. | 397 | 19,358 | ||||||
| Total Energy | 9,616,890 | |||||||
| CONSUMER STAPLES - 7.4% | ||||||||
| Procter & Gamble Co. | 15,388 | 1,240,274 | ||||||
| Coca-Cola Co. | 21,501 | 831,229 | ||||||
| Philip Morris International, Inc. | 8,991 | 736,092 | ||||||
| PepsiCo, Inc. | 8,644 | 721,774 | ||||||
| Wal-Mart Stores, Inc. | 9,183 | 701,856 | ||||||
| CVS Caremark Corp. | 6,712 | 502,460 | ||||||
| Altria Group, Inc. | 11,313 | 423,446 | ||||||
| Mondelez International, Inc. — Class A | 9,655 | 333,579 | ||||||
| Walgreen Co. | 4,956 | 327,245 | ||||||
| Colgate-Palmolive Co. | 4,949 | 321,042 | ||||||
| Costco Wholesale Corp. | 2,498 | 278,977 | ||||||
| Kimberly-Clark Corp. | 2,149 | 236,927 | ||||||
| Kraft Foods Group, Inc. | 3,385 | 189,899 | ||||||
| General Mills, Inc. | 3,541 | 183,495 | ||||||
| Archer-Daniels-Midland Co. | 3,736 | 162,105 | ||||||
| Kroger Co. | 2,929 | 127,851 | ||||||
| Sysco Corp. | 3,319 | 119,915 | ||||||
| Lorillard, Inc. | 2,057 | 111,243 | ||||||
| Whole Foods Market, Inc. | 2,109 | 106,947 | ||||||
| Estee Lauder Companies, Inc. — Class A | 1,453 | 97,177 | ||||||
| Mead Johnson Nutrition Co. — Class A | 1,144 | 95,112 | ||||||
| Reynolds American, Inc. | 1,767 | 94,393 | ||||||
| Kellogg Co. | 1,459 | 91,494 | ||||||
| Hershey Co. | 848 | 88,531 | ||||||
| Brown-Forman Corp. — Class B | 920 | 82,515 | ||||||
| Constellation Brands, Inc. — Class A* | 952 | 80,891 | ||||||
| Beam, Inc. | 938 | 78,135 | ||||||
| Keurig Green Mountain, Inc. | 730 | 77,081 | ||||||
| ConAgra Foods, Inc. | 2,387 | 74,069 | ||||||
| Tyson Foods, Inc. — Class A | 1,525 | 67,115 | ||||||
| Clorox Co. | 736 | 64,775 | ||||||
| Coca-Cola Enterprises, Inc. | 1,347 | 64,333 | ||||||
| Dr Pepper Snapple Group, Inc. | 1,115 | 60,723 | ||||||
| JM Smucker Co. | 592 | 57,566 | ||||||
| Monster Beverage Corp.* | 767 | 53,268 | ||||||
| McCormick & Company, Inc. | 742 | 53,231 | ||||||
| Molson Coors Brewing Co. — Class B | 903 | 53,151 | ||||||
| Safeway, Inc. | 1,302 | 48,096 | ||||||
| Campbell Soup Co. | 1,012 | 45,419 | ||||||
| Hormel Foods Corp. | 763 | 37,593 | ||||||
| Avon Products, Inc. | 2,461 | 36,029 | ||||||
| Total Consumer Staples | 9,157,053 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| NOVA FUND |
| Shares | Value | |||||||
| MATERIALS - 2.7% | ||||||||
| EI du Pont de Nemours & Co. | 5,265 | $ | 353,282 | |||||
| Monsanto Co. | 2,974 | 338,352 | ||||||
| Dow Chemical Co. | 6,895 | 335,028 | ||||||
| Praxair, Inc. | 1,669 | 218,589 | ||||||
| LyondellBasell Industries N.V. — Class A | 2,447 | 217,636 | ||||||
| Freeport-McMoRan Copper & Gold, Inc. | 5,894 | 194,915 | ||||||
| Ecolab, Inc. | 1,535 | 165,765 | ||||||
| PPG Industries, Inc. | 787 | 152,253 | ||||||
| Air Products & Chemicals, Inc. | 1,197 | 142,491 | ||||||
| International Paper Co. | 2,491 | 114,287 | ||||||
| Mosaic Co. | 1,922 | 96,100 | ||||||
| Sherwin-Williams Co. | 484 | 95,411 | ||||||
| Nucor Corp. | 1,807 | 91,325 | ||||||
| CF Industries Holdings, Inc. | 313 | 81,580 | ||||||
| Alcoa, Inc. | 6,111 | 78,649 | ||||||
| Eastman Chemical Co. | 868 | 74,830 | ||||||
| Newmont Mining Corp. | 2,826 | 66,241 | ||||||
| Sigma-Aldrich Corp. | 676 | 63,125 | ||||||
| FMC Corp. | 750 | 57,420 | ||||||
| Vulcan Materials Co. | 744 | 49,439 | ||||||
| International Flavors & Fragrances, Inc. | 461 | 44,104 | ||||||
| Ball Corp. | 796 | 43,629 | ||||||
| Airgas, Inc. | 382 | 40,687 | ||||||
| MeadWestvaco Corp. | 988 | 37,188 | ||||||
| Sealed Air Corp. | 1,116 | 36,683 | ||||||
| Owens-Illinois, Inc.* | 930 | 31,462 | ||||||
| Avery Dennison Corp. | 545 | 27,615 | ||||||
| Allegheny Technologies, Inc. | 612 | 23,060 | ||||||
| United States Steel Corp. | 821 | 22,668 | ||||||
| Bemis Company, Inc. | 572 | 22,445 | ||||||
| Cliffs Natural Resources, Inc. | 869 | 17,780 | ||||||
| Total Materials | 3,334,039 | |||||||
| UTILITIES - 2.4% | ||||||||
| Duke Energy Corp. | 4,006 | 285,307 | ||||||
| NextEra Energy, Inc. | 2,470 | 236,181 | ||||||
| Dominion Resources, Inc. | 3,302 | 234,409 | ||||||
| Southern Co. | 5,042 | 221,545 | ||||||
| Exelon Corp. | 4,869 | 163,404 | ||||||
| American Electric Power Company, Inc. | 2,763 | 139,974 | ||||||
| Sempra Energy | 1,293 | 125,111 | ||||||
| PPL Corp. | 3,583 | 118,741 | ||||||
| PG&E Corp. | 2,593 | 112,018 | ||||||
| Public Service Enterprise Group, Inc. | 2,871 | 109,500 | ||||||
| Edison International | 1,848 | 104,615 | ||||||
| Consolidated Edison, Inc. | 1,662 | 89,166 | ||||||
| Xcel Energy, Inc. | 2,825 | 85,767 | ||||||
| Northeast Utilities | 1,785 | 81,218 | ||||||
| FirstEnergy Corp. | 2,379 | 80,957 | ||||||
| DTE Energy Co. | 1,003 | 74,513 | ||||||
| Entergy Corp. | 1,008 | 67,385 | ||||||
| NiSource, Inc. | 1,782 | 63,314 | ||||||
| Wisconsin Energy Corp. | 1,286 | 59,863 | ||||||
| NRG Energy, Inc. | 1,844 | 58,639 | ||||||
| CenterPoint Energy, Inc. | 2,437 | 57,733 | ||||||
| Ameren Corp. | 1,377 | 56,732 | ||||||
| AES Corp. | 3,734 | 53,322 | ||||||
| CMS Energy Corp. | 1,514 | 44,330 | ||||||
| SCANA Corp. | 802 | 41,159 | ||||||
| Pinnacle West Capital Corp. | 629 | 34,381 | ||||||
| AGL Resources, Inc. | 674 | 32,999 | ||||||
| Pepco Holdings, Inc. | 1,419 | 29,061 | ||||||
| Integrys Energy Group, Inc. | 453 | 27,021 | ||||||
| TECO Energy, Inc. | 1,161 | 19,911 | ||||||
| Total Utilities | 2,908,276 | |||||||
| TELECOMMUNICATION SERVICES - 1.9% | ||||||||
| Verizon Communications, Inc. | 23,500 | 1,117,895 | ||||||
| AT&T, Inc. | 29,544 | 1,036,108 | ||||||
| CenturyLink, Inc. | 3,280 | 107,715 | ||||||
| Frontier Communications Corp. | 5,671 | 32,325 | ||||||
| Windstream Holdings, Inc.1 | 3,378 | 27,835 | ||||||
| Total Telecommunication Services | 2,321,878 | |||||||
| Total Common Stocks | ||||||||
| (Cost $68,242,751) | 94,741,239 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 15.3% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 10,203,961 | 10,203,961 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 4,305,717 | 4,305,717 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 2,911,673 | 2,911,673 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,356,596 | 1,356,596 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $18,777,947) | 18,777,947 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.0% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 3,300 | 3,300 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 2,945 | 2,945 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 555 | 555 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $6,800) | 6,800 | |||||||
| Total Investments - 92.2% | ||||||||
| (Cost $87,027,498) | $ | 113,525,986 | ||||||
| Other Assets & Liabilities, net - 7.8% | 9,541,313 | |||||||
| Total Net Assets - 100.0% | $ | 123,067,299 | ||||||
| 18 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| NOVA FUND |
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 S&P 500 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $43,069,950) | 462 | $ | 272,257 | |||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Goldman Sachs International | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $18,766,124) | 10,023 | $ | 169,904 | |||||
| Barclays Bank plc | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $14,549,980) | 7,771 | 114,902 | ||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $13,281,304) | 7,093 | 51,797 | ||||||
| (Total Notional Value | ||||||||
| $46,597,408) | $ | 336,603 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Total Return based on S&P 500 Index +/- financing at a variable rate. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 19 |
| NOVA FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $6,592 of securities loaned | ||||
| (cost $ 68,242,751) | $ | 94,741,239 | ||
| Repurchase agreements, at value | ||||
| (cost $18,784,747) | 18,784,747 | |||
| Total investments | ||||
| (cost $ 87,027,498) | 113,525,986 | |||
| Segregated cash with broker | 7,586,148 | |||
| Unrealized appreciation on swap agreements | 336,603 | |||
| Receivables: | ||||
| Fund shares sold | 3,060,102 | |||
| Variation margin | 325,710 | |||
| Dividends | 92,299 | |||
| Foreign taxes reclaim | 49 | |||
| Interest | 13 | |||
| Securities lending income | 12 | |||
| Swap settlement | 3,407 | |||
| Total assets | 124,930,329 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 974,771 | |||
| Fund shares redeemed | 709,013 | |||
| Management fees | 61,847 | |||
| Transfer agent and administrative fees | 20,616 | |||
| Distribution and service fees | 12,417 | |||
| Portfolio accounting fees | 8,246 | |||
| Upon return of securities loaned | 6,800 | |||
| Miscellaneous | 69,320 | |||
| Total liabilities | 1,863,030 | |||
| Net assets | $ | 123,067,299 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 119,270,248 | ||
| Undistributed net investment income | 169,151 | |||
| Accumulated net realized loss on investments | (23,479,448 | ) | ||
| Net unrealized appreciation on investments | 27,107,348 | |||
| Net assets | $ | 123,067,299 | ||
| Investor Class: | ||||
| Net assets | $ | 103,254,465 | ||
| Capital shares outstanding | 2,449,652 | |||
| Net asset value per share | $ | 42.15 | ||
| Advisor Class: | ||||
| Net assets | $ | 8,182,711 | ||
| Capital shares outstanding | 211,792 | |||
| Net asset value per share | $ | 38.64 | ||
| A-Class: | ||||
| Net assets | $ | 1,236,544 | ||
| Capital shares outstanding | 31,168 | |||
| Net asset value per share | $ | 39.67 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 41.65 | ||
| C-Class: | ||||
| Net assets | $ | 10,393,579 | ||
| Capital shares outstanding | 283,853 | |||
| Net asset value per share | $ | 36.62 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $262) | $ | 1,467,443 | ||
| Interest | 3,131 | |||
| Income from securities lending, net | 175 | |||
| Total investment income | 1,470,749 | |||
| Expenses: | ||||
| Management fees | 666,881 | |||
| Transfer agent and administrative fees | 222,293 | |||
| Distribution and service fees: | ||||
| Advisor Class | 50,980 | |||
| A-Class | 3,298 | |||
| C-Class | 98,831 | |||
| Portfolio accounting fees | 88,917 | |||
| Custodian fees | 10,004 | |||
| Trustees’ fees* | 7,519 | |||
| Line of credit interest expense | 568 | |||
| Miscellaneous | 141,462 | |||
| Total expenses | 1,290,753 | |||
| Net investment income | 179,996 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 12,400 | |||
| Swap agreements | 9,130,015 | |||
| Futures contracts | 1,869,674 | |||
| Net realized gain | 11,012,089 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 10,901,331 | |||
| Swap agreements | 101,744 | |||
| Futures contracts | 263,695 | |||
| Net change in unrealized appreciation (depreciation) | 11,266,770 | |||
| Net realized and unrealized gain | 22,278,859 | |||
| Net increase in net assets resulting from operations | $ | 22,458,855 |
| * | 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. |
| NOVA FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | 179,996 | $ | (15,582 | ) | |||
| Net realized gain on investments | 11,012,089 | 14,699,226 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 11,266,770 | (3,334,359 | ) | |||||
| Net increase in net assets resulting from operations | 22,458,855 | 11,349,285 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | — | (57,812 | ) | |||||
| Advisor Class | — | (4,536 | ) | |||||
| A-Class | — | (1,140 | ) | |||||
| C-Class | — | (8,918 | ) | |||||
| Total distributions to shareholders | — | (72,406 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 498,203,037 | 318,487,378 | ||||||
| Advisor Class | 225,410,140 | 349,562,781 | ||||||
| A-Class | 1,020,317 | 553,775 | ||||||
| C-Class | 2,942,771 | 3,903,743 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | — | 56,051 | ||||||
| Advisor Class | — | 4,491 | ||||||
| A-Class | — | 985 | ||||||
| C-Class | — | 8,561 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (464,394,553 | ) | (328,304,032 | ) | ||||
| Advisor Class | (232,200,336 | ) | (350,291,346 | ) | ||||
| A-Class | (1,333,344 | ) | (1,019,449 | ) | ||||
| C-Class | (3,860,568 | ) | (5,430,052 | ) | ||||
| Net increase (decrease) from capital share transactions | 25,787,464 | (12,467,114 | ) | |||||
| Net increase (decrease) in net assets | 48,246,319 | (1,190,235 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 74,820,980 | 76,011,215 | ||||||
| End of year | $ | 123,067,299 | $ | 74,820,980 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | 169,151 | $ | (10,845 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 13,162,417 | 11,739,305 | ||||||
| Advisor Class | 6,534,602 | 14,143,960 | ||||||
| A-Class | 29,025 | 22,082 | ||||||
| C-Class | 92,387 | 165,288 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | — | 2,049 | ||||||
| Advisor Class | — | 178 | ||||||
| A-Class | — | 38 | ||||||
| C-Class | — | 356 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (12,359,847 | ) | (12,129,842 | ) | ||||
| Advisor Class | (6,734,244 | ) | (14,179,836 | ) | ||||
| A-Class | (37,200 | ) | (40,802 | ) | ||||
| C-Class | (118,184 | ) | (227,471 | ) | ||||
| Net increase (decrease) in shares | 568,956 | (504,695 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.05 | $ | 26.82 | $ | 24.59 | $ | 20.28 | $ | 11.40 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .14 | .05 | .08 | .02 | .06 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 9.96 | 5.21 | 2.15 | 4.31 | 8.97 | |||||||||||||||
| Total from investment operations | 10.10 | 5.26 | 2.23 | 4.33 | 9.03 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Total distributions | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Net asset value, end of period | $ | 42.15 | $ | 32.05 | $ | 26.82 | $ | 24.59 | $ | 20.28 | ||||||||||
| Total Returnb | 31.51 | % | 19.62 | % | 9.07 | % | 21.38 | % | 79.36 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 103,254 | $ | 52,785 | $ | 54,598 | $ | 65,102 | $ | 77,268 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.37 | % | 0.20 | % | 0.36 | % | 0.11 | % | 0.33 | % | ||||||||||
| Total expenses | 1.28 | % | 1.26 | % | 1.26 | % | 1.29 | % | 1.28 | % | ||||||||||
| Portfolio turnover rate | 259 | % | 137 | % | 116 | % | 53 | % | 68 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 29.51 | $ | 24.85 | $ | 22.88 | $ | 18.97 | $ | 10.73 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.04 | ) | (.11 | ) | (.04 | ) | (.07 | ) | (.01 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 9.17 | 4.80 | 2.01 | 4.00 | 8.40 | |||||||||||||||
| Total from investment operations | 9.13 | 4.69 | 1.97 | 3.93 | 8.39 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Total distributions | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Net asset value, end of period | $ | 38.64 | $ | 29.51 | $ | 24.85 | $ | 22.88 | $ | 18.97 | ||||||||||
| Total Returnb | 30.94 | % | 18.93 | % | 8.57 | % | 20.75 | % | 78.35 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 8,183 | $ | 12,141 | $ | 11,112 | $ | 6,318 | $ | 11,746 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.12 | %) | (0.43 | %) | (0.18 | %) | (0.37 | %) | (0.03 | %) | ||||||||||
| Total expenses | 1.78 | % | 1.75 | % | 1.75 | % | 1.79 | % | 1.78 | % | ||||||||||
| Portfolio turnover rate | 259 | % | 137 | % | 116 | % | 53 | % | 68 | % | ||||||||||
| 22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| NOVA FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 30.23 | $ | 25.38 | $ | 23.32 | $ | 19.28 | $ | 10.88 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .05 | (.01 | ) | .01 | (.02 | ) | .03 | |||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 9.39 | 4.89 | 2.05 | 4.08 | 8.52 | |||||||||||||||
| Total from investment operations | 9.44 | 4.88 | 2.06 | 4.06 | 8.55 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Total distributions | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Net asset value, end of period | $ | 39.67 | $ | 30.23 | $ | 25.38 | $ | 23.32 | $ | 19.28 | ||||||||||
| Total Returnb | 31.23 | % | 19.28 | % | 8.79 | % | 21.09 | % | 78.74 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,237 | $ | 1,189 | $ | 1,472 | $ | 5,843 | $ | 1,876 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.14 | % | (0.04 | %) | 0.06 | % | (0.11 | %) | 0.18 | % | ||||||||||
| Total expenses | 1.53 | % | 1.50 | % | 1.51 | % | 1.54 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 259 | % | 137 | % | 116 | % | 53 | % | 68 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 28.11 | $ | 23.77 | $ | 22.01 | $ | 18.33 | $ | 10.42 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.20 | ) | (.19 | ) | (.13 | ) | (.16 | ) | (.09 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 8.71 | 4.56 | 1.89 | 3.86 | 8.15 | |||||||||||||||
| Total from investment operations | 8.51 | 4.37 | 1.76 | 3.70 | 8.06 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Total distributions | — | (.03 | ) | — | (.02 | ) | (.15 | ) | ||||||||||||
| Net asset value, end of period | $ | 36.62 | $ | 28.11 | $ | 23.77 | $ | 22.01 | $ | 18.33 | ||||||||||
| Total Returnb | 30.27 | % | 18.39 | % | 8.00 | % | 20.22 | % | 77.51 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 10,394 | $ | 8,705 | $ | 8,829 | $ | 10,461 | $ | 10,661 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.62 | %) | (0.79 | %) | (0.62 | %) | (0.85 | %) | (0.61 | %) | ||||||||||
| Total expenses | 2.28 | % | 2.25 | % | 2.26 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 259 | % | 137 | % | 116 | % | 53 | % | 68 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
S&P 500® 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 S&P 500® Index (the “underlying index”).
The broad-market S&P 500 Index returned 21.86% for the one-year period ended March 31, 2014, while the S&P 500® Fund H-Class returned 19.87% for the same period. The Fund maintained a daily correlation of over 99% to its benchmark of the daily price movement of the S&P 500 Index.
Sectors contributing most to performance of the underlying index were Financials and Information Technology. The sector contributing least was Telecommunication Services, followed by Utilities. No sector detracted from return.
Microsoft Corp., Apple, Inc. and Google, Inc. — Class A were the holdings contributing the most to performance of the underlying index for the period. International Business Machines Corp., Philip Morris International, Inc. and Newmont Mining Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| A-Class | May 31, 2006 |
| C-Class | May 31, 2006 |
| H-Class | May 31, 2006 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 1.6 | % | ||
| Exxon Mobil Corp. | 1.4 | % | ||
| Google, Inc. — Class A | 1.0 | % | ||
| Microsoft Corp. | 1.0 | % | ||
| Johnson & Johnson | 0.9 | % | ||
| General Electric Co. | 0.9 | % | ||
| Wells Fargo & Co. | 0.8 | % | ||
| JPMorgan Chase & Co. | 0.8 | % | ||
| Chevron Corp. | 0.8 | % | ||
| Berkshire Hathaway, Inc. — Class B | 0.7 | % | ||
| Top Ten Total | 9.9 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 24 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
| Average Annual Returns* | |||
| Periods Ended March 31, 2014 | |||
| Since | |||
| Inception | |||
| 1 Year | 5 Year | (05/31/06) | |
| A-Class Shares | 19.87% | 19.27% | 5.87% |
| A-Class Shares with sales charge† | 14.19% | 18.11% | 5.22% |
| C-Class Shares | 19.01% | 18.34% | 5.05% |
| C-Class Shares with CDSC‡ | 18.01% | 18.34% | 5.05% |
| H-Class Shares | 19.87% | 19.28% | 5.87% |
| S&P 500 Index | 21.86% | 21.16% | 7.35% |
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 25 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P 500® FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 55.3% | ||||||||
| INFORMATION TECHNOLOGY - 10.3% | ||||||||
| Apple, Inc. | 8,862 | $ | 4,756,590 | |||||
| Google, Inc. — Class A* | 2,806 | 3,127,316 | ||||||
| Microsoft Corp. | 75,015 | 3,074,865 | ||||||
| International Business Machines Corp. | 9,726 | 1,872,158 | ||||||
| Oracle Corp. | 34,397 | 1,407,181 | ||||||
| QUALCOMM, Inc. | 16,799 | 1,324,770 | ||||||
| Intel Corp. | 49,380 | 1,274,497 | ||||||
| Cisco Systems, Inc. | 51,156 | 1,146,406 | ||||||
| Visa, Inc. — Class A | 5,038 | 1,087,504 | ||||||
| Facebook, Inc. — Class A* | 16,977 | 1,022,694 | ||||||
| MasterCard, Inc. — Class A | 10,134 | 757,010 | ||||||
| eBay, Inc.* | 11,572 | 639,237 | ||||||
| Hewlett-Packard Co. | 18,826 | 609,209 | ||||||
| EMC Corp. | 20,121 | 551,516 | ||||||
| Texas Instruments, Inc. | 10,771 | 507,852 | ||||||
| Accenture plc — Class A | 6,328 | 504,468 | ||||||
| Automatic Data Processing, Inc. | 4,782 | 369,457 | ||||||
| Yahoo!, Inc.* | 9,323 | 334,696 | ||||||
| Salesforce.com, Inc.* | 5,572 | 318,105 | ||||||
| Cognizant Technology Solutions | ||||||||
| Corp. — Class A* | 6,050 | 306,191 | ||||||
| Adobe Systems, Inc.* | 4,613 | 303,259 | ||||||
| Corning, Inc. | 13,830 | 287,940 | ||||||
| Micron Technology, Inc.* | 10,547 | 249,542 | ||||||
| Applied Materials, Inc. | 12,032 | 245,694 | ||||||
| TE Connectivity Ltd. | 4,075 | 245,356 | ||||||
| Intuit, Inc. | 2,816 | 218,888 | ||||||
| Western Digital Corp. | 2,091 | 191,996 | ||||||
| Seagate Technology plc | 3,283 | 184,373 | ||||||
| SanDisk Corp. | 2,247 | 182,434 | ||||||
| Broadcom Corp. — Class A | 5,481 | 172,542 | ||||||
| Analog Devices, Inc. | 3,104 | 164,947 | ||||||
| Fidelity National Information Services, Inc. | 2,889 | 154,417 | ||||||
| Alliance Data Systems Corp.* | 537 | 146,306 | ||||||
| Motorola Solutions, Inc. | 2,246 | 144,395 | ||||||
| Xilinx, Inc. | 2,655 | 144,087 | ||||||
| Amphenol Corp. — Class A | 1,572 | 144,074 | ||||||
| Fiserv, Inc.* | 2,538 | 143,879 | ||||||
| Symantec Corp. | 6,869 | 137,174 | ||||||
| Paychex, Inc. | 3,219 | 137,129 | ||||||
| Juniper Networks, Inc.* | 4,978 | 128,233 | ||||||
| Xerox Corp. | 11,066 | 125,046 | ||||||
| NetApp, Inc. | 3,290 | 121,401 | ||||||
| KLA-Tencor Corp. | 1,659 | 114,703 | ||||||
| Altera Corp. | 3,159 | 114,482 | ||||||
| Linear Technology Corp. | 2,341 | 113,983 | ||||||
| Autodesk, Inc.* | 2,254 | 110,852 | ||||||
| Citrix Systems, Inc.* | 1,829 | 105,039 | ||||||
| Akamai Technologies, Inc.* | 1,778 | 103,497 | ||||||
| Red Hat, Inc.* | 1,890 | 100,132 | ||||||
| CA, Inc. | 3,207 | 99,321 | ||||||
| NVIDIA Corp. | 5,505 | 98,595 | ||||||
| Microchip Technology, Inc. | 1,979 | 94,517 | ||||||
| Electronic Arts, Inc.* | 3,074 | 89,177 | ||||||
| Western Union Co. | 5,440 | 88,998 | ||||||
| Lam Research Corp.* | 1,617 | 88,935 | ||||||
| Computer Sciences Corp. | 1,450 | 88,189 | ||||||
| F5 Networks, Inc.* | 747 | 79,653 | ||||||
| Harris Corp. | 1,070 | 78,281 | ||||||
| Teradata Corp.* | 1,586 | 78,015 | ||||||
| VeriSign, Inc.* | 1,253 | 67,549 | ||||||
| LSI Corp. | 5,550 | 61,439 | ||||||
| FLIR Systems, Inc. | 1,404 | 50,544 | ||||||
| Total System Services, Inc. | 1,649 | 50,146 | ||||||
| First Solar, Inc.* | 707 | 49,342 | ||||||
| Jabil Circuit, Inc. | 1,869 | 33,642 | ||||||
| Total Information Technology | 30,923,865 | |||||||
| FINANCIALS - 9.1% | ||||||||
| Wells Fargo & Co. | 47,556 | 2,365,436 | ||||||
| JPMorgan Chase & Co. | 37,614 | 2,283,546 | ||||||
| Berkshire Hathaway, Inc. — Class B* | 17,881 | 2,234,588 | ||||||
| Bank of America Corp. | 104,955 | 1,805,226 | ||||||
| Citigroup, Inc. | 30,157 | 1,435,473 | ||||||
| American Express Co. | 9,076 | 817,112 | ||||||
| U.S. Bancorp | 18,098 | 775,680 | ||||||
| American International Group, Inc. | 14,541 | 727,196 | ||||||
| Goldman Sachs Group, Inc. | 4,186 | 685,876 | ||||||
| MetLife, Inc. | 11,157 | 589,090 | ||||||
| Simon Property Group, Inc. | 3,121 | 511,843 | ||||||
| PNC Financial Services Group, Inc. | 5,304 | 461,449 | ||||||
| Capital One Financial Corp. | 5,686 | 438,732 | ||||||
| Morgan Stanley | 13,932 | 434,260 | ||||||
| Bank of New York Mellon Corp. | 11,274 | 397,859 | ||||||
| BlackRock, Inc. — Class A | 1,253 | 394,043 | ||||||
| Prudential Financial, Inc. | 4,600 | 389,390 | ||||||
| ACE Ltd. | 3,345 | 331,355 | ||||||
| American Tower Corp. — Class A | 3,921 | 321,012 | ||||||
| Charles Schwab Corp. | 11,620 | 317,575 | ||||||
| State Street Corp. | 4,283 | 297,883 | ||||||
| Travelers Companies, Inc. | 3,497 | 297,595 | ||||||
| Aflac, Inc. | 4,532 | 285,697 | ||||||
| BB&T Corp. | 7,057 | 283,480 | ||||||
| Discover Financial Services | 4,677 | 272,155 | ||||||
| Marsh & McLennan Companies, Inc. | 5,443 | 268,340 | ||||||
| Aon plc | 3,001 | 252,924 | ||||||
| Allstate Corp. | 4,442 | 251,328 | ||||||
| Crown Castle International Corp. | 3,322 | 245,097 | ||||||
| Public Storage | 1,435 | 241,784 | ||||||
| CME Group, Inc. — Class A | 3,147 | 232,909 | ||||||
| IntercontinentalExchange Group, Inc. | 1,142 | 225,922 | ||||||
| Chubb Corp. | 2,446 | 218,428 | ||||||
| Franklin Resources, Inc. | 4,007 | 217,099 | ||||||
| T. Rowe Price Group, Inc. | 2,605 | 214,522 | ||||||
| SunTrust Banks, Inc. | 5,315 | 211,484 | ||||||
| Ameriprise Financial, Inc. | 1,895 | 208,583 | ||||||
| McGraw Hill Financial, Inc. | 2,695 | 205,629 | ||||||
| Prologis, Inc. | 4,958 | 202,435 | ||||||
| Fifth Third Bancorp | 8,455 | 194,042 | ||||||
| Equity Residential | 3,336 | 193,454 | ||||||
| Ventas, Inc. | 2,927 | 177,288 | ||||||
| 26 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| S&P 500® FUND |
| Shares | Value | |||||||
| HCP, Inc. | 4,542 | $ | 176,184 | |||||
| Boston Properties, Inc. | 1,519 | 173,971 | ||||||
| Health Care REIT, Inc. | 2,884 | 171,886 | ||||||
| Vornado Realty Trust | 1,739 | 171,396 | ||||||
| Weyerhaeuser Co. | 5,802 | 170,289 | ||||||
| AvalonBay Communities, Inc. | 1,221 | 160,342 | ||||||
| Invesco Ltd. | 4,307 | 159,359 | ||||||
| M&T Bank Corp. | 1,301 | 157,811 | ||||||
| Regions Financial Corp. | 14,096 | 156,607 | ||||||
| Hartford Financial Services Group, Inc. | 4,430 | 156,246 | ||||||
| Host Hotels & Resorts, Inc. | 7,515 | 152,104 | ||||||
| Moody’s Corp. | 1,874 | 148,646 | ||||||
| Northern Trust Corp. | 2,216 | 145,281 | ||||||
| Loews Corp. | 3,049 | 134,308 | ||||||
| Lincoln National Corp. | 2,619 | 132,705 | ||||||
| Progressive Corp. | 5,437 | 131,684 | ||||||
| KeyCorp | 8,835 | 125,810 | ||||||
| Principal Financial Group, Inc. | 2,734 | 125,737 | ||||||
| General Growth Properties, Inc. | 5,177 | 113,894 | ||||||
| SLM Corp. | 4,263 | 104,358 | ||||||
| Comerica, Inc. | 1,804 | 93,447 | ||||||
| Unum Group | 2,581 | 91,135 | ||||||
| Kimco Realty Corp. | 4,070 | 89,052 | ||||||
| Genworth Financial, Inc. — Class A* | 4,924 | 87,303 | ||||||
| Leucadia National Corp. | 3,112 | 87,136 | ||||||
| Macerich Co. | 1,393 | 86,826 | ||||||
| XL Group plc — Class A | 2,742 | 85,688 | ||||||
| Huntington Bancshares, Inc. | 8,258 | 82,332 | ||||||
| CBRE Group, Inc. — Class A* | 2,769 | 75,954 | ||||||
| Plum Creek Timber Company, Inc. | 1,758 | 73,906 | ||||||
| Cincinnati Financial Corp. | 1,465 | 71,287 | ||||||
| Torchmark Corp. | 882 | 69,413 | ||||||
| E*TRADE Financial Corp.* | 2,861 | 65,860 | ||||||
| Zions Bancorporation | 1,833 | 56,786 | ||||||
| Legg Mason, Inc. | 1,039 | 50,953 | ||||||
| Assurant, Inc. | 717 | 46,576 | ||||||
| Hudson City Bancorp, Inc. | 4,726 | 46,457 | ||||||
| People’s United Financial, Inc. | 3,084 | 45,859 | ||||||
| Apartment Investment & Management | ||||||||
| Co. — Class A | 1,449 | 43,789 | ||||||
| NASDAQ OMX Group, Inc. | 1,161 | 42,887 | ||||||
| Total Financials | 27,276,083 | |||||||
| HEALTH CARE - 7.4% | ||||||||
| Johnson & Johnson | 28,093 | 2,759,576 | ||||||
| Pfizer, Inc. | 63,394 | 2,036,216 | ||||||
| Merck & Company, Inc. | 29,207 | 1,658,082 | ||||||
| Gilead Sciences, Inc.* | 15,280 | 1,082,742 | ||||||
| Amgen, Inc. | 7,510 | 926,283 | ||||||
| Bristol-Myers Squibb Co. | 16,331 | 848,395 | ||||||
| AbbVie, Inc. | 15,778 | 810,989 | ||||||
| UnitedHealth Group, Inc. | 9,822 | 805,305 | ||||||
| Biogen Idec, Inc.* | 2,361 | 722,159 | ||||||
| Medtronic, Inc. | 9,953 | 612,507 | ||||||
| Abbott Laboratories | 15,322 | 590,050 | ||||||
| Express Scripts Holding Co.* | 7,708 | 578,794 | ||||||
| Eli Lilly & Co. | 9,783 | 575,827 | ||||||
| Celgene Corp.* | 4,029 | 562,448 | ||||||
| Thermo Fisher Scientific, Inc. | 3,893 | 468,095 | ||||||
| McKesson Corp. | 2,287 | 403,816 | ||||||
| Baxter International, Inc. | 5,400 | 397,331 | ||||||
| Allergan, Inc. | 2,960 | 367,336 | ||||||
| Actavis plc* | 1,735 | 357,150 | ||||||
| Covidien plc | 4,480 | 329,997 | ||||||
| Alexion Pharmaceuticals, Inc.* | 1,961 | 298,327 | ||||||
| WellPoint, Inc. | 2,808 | 279,536 | ||||||
| Aetna, Inc. | 3,612 | 270,792 | ||||||
| Stryker Corp. | 2,940 | 239,522 | ||||||
| Cardinal Health, Inc. | 3,401 | 238,002 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 779 | 233,918 | ||||||
| Cigna Corp. | 2,716 | 227,411 | ||||||
| Becton Dickinson and Co. | 1,917 | 224,442 | ||||||
| Forest Laboratories, Inc.* | 2,375 | 219,141 | ||||||
| Perrigo Company plc | 1,332 | 206,007 | ||||||
| Agilent Technologies, Inc. | 3,316 | 185,431 | ||||||
| St. Jude Medical, Inc. | 2,821 | 184,465 | ||||||
| Mylan, Inc.* | 3,698 | 180,573 | ||||||
| Boston Scientific Corp.* | 13,151 | 177,802 | ||||||
| Humana, Inc. | 1,526 | 172,011 | ||||||
| Intuitive Surgical, Inc.* | 387 | 169,502 | ||||||
| Vertex Pharmaceuticals, Inc.* | 2,340 | 165,485 | ||||||
| Cerner Corp.* | 2,940 | 165,375 | ||||||
| Zimmer Holdings, Inc. | 1,683 | 159,178 | ||||||
| AmerisourceBergen Corp. — Class A | 2,277 | 149,348 | ||||||
| Zoetis, Inc. | 4,964 | 143,658 | ||||||
| DaVita HealthCare Partners, Inc.* | 1,759 | 121,107 | ||||||
| CR Bard, Inc. | 769 | 113,797 | ||||||
| Waters Corp.* | 845 | 91,606 | ||||||
| Varian Medical Systems, Inc.* | 1,033 | 86,762 | ||||||
| Laboratory Corporation of America Holdings* | 855 | 83,970 | ||||||
| CareFusion Corp.* | 2,075 | 83,457 | ||||||
| Quest Diagnostics, Inc. | 1,435 | 83,115 | ||||||
| Edwards Lifesciences Corp.* | 1,071 | 79,436 | ||||||
| Hospira, Inc.* | 1,659 | 71,752 | ||||||
| DENTSPLY International, Inc. | 1,410 | 64,916 | ||||||
| PerkinElmer, Inc. | 1,124 | 50,647 | ||||||
| Tenet Healthcare Corp.* | 968 | 41,440 | ||||||
| Patterson Companies, Inc. | 815 | 34,034 | ||||||
| Total Health Care | 22,189,063 | |||||||
| CONSUMER DISCRETIONARY - 6.7% | ||||||||
| Walt Disney Co. | 16,179 | 1,295,452 | ||||||
| Comcast Corp. — Class A | 25,891 | 1,295,067 | ||||||
| Amazon.com, Inc.* | 3,700 | 1,245,123 | ||||||
| Home Depot, Inc. | 13,981 | 1,106,317 | ||||||
| McDonald’s Corp. | 9,830 | 963,635 | ||||||
| Priceline Group, Inc.* | 526 | 626,934 | ||||||
| Twenty-First Century Fox, Inc. — Class A | 19,278 | 616,317 | ||||||
| Ford Motor Co. | 39,163 | 610,943 | ||||||
| Time Warner, Inc. | 8,869 | 579,412 | ||||||
| Starbucks Corp. | 7,510 | 551,084 | ||||||
| NIKE, Inc. — Class B | 7,387 | 545,604 | ||||||
| Lowe’s Companies, Inc. | 10,387 | 507,924 | ||||||
| General Motors Co. | 12,952 | 445,808 | ||||||
| TJX Companies, Inc. | 7,072 | 428,917 | ||||||
| Target Corp. | 6,281 | 380,063 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 27 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| S&P 500® FUND |
| Shares | Value | |||||||
| Time Warner Cable, Inc. | 2,756 | $ | 378,068 | |||||
| DIRECTV* | 4,707 | 359,709 | ||||||
| CBS Corp. — Class B | 5,480 | 338,664 | ||||||
| Viacom, Inc. — Class B | 3,962 | 336,730 | ||||||
| Yum! Brands, Inc. | 4,399 | 331,641 | ||||||
| Johnson Controls, Inc. | 6,595 | 312,076 | ||||||
| VF Corp. | 3,508 | 217,075 | ||||||
| Macy’s, Inc. | 3,659 | 216,942 | ||||||
| Netflix, Inc.* | 598 | 210,514 | ||||||
| Delphi Automotive plc | 2,770 | 187,972 | ||||||
| Omnicom Group, Inc. | 2,576 | 187,017 | ||||||
| Discovery Communications, Inc. — Class A* | 2,209 | 182,684 | ||||||
| AutoZone, Inc.* | 337 | 181,003 | ||||||
| Wynn Resorts Ltd. | 801 | 177,942 | ||||||
| Chipotle Mexican Grill, Inc. — Class A* | 304 | 172,687 | ||||||
| Michael Kors Holdings Ltd.* | 1,784 | 166,394 | ||||||
| Carnival Corp. | 4,364 | 165,221 | ||||||
| Dollar General Corp.* | 2,930 | 162,556 | ||||||
| O’Reilly Automotive, Inc.* | 1,060 | 157,293 | ||||||
| Ross Stores, Inc. | 2,132 | 152,545 | ||||||
| Starwood Hotels & Resorts Worldwide, Inc. | 1,914 | 152,354 | ||||||
| Harley-Davidson, Inc. | 2,185 | 145,543 | ||||||
| Bed Bath & Beyond, Inc.* | 2,112 | 145,306 | ||||||
| BorgWarner, Inc. | 2,267 | 139,352 | ||||||
| L Brands, Inc. | 2,425 | 137,667 | ||||||
| Coach, Inc. | 2,757 | 136,913 | ||||||
| Mattel, Inc. | 3,386 | 135,813 | ||||||
| Genuine Parts Co. | 1,532 | 133,054 | ||||||
| Marriott International, Inc. — Class A | 2,196 | 123,020 | ||||||
| Whirlpool Corp. | 767 | 114,636 | ||||||
| Kohl’s Corp. | 2,003 | 113,770 | ||||||
| Dollar Tree, Inc.* | 2,064 | 107,700 | ||||||
| The Gap, Inc. | 2,633 | 105,478 | ||||||
| CarMax, Inc.* | 2,218 | 103,802 | ||||||
| PVH Corp. | 816 | 101,812 | ||||||
| TripAdvisor, Inc.* | 1,098 | 99,468 | ||||||
| Tractor Supply Co. | 1,382 | 97,611 | ||||||
| Ralph Lauren Corp. — Class A | 597 | 96,075 | ||||||
| Tiffany & Co. | 1,098 | 94,593 | ||||||
| Wyndham Worldwide Corp. | 1,269 | 92,929 | ||||||
| Nordstrom, Inc. | 1,426 | 89,054 | ||||||
| News Corp. — Class A* | 4,948 | 85,205 | ||||||
| Scripps Networks Interactive, Inc. — Class A | 1,093 | 82,970 | ||||||
| Newell Rubbermaid, Inc. | 2,771 | 82,853 | ||||||
| Mohawk Industries, Inc.* | 608 | 82,676 | ||||||
| H&R Block, Inc. | 2,723 | 82,207 | ||||||
| Expedia, Inc. | 1,013 | 73,443 | ||||||
| Staples, Inc. | 6,466 | 73,324 | ||||||
| Interpublic Group of Companies, Inc. | 4,213 | 72,211 | ||||||
| Harman International Industries, Inc. | 677 | 72,033 | ||||||
| Best Buy Company, Inc. | 2,718 | 71,783 | ||||||
| PetSmart, Inc. | 1,035 | 71,301 | ||||||
| Lennar Corp. — Class A | 1,747 | 69,216 | ||||||
| Garmin Ltd. | 1,224 | 67,638 | ||||||
| Darden Restaurants, Inc. | 1,308 | 66,394 | ||||||
| PulteGroup, Inc. | 3,412 | 65,476 | ||||||
| Hasbro, Inc. | 1,162 | 64,630 | ||||||
| Goodyear Tire & Rubber Co. | 2,461 | 64,306 | ||||||
| Gannett Company, Inc. | 2,260 | 62,376 | ||||||
| DR Horton, Inc. | 2,827 | 61,205 | ||||||
| Family Dollar Stores, Inc. | 961 | 55,748 | ||||||
| Fossil Group, Inc.* | 475 | 55,390 | ||||||
| GameStop Corp. — Class A | 1,152 | 47,347 | ||||||
| Leggett & Platt, Inc. | 1,380 | 45,043 | ||||||
| Urban Outfitters, Inc.* | 1,079 | 39,351 | ||||||
| Cablevision Systems Corp. — Class A | 2,125 | 35,849 | ||||||
| International Game Technology | 2,449 | 34,433 | ||||||
| AutoNation, Inc.* | 630 | 33,535 | ||||||
| Graham Holdings Co. — Class B | 45 | 31,669 | ||||||
| Total Consumer Discretionary | 20,008,895 | |||||||
| INDUSTRIALS - 5.9% | ||||||||
| General Electric Co. | 99,638 | 2,579,628 | ||||||
| United Technologies Corp. | 8,368 | 977,716 | ||||||
| Boeing Co. | 6,790 | 852,077 | ||||||
| Union Pacific Corp. | 4,524 | 848,974 | ||||||
| 3M Co. | 6,250 | 847,875 | ||||||
| Honeywell International, Inc. | 7,784 | 722,044 | ||||||
| United Parcel Service, Inc. — Class B | 7,063 | 687,796 | ||||||
| Caterpillar, Inc. | 6,340 | 630,005 | ||||||
| Emerson Electric Co. | 6,982 | 466,397 | ||||||
| Danaher Corp. | 5,969 | 447,676 | ||||||
| Lockheed Martin Corp. | 2,686 | 438,463 | ||||||
| FedEx Corp. | 3,031 | 401,789 | ||||||
| Precision Castparts Corp. | 1,444 | 364,985 | ||||||
| Eaton Corporation plc | 4,729 | 355,242 | ||||||
| General Dynamics Corp. | 3,227 | 351,485 | ||||||
| Deere & Co. | 3,676 | 333,781 | ||||||
| Illinois Tool Works, Inc. | 3,884 | 315,886 | ||||||
| Raytheon Co. | 3,127 | 308,916 | ||||||
| Norfolk Southern Corp. | 3,079 | 299,186 | ||||||
| Delta Air Lines, Inc. | 8,433 | 292,203 | ||||||
| CSX Corp. | 10,012 | 290,048 | ||||||
| Northrop Grumman Corp. | 2,151 | 265,390 | ||||||
| Cummins, Inc. | 1,727 | 257,306 | ||||||
| PACCAR, Inc. | 3,515 | 237,052 | ||||||
| Tyco International Ltd. | 4,576 | 194,022 | ||||||
| Waste Management, Inc. | 4,290 | 180,481 | ||||||
| Parker Hannifin Corp. | 1,480 | 177,171 | ||||||
| Rockwell Automation, Inc. | 1,374 | 171,132 | ||||||
| Southwest Airlines Co. | 6,978 | 164,751 | ||||||
| WW Grainger, Inc. | 618 | 156,144 | ||||||
| Pentair Ltd. | 1,962 | 155,665 | ||||||
| Ingersoll-Rand plc | 2,572 | 147,221 | ||||||
| Dover Corp. | 1,697 | 138,730 | ||||||
| Fastenal Co. | 2,717 | 134,002 | ||||||
| Roper Industries, Inc. | 996 | 132,976 | ||||||
| Nielsen Holdings N.V. | 2,833 | 126,436 | ||||||
| Stanley Black & Decker, Inc. | 1,547 | 125,678 | ||||||
| AMETEK, Inc. | 2,430 | 125,121 | ||||||
| Fluor Corp. | 1,591 | 123,668 | ||||||
| Kansas City Southern | 1,097 | 111,960 | ||||||
| Textron, Inc. | 2,818 | 110,719 | ||||||
| Rockwell Collins, Inc. | 1,353 | 107,794 | ||||||
| 28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| S&P 500® FUND |
| Shares | Value | |||||||
| Flowserve Corp. | 1,366 | $ | 107,012 | |||||
| L-3 Communications Holdings, Inc. | 854 | 100,900 | ||||||
| Pall Corp. | 1,090 | 97,522 | ||||||
| Stericycle, Inc.* | 844 | 95,895 | ||||||
| Republic Services, Inc. — Class A | 2,689 | 91,856 | ||||||
| Jacobs Engineering Group, Inc.* | 1,313 | 83,376 | ||||||
| Equifax, Inc. | 1,220 | 82,997 | ||||||
| Expeditors International of Washington, Inc. | 2,016 | 79,894 | ||||||
| Quanta Services, Inc.* | 2,164 | 79,852 | ||||||
| Masco Corp. | 3,543 | 78,690 | ||||||
| CH Robinson Worldwide, Inc. | 1,478 | 77,432 | ||||||
| Xylem, Inc. | 1,838 | 66,940 | ||||||
| Snap-on, Inc. | 589 | 66,840 | ||||||
| Cintas Corp. | 996 | 59,371 | ||||||
| Joy Global, Inc. | 991 | 57,478 | ||||||
| Robert Half International, Inc. | 1,365 | 57,262 | ||||||
| ADT Corp. | 1,831 | 54,839 | ||||||
| Pitney Bowes, Inc. | 2,013 | 52,318 | ||||||
| Iron Mountain, Inc. | 1,703 | 46,952 | ||||||
| Allegion plc | 895 | 46,692 | ||||||
| Ryder System, Inc. | 527 | 42,118 | ||||||
| Dun & Bradstreet Corp. | 377 | 37,455 | ||||||
| Total Industrials | 17,719,282 | |||||||
| ENERGY - 5.6% | ||||||||
| Exxon Mobil Corp. | 42,911 | 4,191,546 | ||||||
| Chevron Corp. | 18,962 | 2,254,771 | ||||||
| Schlumberger Ltd. | 12,987 | 1,266,233 | ||||||
| ConocoPhillips | 12,182 | 857,004 | ||||||
| Occidental Petroleum Corp. | 7,891 | 751,933 | ||||||
| EOG Resources, Inc. | 2,710 | 531,622 | ||||||
| Halliburton Co. | 8,456 | 497,974 | ||||||
| Phillips 66 | 5,839 | 449,954 | ||||||
| Anadarko Petroleum Corp. | 5,015 | 425,071 | ||||||
| National Oilwell Varco, Inc. | 4,266 | 332,193 | ||||||
| Apache Corp. | 3,923 | 325,413 | ||||||
| Baker Hughes, Inc. | 4,340 | 282,187 | ||||||
| Valero Energy Corp. | 5,291 | 280,952 | ||||||
| Williams Companies, Inc. | 6,801 | 275,985 | ||||||
| Pioneer Natural Resources Co. | 1,424 | 266,487 | ||||||
| Devon Energy Corp. | 3,811 | 255,070 | ||||||
| Marathon Petroleum Corp. | 2,930 | 255,027 | ||||||
| Noble Energy, Inc. | 3,586 | 254,749 | ||||||
| Marathon Oil Corp. | 6,926 | 246,012 | ||||||
| Spectra Energy Corp. | 6,654 | 245,799 | ||||||
| Hess Corp. | 2,713 | 224,853 | ||||||
| Kinder Morgan, Inc. | 6,656 | 216,253 | ||||||
| Southwestern Energy Co.* | 3,509 | 161,449 | ||||||
| Equities Corp. | 1,503 | 145,746 | ||||||
| Cabot Oil & Gas Corp. | 4,196 | 142,160 | ||||||
| Transocean Ltd. | 3,370 | 139,316 | ||||||
| Range Resources Corp. | 1,630 | 135,241 | ||||||
| Cameron International Corp.* | 2,151 | 132,867 | ||||||
| Chesapeake Energy Corp. | 5,029 | 128,843 | ||||||
| Ensco plc — Class A | 2,324 | 122,661 | ||||||
| FMC Technologies, Inc.* | 2,344 | 122,568 | ||||||
| ONEOK, Inc. | 2,067 | 122,470 | ||||||
| Helmerich & Payne, Inc. | 1,066 | 114,659 | ||||||
| Murphy Oil Corp. | 1,712 | 107,616 | ||||||
| CONSOL Energy, Inc. | 2,276 | 90,926 | ||||||
| Noble Corporation plc | 2,523 | 82,603 | ||||||
| Tesoro Corp. | 1,307 | 66,121 | ||||||
| Nabors Industries Ltd. | 2,591 | 63,868 | ||||||
| Denbury Resources, Inc. | 3,534 | 57,958 | ||||||
| QEP Resources, Inc. | 1,784 | 52,521 | ||||||
| Peabody Energy Corp. | 2,693 | 44,004 | ||||||
| Newfield Exploration Co.* | 1,353 | 42,430 | ||||||
| Rowan Companies plc — Class A* | 1,240 | 41,763 | ||||||
| Diamond Offshore Drilling, Inc. | 695 | 33,888 | ||||||
| Total Energy | 16,838,766 | |||||||
| CONSUMER STAPLES - 5.3% | ||||||||
| Procter & Gamble Co. | 26,928 | 2,170,397 | ||||||
| Coca-Cola Co. | 37,634 | 1,454,931 | ||||||
| Philip Morris International, Inc. | 15,747 | 1,289,207 | ||||||
| PepsiCo, Inc. | 15,122 | 1,262,687 | ||||||
| Wal-Mart Stores, Inc. | 16,073 | 1,228,460 | ||||||
| CVS Caremark Corp. | 11,742 | 879,006 | ||||||
| Altria Group, Inc. | 19,797 | 741,002 | ||||||
| Mondelez International, Inc. — Class A | 16,889 | 583,514 | ||||||
| Walgreen Co. | 8,677 | 572,942 | ||||||
| Colgate-Palmolive Co. | 8,666 | 562,163 | ||||||
| Costco Wholesale Corp. | 4,365 | 487,483 | ||||||
| Kimberly-Clark Corp. | 3,765 | 415,091 | ||||||
| Kraft Foods Group, Inc. | 5,925 | 332,393 | ||||||
| General Mills, Inc. | 6,207 | 321,647 | ||||||
| Archer-Daniels-Midland Co. | 6,543 | 283,901 | ||||||
| Kroger Co. | 5,135 | 224,143 | ||||||
| Sysco Corp. | 5,809 | 209,879 | ||||||
| Lorillard, Inc. | 3,606 | 195,012 | ||||||
| Whole Foods Market, Inc. | 3,699 | 187,576 | ||||||
| Estee Lauder Companies, Inc. — Class A | 2,538 | 169,742 | ||||||
| Mead Johnson Nutrition Co. — Class A | 2,006 | 166,779 | ||||||
| Reynolds American, Inc. | 3,096 | 165,388 | ||||||
| Kellogg Co. | 2,553 | 160,099 | ||||||
| Hershey Co. | 1,493 | 155,869 | ||||||
| Brown-Forman Corp. — Class B | 1,615 | 144,849 | ||||||
| Constellation Brands, Inc. — Class A* | 1,664 | 141,390 | ||||||
| Beam, Inc. | 1,640 | 136,612 | ||||||
| Keurig Green Mountain, Inc. | 1,280 | 135,155 | ||||||
| ConAgra Foods, Inc. | 4,172 | 129,457 | ||||||
| Tyson Foods, Inc. — Class A | 2,667 | 117,375 | ||||||
| Clorox Co. | 1,292 | 113,709 | ||||||
| Coca-Cola Enterprises, Inc. | 2,364 | 112,905 | ||||||
| Dr Pepper Snapple Group, Inc. | 1,961 | 106,796 | ||||||
| JM Smucker Co. | 1,034 | 100,546 | ||||||
| McCormick & Company, Inc. | 1,308 | 93,836 | ||||||
| Monster Beverage Corp.* | 1,341 | 93,132 | ||||||
| Molson Coors Brewing Co. — Class B | 1,575 | 92,705 | ||||||
| Safeway, Inc. | 2,297 | 84,851 | ||||||
| Campbell Soup Co. | 1,778 | 79,797 | ||||||
| Hormel Foods Corp. | 1,341 | 66,071 | ||||||
| Avon Products, Inc. | 4,316 | 63,186 | ||||||
| Total Consumer Staples | 16,031,683 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| S&P 500® FUND |
| Shares | Value | |||||||
| MATERIALS - 1.9% | ||||||||
| EI du Pont de Nemours & Co. | 9,211 | $ | 618,057 | |||||
| Monsanto Co. | 5,211 | 592,855 | ||||||
| Dow Chemical Co. | 12,073 | 586,627 | ||||||
| Praxair, Inc. | 2,924 | 382,957 | ||||||
| LyondellBasell Industries N.V. — Class A | 4,285 | 381,108 | ||||||
| Freeport-McMoRan Copper & Gold, Inc. | 10,316 | 341,150 | ||||||
| Ecolab, Inc. | 2,693 | 290,817 | ||||||
| PPG Industries, Inc. | 1,376 | 266,201 | ||||||
| Air Products & Chemicals, Inc. | 2,106 | 250,698 | ||||||
| International Paper Co. | 4,365 | 200,266 | ||||||
| Mosaic Co. | 3,367 | 168,350 | ||||||
| Sherwin-Williams Co. | 848 | 167,166 | ||||||
| Nucor Corp. | 3,163 | 159,858 | ||||||
| CF Industries Holdings, Inc. | 551 | 143,613 | ||||||
| Alcoa, Inc. | 10,708 | 137,812 | ||||||
| Eastman Chemical Co. | 1,519 | 130,953 | ||||||
| Newmont Mining Corp. | 4,946 | 115,934 | ||||||
| Sigma-Aldrich Corp. | 1,197 | 111,776 | ||||||
| FMC Corp. | 1,323 | 101,289 | ||||||
| Vulcan Materials Co. | 1,302 | 86,518 | ||||||
| International Flavors & Fragrances, Inc. | 807 | 77,206 | ||||||
| Ball Corp. | 1,397 | 76,570 | ||||||
| Airgas, Inc. | 663 | 70,616 | ||||||
| MeadWestvaco Corp. | 1,744 | 65,644 | ||||||
| Sealed Air Corp. | 1,947 | 63,998 | ||||||
| Owens-Illinois, Inc.* | 1,634 | 55,278 | ||||||
| Avery Dennison Corp. | 965 | 48,897 | ||||||
| Allegheny Technologies, Inc. | 1,088 | 40,996 | ||||||
| United States Steel Corp. | 1,441 | 39,786 | ||||||
| Bemis Company, Inc. | 1,007 | 39,515 | ||||||
| Cliffs Natural Resources, Inc.1 | 1,524 | 31,181 | ||||||
| Total Materials | 5,843,692 | |||||||
| UTILITIES - 1.7% | ||||||||
| Duke Energy Corp. | 7,017 | 499,752 | ||||||
| NextEra Energy, Inc. | 4,328 | 413,843 | ||||||
| Dominion Resources, Inc. | 5,782 | 410,464 | ||||||
| Southern Co. | 8,831 | 388,034 | ||||||
| Exelon Corp. | 8,518 | 285,864 | ||||||
| American Electric Power Company, Inc. | 4,851 | 245,752 | ||||||
| Sempra Energy | 2,261 | 218,774 | ||||||
| PPL Corp. | 6,274 | 207,920 | ||||||
| PG&E Corp. | 4,545 | 196,344 | ||||||
| Public Service Enterprise Group, Inc. | 5,025 | 191,654 | ||||||
| Edison International | 3,243 | 183,586 | ||||||
| Consolidated Edison, Inc. | 2,924 | 156,873 | ||||||
| Xcel Energy, Inc. | 4,951 | 150,312 | ||||||
| Northeast Utilities | 3,145 | 143,098 | ||||||
| FirstEnergy Corp. | 4,161 | 141,599 | ||||||
| DTE Energy Co. | 1,760 | 130,750 | ||||||
| Entergy Corp. | 1,788 | 119,528 | ||||||
| NiSource, Inc. | 3,129 | 111,173 | ||||||
| Wisconsin Energy Corp. | 2,249 | 104,691 | ||||||
| NRG Energy, Inc. | 3,237 | 102,936 | ||||||
| CenterPoint Energy, Inc. | 4,271 | 101,180 | ||||||
| Ameren Corp. | 2,409 | 99,251 | ||||||
| AES Corp. | 6,552 | 93,563 | ||||||
| CMS Energy Corp. | 2,656 | 77,768 | ||||||
| SCANA Corp. | 1,401 | 71,899 | ||||||
| Pinnacle West Capital Corp. | 1,090 | 59,579 | ||||||
| AGL Resources, Inc. | 1,188 | 58,164 | ||||||
| Pepco Holdings, Inc. | 2,488 | 50,954 | ||||||
| Integrys Energy Group, Inc. | 798 | 47,601 | ||||||
| TECO Energy, Inc. | 2,032 | 34,849 | ||||||
| Total Utilities | 5,097,755 | |||||||
| TELECOMMUNICATION SERVICES - 1.4% | ||||||||
| Verizon Communications, Inc. | 41,134 | 1,956,743 | ||||||
| AT&T, Inc. | 51,708 | 1,813,400 | ||||||
| CenturyLink, Inc. | 5,739 | 188,469 | ||||||
| Frontier Communications Corp. | 9,931 | 56,607 | ||||||
| Windstream Holdings, Inc.1 | 5,919 | 48,773 | ||||||
| Total Telecommunication Services | 4,063,992 | |||||||
| Total Common Stocks | ||||||||
| (Cost $87,943,449) | 165,993,076 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 39.8% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 64,853,292 | 64,853,292 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 27,365,840 | 27,365,840 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 18,505,717 | 18,505,717 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 8,622,114 | 8,622,114 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $119,346,963) | 119,346,963 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.0% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 27,517 | 27,517 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 24,554 | 24,554 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 4,629 | 4,629 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $56,700) | 56,700 | |||||||
| Total Investments - 95.1% | ||||||||
| (Cost $207,347,112) | $ | 285,396,739 | ||||||
| Other Assets & Liabilities, net - 4.9% | 14,724,226 | |||||||
| Total Net Assets - 100.0% | $ | 300,120,965 | ||||||
| 30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P 500® FUND |
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 S&P 500 Index Mini | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $46,612,500) | 500 | $ | 474,871 | |||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Barclays Bank plc | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $60,746,089) | 32,444 | $ | 479,869 | |||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $23,361,960) | 12,477 | 91,111 | ||||||
| Goldman Sachs International | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $6,654,773) | 3,554 | 39,386 | ||||||
| (Total Notional Value | ||||||||
| $90,762,822) | $ | 610,366 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Total Return based on S&P 500 Index +/- financing at a variable rate. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
| S&P 500® FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $55,494 of | ||||
| securities loaned | ||||
| (cost $87,943,449) | $ | 165,993,076 | ||
| Repurchase agreements, at value | ||||
| (cost $119,403,663) | 119,403,663 | |||
| Total investments | ||||
| (cost $207,347,112) | 285,396,739 | |||
| Segregated cash with broker | 13,929,927 | |||
| Unrealized appreciation on swap agreements | 610,366 | |||
| Receivables: | ||||
| Fund shares sold | 4,876,767 | |||
| Variation margin | 352,500 | |||
| Dividends | 199,329 | |||
| Swap settlement | 36,260 | |||
| Securities lending income | 132 | |||
| Foreign taxes reclaim | 114 | |||
| Interest | 79 | |||
| Total assets | 305,402,213 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 4,654,480 | |||
| Management fees | 176,944 | |||
| Distribution and service fees | 68,783 | |||
| Transfer agent and administrative fees | 58,982 | |||
| Upon return of securities loaned | 56,700 | |||
| Portfolio accounting fees | 35,389 | |||
| Miscellaneous | 229,970 | |||
| Total liabilities | 5,281,248 | |||
| Net assets | $ | 300,120,965 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 239,222,098 | ||
| Accumulated net investment loss | (16,281 | ) | ||
| Accumulated net realized loss on investments | (18,219,716 | ) | ||
| Net unrealized appreciation on investments | 79,134,864 | |||
| Net assets | $ | 300,120,965 | ||
| A-Class: | ||||
| Net assets | $ | 28,027,554 | ||
| Capital shares outstanding | 741,864 | |||
| Net asset value per share | $ | 37.78 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 39.66 | ||
| C-Class: | ||||
| Net assets | $ | 16,181,564 | ||
| Capital shares outstanding | 455,753 | |||
| Net asset value per share | $ | 35.51 | ||
| H-Class: | ||||
| Net assets | $ | 255,911,847 | ||
| Capital shares outstanding | 6,772,886 | |||
| Net asset value per share | $ | 37.78 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $948) | $ | 5,580,789 | ||
| Interest | 14,023 | |||
| Income from securities lending, net | 2,034 | |||
| Total investment income | 5,596,846 | |||
| Expenses: | ||||
| Management fees | 2,450,873 | |||
| Transfer agent and administrative fees | 816,954 | |||
| Distribution and service fees: | ||||
| A-Class | 54,332 | |||
| C-Class | 144,438 | |||
| H-Class | 726,522 | |||
| Portfolio accounting fees | 433,991 | |||
| Custodian fees | 35,278 | |||
| Trustees’ fees* | 29,789 | |||
| Line of credit interest expense | 362 | |||
| Miscellaneous | 517,458 | |||
| Total expenses | 5,209,997 | |||
| Net investment income | 386,849 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 28,003,215 | |||
| Swap agreements | 63,012 | |||
| Futures contracts | (1,501,671 | ) | ||
| Net realized gain | 26,564,556 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 12,469,006 | |||
| Swap agreements | 350,872 | |||
| Futures contracts | 472,968 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 13,292,846 | |||
| Net realized and unrealized gain | 39,857,402 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 40,244,251 |
* 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. |
| S&P 500® FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 386,849 | $ | 552,358 | ||||
| Net realized gain on investments | 26,564,556 | 1,566,444 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 13,292,846 | 17,913,896 | ||||||
| Net increase in net assets resulting from operations | 40,244,251 | 20,032,698 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | (27,498 | ) | (20,560 | ) | ||||
| C-Class | (17,900 | ) | (24,329 | ) | ||||
| H-Class | (356,867 | ) | (561,984 | ) | ||||
| Total distributions to shareholders | (402,265 | ) | (606,873 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 67,031,023 | 64,513,152 | ||||||
| C-Class | 69,955,990 | 108,459,874 | ||||||
| H-Class | 1,826,152,142 | 1,437,709,986 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 20,158 | 17,839 | ||||||
| C-Class | 17,263 | 23,112 | ||||||
| H-Class | 258,190 | 378,849 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (54,708,718 | ) | (67,248,396 | ) | ||||
| C-Class | (66,380,612 | ) | (109,371,658 | ) | ||||
| H-Class | (1,869,669,239 | ) | (1,430,676,174 | ) | ||||
| Net increase (decrease) from capital share transactions | (27,323,803 | ) | 3,806,584 | |||||
| Net increase in net assets | 12,518,183 | 23,232,409 | ||||||
| Net assets: | ||||||||
| Beginning of year | 287,602,782 | 264,370,373 | ||||||
| End of year | $ | 300,120,965 | $ | 287,602,782 | ||||
| Accumulated net investment loss at end of year | $ | (16,281 | ) | $ | (4,405 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 1,949,686 | 2,325,920 | ||||||
| C-Class | 2,155,638 | 4,026,873 | ||||||
| H-Class | 52,445,747 | 50,643,688 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 563 | 622 | ||||||
| C-Class | 512 | 849 | ||||||
| H-Class | 7,212 | 13,207 | ||||||
| Shares redeemed | ||||||||
| A-Class | (1,589,203 | ) | (2,421,335 | ) | ||||
| C-Class | (2,042,904 | ) | (4,060,876 | ) | ||||
| H-Class | (54,091,461 | ) | (50,785,708 | ) | ||||
| Net decrease in shares | (1,164,210 | ) | (256,760 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
| S&P 500® 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 31.55 | $ | 28.20 | $ | 26.41 | $ | 23.18 | $ | 15.79 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .07 | .06 | .01 | (.06 | ) | .07 | ||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 6.20 | 3.36 | 1.78 | 3.29 | 7.43 | |||||||||||||||
| Total from investment operations | 6.27 | 3.42 | 1.79 | 3.23 | 7.50 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | (.07 | ) | — | (— | )b | (.11 | ) | |||||||||||
| Total distributions | (.04 | ) | (.07 | ) | — | (— | ) | (.11 | ) | |||||||||||
| Net asset value, end of period | $ | 37.78 | $ | 31.55 | $ | 28.20 | $ | 26.41 | $ | 23.18 | ||||||||||
| Total Returnc | 19.87 | % | 12.16 | % | 6.78 | % | 13.94 | % | 47.55 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 28,028 | $ | 12,014 | $ | 13,413 | $ | 10,288 | $ | 46,312 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.19 | % | 0.22 | % | 0.05 | % | (0.25 | %) | 0.34 | % | ||||||||||
| Total expenses | 1.57 | % | 1.50 | % | 1.51 | % | 1.54 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 157 | % | 76 | % | 196 | % | 202 | % | 58 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 29.87 | $ | 26.91 | $ | 25.41 | $ | 22.50 | $ | 15.44 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.19 | ) | (.14 | ) | (.20 | ) | (.27 | ) | (.08 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 5.87 | 3.17 | 1.70 | 3.18 | 7.25 | |||||||||||||||
| Total from investment operations | 5.68 | 3.03 | 1.50 | 2.91 | 7.17 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | (.07 | ) | — | (— | )b | (.11 | ) | |||||||||||
| Total distributions | (.04 | ) | (.07 | ) | — | (— | ) | (.11 | ) | |||||||||||
| Net asset value, end of period | $ | 35.51 | $ | 29.87 | $ | 26.91 | $ | 25.41 | $ | 22.50 | ||||||||||
| Total Returnc | 19.01 | % | 11.29 | % | 5.90 | % | 12.93 | % | 46.49 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 16,182 | $ | 10,231 | $ | 10,110 | $ | 10,032 | $ | 11,456 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.59 | %) | (0.52 | %) | (0.80 | %) | (1.11 | %) | (0.41 | %) | ||||||||||
| Total expenses | 2.32 | % | 2.28 | % | 2.26 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 157 | % | 76 | % | 196 | % | 202 | % | 58 | % | ||||||||||
| 34 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P 500® FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 31.55 | $ | 28.20 | $ | 26.39 | $ | 23.17 | $ | 15.78 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .05 | .07 | (.02 | ) | (.09 | ) | .06 | |||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 6.22 | 3.35 | 1.83 | 3.31 | 7.44 | |||||||||||||||
| Total from investment operations | 6.27 | 3.42 | 1.81 | 3.22 | 7.50 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.04 | ) | (.07 | ) | — | (— | )b | (.11 | ) | |||||||||||
| Total distributions | (.04 | ) | (.07 | ) | — | (—) | (.11 | ) | ||||||||||||
| Net asset value, end of period | $ | 37.78 | $ | 31.55 | $ | 28.20 | $ | 26.39 | $ | 23.17 | ||||||||||
| Total Returnc | 19.87 | % | 12.16 | % | 6.86 | % | 13.90 | % | 47.58 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 255,912 | $ | 265,358 | $ | 240,847 | $ | 249,090 | $ | 194,193 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.15 | % | 0.24 | % | (0.07 | %) | (0.37 | %) | 0.29 | % | ||||||||||
| Total expenses | 1.56 | % | 1.50 | % | 1.50 | % | 1.54 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 157 | % | 76 | % | 196 | % | 202 | % | 58 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Less than $0.01 per share. |
| c | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 35 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
| 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 March 31, 2014, 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 Investor Class returned -20.02%, while the S&P 500 Index returned 21.86% over the same period.
Sectors contributing most to performance of the underlying index were Financials and Information Technology. The sector contributing least was Telecommunication Services, followed by Utilities. No sector detracted from return.
Microsoft Corp., Apple, Inc. and Google, Inc. — Class A were the holdings contributing the most to performance of the underlying index for the period. International Business Machines Corp., Philip Morris International, Inc. and Newmont Mining Corp. detracted the most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | ||
| Investor Class | January 7, 1994 | |
| Advisor Class | August 5, 1998 | |
| A-Class | March 31, 2004 | |
| C-Class | March 15, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 36 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||
| Investor Class Shares | -20.02% | -20.85% | -8.60% | |||
| Advisor Class Shares | -20.46% | -21.26% | -9.07% | |||
| A-Class Shares | -20.21% | -21.05% | -8.87% | |||
| A-Class Shares with sales charge† | -24.00% | -21.82% | -9.31% | |||
| C-Class Shares | -20.80% | -21.65% | -9.53% | |||
| C-Class Shares with CDSC‡ | -21.59% | -21.65% | -9.53% | |||
| S&P 500 Index | 21.86% | 21.16% | 7.42% |
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 37 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE S&P 500® STRATEGY FUND |
| Shares | Value | |||||||
| MUTUAL FUNDS†, 5 - 24.5% | ||||||||
| Guggenheim Strategy Fund I | 920,000 | $ | 22,990,800 | |||||
| Total Mutual Funds | ||||||||
| (Cost $23,000,000) | 22,990,800 | |||||||
| Face | ||||||||
| Amount | ||||||||
| FEDERAL AGENCY DISCOUNT NOTES†† - 53.3% | ||||||||
| Freddie Mac1 | ||||||||
| 0.09% due 10/29/14 | $ | 15,000,000 | 14,994,720 | |||||
| 0.13% due 06/25/14 | 10,000,000 | 9,999,290 | ||||||
| 0.10% due 11/12/14 | 10,000,000 | 9,995,620 | ||||||
| Total Freddie Mac | 34,989,630 | |||||||
| Farmer Mac2 | ||||||||
| 0.10% due 04/08/14 | 15,000,000 | 14,999,910 | ||||||
| Total Federal Agency Discount Notes | ||||||||
| (Cost $49,982,477) | 49,989,540 | |||||||
| REPURCHASE AGREEMENTS††,3 - 9.8% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 5,006,627 | 5,006,627 | ||||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,112,623 | 2,112,623 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,428,628 | 1,428,628 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 665,621 | 665,621 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $9,213,499) | 9,213,499 | |||||||
| Total Investments - 87.6% | ||||||||
| (Cost $82,195,976) | $ | 82,193,839 | ||||||
| Other Assets & Liabilities, net - 12.4% | 11,684,886 | |||||||
| Total Net Assets - 100.0% | $ | 93,878,725 | ||||||
| Unrealized | ||||||||
| Contracts | Loss | |||||||
| EQUITY FUTURES CONTRACTS SOLD SHORT† | ||||||||
| June 2014 S&P 500 Index Mini | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $4,847,700) | 52 | $ | (62,991 | ) | ||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Barclays Bank plc | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $17,551,547) | 9,374 | $ | (138,769 | ) | ||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $46,389,020) | 24,776 | (180,917 | ) | |||||
| Goldman Sachs International | ||||||||
| April 2014 S&P 500 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $24,967,590) | 13,335 | (269,433 | ) | |||||
| (Total Notional Value | ||||||||
| $88,908,157) | $ | (589,119 | ) | |||||
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
| 2 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
| 3 | Repurchase Agreements — See Note 5. |
| 4 | Total Return based on S&P 500 Index +/- financing at a variable rate. |
| 5 | Affiliated fund — See Note 16. |
| plc — Public Limited Company |
| 38 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE S&P 500® STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments in unaffiliated issuers, at value | ||||
| (cost $49,982,477) | $ | 49,989,540 | ||
| Investments in affiliated issuers, at value | ||||
| (cost $23,000,000) | 22,990,800 | |||
| Repurchase agreements, at value | ||||
| (cost $9,213,499) | 9,213,499 | |||
| Total investments | ||||
| (cost $82,195,976) | 82,193,839 | |||
| Segregated cash with broker | 12,897,568 | |||
| Receivables: | ||||
| Fund shares sold | 186,324 | |||
| Dividends | 13,365 | |||
| Interest | 6 | |||
| Total assets | 95,291,102 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 589,119 | |||
| Payable for: | ||||
| Fund shares redeemed | 574,201 | |||
| Management fees | 68,872 | |||
| Variation margin | 36,660 | |||
| Transfer agent and administrative fees | 19,131 | |||
| Swap settlement | 19,016 | |||
| Distribution and service fees | 8,411 | |||
| Portfolio accounting fees | 7,652 | |||
| Miscellaneous | 89,315 | |||
| Total liabilities | 1,412,377 | |||
| Net assets | $ | 93,878,725 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 458,688,708 | ||
| Accumulated net investment loss | (382,578 | ) | ||
| Accumulated net realized loss on investments | (363,773,158 | ) | ||
| Net unrealized depreciation on investments | (654,247 | ) | ||
| Net assets | $ | 93,878,725 | ||
| Investor Class: | ||||
| Net assets | $ | 79,172,364 | ||
| Capital shares outstanding | 4,707,861 | |||
| Net asset value per share | $ | 16.82 | ||
| Advisor Class: | ||||
| Net assets | $ | 3,061,083 | ||
| Capital shares outstanding | 199,258 | |||
| Net asset value per share | $ | 15.36 | ||
| A-Class: | ||||
| Net assets | $ | 5,467,969 | ||
| Capital shares outstanding | 348,017 | |||
| Net asset value per share | $ | 15.71 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 16.49 | ||
| C-Class: | ||||
| Net assets | $ | 6,177,309 | ||
| Capital shares outstanding | 422,498 | |||
| Net asset value per share | $ | 14.62 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Interest | $ | 112,857 | ||
| Dividends from securities of affiliated issuers | 13,365 | |||
| Total investment income | 126,222 | |||
| Expenses: | ||||
| Management fees | 1,446,049 | |||
| Transfer agent and administrative fees | 401,680 | |||
| Distribution and service fees: | ||||
| Advisor Class | 38,165 | |||
| A-Class | 12,510 | |||
| C-Class | 69,185 | |||
| Portfolio accounting fees | 160,671 | |||
| Custodian fees | 18,525 | |||
| Trustees’ fees* | 15,509 | |||
| Miscellaneous | 244,283 | |||
| Total expenses | 2,406,577 | |||
| Net investment loss | (2,280,355 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments in unaffiliated issuers | 953 | |||
| Swap agreements | (26,247,179 | ) | ||
| Futures contracts | (11,003,914 | ) | ||
| Net realized loss | (37,250,140 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments in unaffiliated issuers | (12,091 | ) | ||
| Investments in affiliated issuers | (9,200 | ) | ||
| Swap agreements | (200,682 | ) | ||
| Futures contracts | 198,052 | |||
| Net change in unrealized appreciation (depreciation) | (23,921 | ) | ||
| Net realized and unrealized loss | (37,274,061 | ) | ||
| Net decrease in net assets resulting from operations | $ | (39,554,416 | ) |
* 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 |
| INVERSE S&P 500® STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (2,280,355 | ) | $ | (2,111,038 | ) | ||
| Net realized loss on investments | (37,250,140 | ) | (23,000,794 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | (23,921 | ) | (379,315 | ) | ||||
| Net decrease in net assets resulting from operations | (39,554,416 | ) | (25,491,147 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 396,150,082 | 290,140,547 | ||||||
| Advisor Class | 43,312,714 | 70,061,389 | ||||||
| A-Class | 24,186,917 | 15,522,986 | ||||||
| C-Class | 13,040,917 | 15,210,173 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (388,967,563 | ) | (275,618,714 | ) | ||||
| Advisor Class | (47,807,585 | ) | (64,204,487 | ) | ||||
| A-Class | (23,182,304 | ) | (16,274,985 | ) | ||||
| C-Class | (12,185,135 | ) | (14,556,925 | ) | ||||
| Net increase from capital share transactions | 4,548,043 | 20,279,984 | ||||||
| Net decrease in net assets | (35,006,373 | ) | (5,211,163 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 128,885,098 | 134,096,261 | ||||||
| End of year | $ | 93,878,725 | $ | 128,885,098 | ||||
| Accumulated net investment loss at end of year | $ | (382,578 | ) | $ | (466,290 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 20,629,628 | 11,922,834 | ||||||
| Advisor Class | 2,483,798 | 3,161,277 | ||||||
| A-Class | 1,354,080 | 706,864 | ||||||
| C-Class | 790,782 | 704,780 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (20,970,317 | ) | (11,439,101 | ) | ||||
| Advisor Class | (2,790,831 | ) | (2,918,160 | ) | ||||
| A-Class | (1,306,326 | ) | (749,248 | ) | ||||
| C-Class | (749,635 | ) | (683,975 | ) | ||||
| Net increase (decrease) in shares | (558,821 | ) | 705,271 | |||||
| 40 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 21.03 | $ | 24.61 | $ | 28.50 | $ | 34.38 | $ | 54.23 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.25 | ) | (.30 | ) | (.38 | ) | (.41 | ) | (.47 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (3.96 | ) | (3.28 | ) | (3.51 | ) | (5.47 | ) | (19.32 | ) | ||||||||||
| Total from investment operations | (4.21 | ) | (3.58 | ) | (3.89 | ) | (5.88 | ) | (19.79 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.06 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.06 | ) | ||||||||||||||
| Net asset value, end of period | $ | 16.82 | $ | 21.03 | $ | 24.61 | $ | 28.50 | $ | 34.38 | ||||||||||
| Total Returnb | (20.02 | %) | (14.55 | %) | (13.65 | %) | (17.10 | %) | (36.51 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 79,172 | $ | 106,158 | $ | 112,334 | $ | 118,410 | $ | 171,423 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.35 | %) | (1.27 | %) | (1.31 | %) | (1.22 | %) | (1.16 | %) | ||||||||||
| Total expensesc | 1.42 | % | 1.41 | % | 1.41 | % | 1.44 | % | 1.43 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.31 | $ | 22.71 | $ | 26.44 | $ | 32.06 | $ | 50.83 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.32 | ) | (.39 | ) | (.48 | ) | (.54 | ) | (.63 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (3.63 | ) | (3.01 | ) | (3.25 | ) | (5.08 | ) | (18.08 | ) | ||||||||||
| Total from investment operations | (3.95 | ) | (3.40 | ) | (3.73 | ) | (5.62 | ) | (18.71 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.06 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.06 | ) | ||||||||||||||
| Net asset value, end of period | $ | 15.36 | $ | 19.31 | $ | 22.71 | $ | 26.44 | $ | 32.06 | ||||||||||
| Total Returnb | (20.46 | %) | (14.97 | %) | (14.11 | %) | (17.53 | %) | (36.82 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,061 | $ | 9,775 | $ | 5,978 | $ | 6,434 | $ | 9,607 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.85 | %) | (1.77 | %) | (1.81 | %) | (1.72 | %) | (1.63 | %) | ||||||||||
| Total expensesc | 1.93 | % | 1.90 | % | 1.91 | % | 1.93 | % | 1.93 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
| INVERSE S&P 500® STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.69 | $ | 23.10 | $ | 26.82 | $ | 32.43 | $ | 51.30 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.28 | ) | (.34 | ) | (.42 | ) | (.48 | ) | (.53 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (3.70 | ) | (3.07 | ) | (3.30 | ) | (5.13 | ) | (18.28 | ) | ||||||||||
| Total from investment operations | (3.98 | ) | (3.41 | ) | (3.72 | ) | (5.61 | ) | (18.81 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.06 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.06 | ) | ||||||||||||||
| Net asset value, end of period | $ | 15.71 | $ | 19.69 | $ | 23.10 | $ | 26.82 | $ | 32.43 | ||||||||||
| Total Returnb | (20.21 | %) | (14.76 | %) | (13.87 | %) | (17.30 | %) | (36.68 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,468 | $ | 5,912 | $ | 7,915 | $ | 5,029 | $ | 28,565 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.58 | %) | (1.52 | %) | (1.56 | %) | (1.47 | %) | (1.42 | %) | ||||||||||
| Total expensesc | 1.68 | % | 1.65 | % | 1.66 | % | 1.68 | % | 1.67 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 18.46 | $ | 21.83 | $ | 25.53 | $ | 31.12 | $ | 49.59 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.38 | ) | (.48 | ) | (.59 | ) | (.67 | ) | (.79 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (3.46 | ) | (2.89 | ) | (3.11 | ) | (4.92 | ) | (17.62 | ) | ||||||||||
| Total from investment operations | (3.84 | ) | (3.37 | ) | (3.70 | ) | (5.59 | ) | (18.41 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.06 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.06 | ) | ||||||||||||||
| Net asset value, end of period | $ | 14.62 | $ | 18.46 | $ | 21.83 | $ | 25.53 | $ | 31.12 | ||||||||||
| Total Returnb | (20.80 | %) | (15.44 | %) | (14.49 | %) | (17.96 | %) | (37.14 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 6,177 | $ | 7,041 | $ | 7,870 | $ | 11,817 | $ | 16,041 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.34 | %) | (2.27 | %) | (2.31 | %) | (2.23 | %) | (2.15 | %) | ||||||||||
| Total expensesc | 2.42 | % | 2.40 | % | 2.42 | % | 2.44 | % | 2.43 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| 42 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 43 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, with the NASDAQ-100 Index returning 29.40%, the Inverse NASDAQ-100® Strategy Fund Investor Class returned -24.62%. For the one-year period ended March 31, 2014, 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 sector contributed most to performance of the underlying index, followed by the Consumer Discretionary sector. No sector detracted from performance. The Materials sector contributed least, followed by the Industrials sector.
Microsoft Corp., Google, Inc. — Class A and Apple, Inc. were the holdings contributing most to performance of the underlying index for the year. VimpleCom Ltd. ADR, Citrix Systems, Inc. and Intuitive Surgical, Inc. detracted most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | ||
| Investor Class | September 3, 1998 | |
| Advisor Class | August 1, 2003 | |
| A-Class | March 31, 2004 | |
| C-Class | March 7, 2001 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 44 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||
| Investor Class Shares | -24.62% | -23.40% | -11.88% | |||
| Advisor Class Shares | -25.30% | -23.82% | -12.34% | |||
| A-Class Shares | -24.88% | -23.65% | -12.14% | |||
| A-Class Shares with sales charge† | -28.41% | -24.39% | -12.56% | |||
| C-Class Shares | -25.44% | -24.22% | -12.80% | |||
| C-Class Shares with CDSC‡ | -26.19% | -24.22% | -12.80% | |||
| NASDAQ-100 Index | 29.40% | 25.09% | 10.42% |
| * | 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. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 45 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE NASDAQ-100® STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 131.5% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 5,655,666 | $ | 5,655,666 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,386,495 | 2,386,495 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,613,830 | 1,613,830 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 751,909 | 751,909 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $10,407,900) | 10,407,900 | |||||||
| Total Investments - 131.5% | ||||||||
| (Cost $10,407,900) | $ | 10,407,900 | ||||||
| Other Assets & Liabilities, net - (31.5)% | (2,492,300 | ) | ||||||
| Total Net Assets - 100.0% | $ | 7,915,600 | ||||||
| Unrealized | ||||||||
| Units | Gain (Loss) | |||||||
| OTC EQUITY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 NASDAQ-100 Index | ||||||||
| Swap, Terminating 04/28/142 | ||||||||
| (Notional Value $4,176,749) | 1,162 | $ | 38,895 | |||||
| Goldman Sachs International | ||||||||
| April 2014 NASDAQ-100 Index | ||||||||
| Swap, Terminating 04/29/142 | ||||||||
| (Notional Value $2,279,161) | 634 | (8,994 | ) | |||||
| Barclays Bank plc | ||||||||
| April 2014 NASDAQ-100 Index | ||||||||
| Swap, Terminating 04/30/142 | ||||||||
| (Notional Value $1,378,033) | 383 | (9,576 | ) | |||||
| (Total Notional Value $7,833,943) | $ | 20,325 | ||||||
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreements — See Note 5. |
| 2 | Total Return based on NASDAQ-100 Index +/- financing at a variable rate. |
plc — Public Limited Company
| 46 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE NASDAQ-100® STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $10,407,900) | $ | 10,407,900 | ||
| Segregated cash with broker | 1,823,003 | |||
| Unrealized appreciation on swap agreements | 38,895 | |||
| Receivables: | ||||
| Fund shares sold | 25,459 | |||
| Interest | 7 | |||
| Swap settlement | 24,727 | |||
| Total assets | 12,319,991 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 18,570 | |||
| Payable for: | ||||
| Fund shares redeemed | 4,346,583 | |||
| Swap settlement | 20,552 | |||
| Management fees | 6,876 | |||
| Transfer agent and administrative fees | 1,910 | |||
| Portfolio accounting fees | 764 | |||
| Distribution and service fees | 612 | |||
| Miscellaneous | 8,524 | |||
| Total liabilities | 4,404,391 | |||
| Net assets | $ | 7,915,600 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 72,360,662 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (64,465,387 | ) | ||
| Net unrealized appreciation on investments | 20,325 | |||
| Net assets | $ | 7,915,600 | ||
| Investor Class: | ||||
| Net assets | $ | 6,864,606 | ||
| Capital shares outstanding | 207,442 | |||
| Net asset value per share | $ | 33.09 | ||
| Advisor Class: | ||||
| Net assets | $ | 118,314 | ||
| Capital shares outstanding | 3,784 | |||
| Net asset value per share | $ | 31.26 | ||
| A-Class: | ||||
| Net assets | $ | 371,734 | ||
| Capital shares outstanding | 11,618 | |||
| Net asset value per share | $ | 32.00 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 33.60 | ||
| C-Class: | ||||
| Net assets | $ | 560,946 | ||
| Capital shares outstanding | 19,594 | |||
| Net asset value per share | $ | 28.63 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Interest | $ | 2,806 | ||
| Total investment income | 2,806 | |||
| Expenses: | ||||
| Management fees | 102,187 | |||
| Transfer agent and administrative fees | 28,385 | |||
| Distribution and service fees: | ||||
| Advisor Class | 8,630 | |||
| A-Class | 724 | |||
| C-Class | 6,966 | |||
| Portfolio accounting fees | 11,354 | |||
| Trustees’ fees* | 1,354 | |||
| Custodian fees | 1,277 | |||
| Miscellaneous | 21,217 | |||
| Total expenses | 182,094 | |||
| Net investment loss | (179,288 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | (2,140,350 | ) | ||
| Futures contracts | (1,284,158 | ) | ||
| Net realized loss | (3,424,508 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Swap agreements | 47,899 | |||
| Futures contracts | 17,114 | |||
| Net change in unrealized appreciation (depreciation) | 65,013 | |||
| Net realized and unrealized loss | (3,359,495 | ) | ||
| Net decrease in net assets resulting from operations | $ | (3,538,783 | ) |
| * | 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 | 47 |
| INVERSE NASDAQ-100® STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (179,288 | ) | $ | (215,845 | ) | ||
| Net realized loss on investments | (3,424,508 | ) | (1,529,851 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | 65,013 | (85,807 | ) | |||||
| Net decrease in net assets resulting from operations | (3,538,783 | ) | (1,831,503 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 152,933,607 | 171,623,947 | ||||||
| Advisor Class | 38,354,968 | 21,701,866 | ||||||
| A-Class | 646,006 | 2,082,298 | ||||||
| C-Class | 1,338,850 | 10,143,906 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (150,997,216 | ) | (171,487,070 | ) | ||||
| Advisor Class | (39,937,666 | ) | (19,284,493 | ) | ||||
| A-Class | (371,971 | ) | (2,284,696 | ) | ||||
| C-Class | (1,253,224 | ) | (10,147,691 | ) | ||||
| Net increase from capital share transactions | 713,354 | 2,348,067 | ||||||
| Net increase (decrease) in net assets | (2,825,429 | ) | 516,564 | |||||
| Net assets: | ||||||||
| Beginning of year | 10,741,029 | 10,224,465 | ||||||
| End of year | $ | 7,915,600 | $ | 10,741,029 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (56,251 | ) | |||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| Investor Class | 4,127,092 | 3,686,255 | ||||||
| Advisor Class | 1,099,075 | 478,498 | ||||||
| A-Class | 17,551 | 43,806 | ||||||
| C-Class | 37,993 | 245,120 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (4,095,216 | ) | (3,697,937 | ) | ||||
| Advisor Class | (1,147,177 | ) | (431,218 | ) | ||||
| A-Class | (10,220 | ) | (49,867 | ) | ||||
| C-Class | (36,051 | ) | (245,545 | ) | ||||
| Net increase (decrease) in shares | (6,953 | ) | 29,112 | |||||
| * | Capital share activity for the period presented through February 21, 2014 has been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 12 in Notes to Financial Statements. |
| 48 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.91 | $ | 46.95 | $ | 59.62 | $ | 75.34 | $ | 125.44 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.54 | ) | (.60 | ) | (.80 | ) | (.90 | ) | (1.25 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (10.28 | ) | (2.44 | ) | (11.87 | ) | (14.82 | ) | (48.85 | ) | ||||||||||
| Total from investment operations | (10.82 | ) | (3.04 | ) | (12.67 | ) | (15.72 | ) | (50.10 | ) | ||||||||||
| Net asset value, end of period | $ | 33.09 | $ | 43.91 | $ | 46.95 | $ | 59.62 | $ | 75.34 | ||||||||||
| Total Returnb | (24.62 | %) | (6.50 | %) | (21.22 | %) | (20.90 | %) | (39.94 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 6,865 | $ | 7,709 | $ | 8,792 | $ | 32,978 | $ | 21,137 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.44 | %) | (1.32 | %) | (1.38 | %) | (1.30 | %) | (1.35 | %) | ||||||||||
| Total expenses | 1.46 | % | 1.44 | % | 1.45 | % | 1.47 | % | 1.47 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.85 | $ | 45.01 | $ | 57.15 | $ | 72.70 | $ | 121.83 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.73 | ) | (0.80 | ) | (1.05 | ) | (1.20 | ) | (1.60 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (9.86 | ) | (2.36 | ) | (11.09 | ) | (14.35 | ) | (47.53 | ) | ||||||||||
| Total from investment operations | (10.59 | ) | (3.16 | ) | (12.14 | ) | (15.55 | ) | (49.13 | ) | ||||||||||
| Net asset value, end of period | $ | 31.26 | $ | 41.85 | $ | 45.01 | $ | 57.15 | $ | 72.70 | ||||||||||
| Total Returnb | (25.30 | %) | (7.00 | %) | (21.26 | %) | (21.39 | %) | (40.34 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 118 | $ | 2,171 | $ | 207 | $ | 642 | $ | 916 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.93 | %) | (1.83 | %) | (1.91 | %) | (1.80 | %) | (1.84 | %) | ||||||||||
| Total expenses | 1.96 | % | 1.95 | % | 1.95 | % | 1.97 | % | 1.97 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
INVERSE NASDAQ-100® STRATEGY FUND
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 42.61 | $ | 45.77 | $ | 58.30 | $ | 73.88 | $ | 123.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.60 | ) | (.70 | ) | (.90 | ) | (1.05 | ) | (1.30 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (10.01 | ) | (2.46 | ) | (11.63 | ) | (14.53 | ) | (48.15 | ) | ||||||||||
| Total from investment operations | (10.61 | ) | (3.16 | ) | (12.53 | ) | (15.58 | ) | (49.45 | ) | ||||||||||
| Net asset value, end of period | $ | 32.00 | $ | 42.61 | $ | 45.77 | $ | 58.30 | $ | 73.88 | ||||||||||
| Total Returnb | (24.88 | %) | (6.89 | %) | (21.53 | %) | (21.11 | %) | (40.09 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 372 | $ | 183 | $ | 474 | $ | 946 | $ | 1,041 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.69 | %) | (1.56 | %) | (1.62 | %) | (1.54 | %) | (1.37 | %) | ||||||||||
| Total expenses | 1.71 | % | 1.68 | % | 1.69 | % | 1.72 | % | 1.71 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C- Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.42 | $ | 41.58 | $ | 53.34 | $ | 68.10 | $ | 114.53 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.80 | ) | (.95 | ) | (1.20 | ) | (1.45 | ) | (1.95 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (8.99 | ) | (2.21 | ) | (10.56 | ) | (13.31 | ) | (44.48 | ) | ||||||||||
| Total from investment operations | (9.79 | ) | (3.16 | ) | (11.76 | ) | (14.76 | ) | (46.43 | ) | ||||||||||
| Net asset value, end of period | $ | 28.63 | $ | 38.42 | $ | 41.58 | $ | 53.34 | $ | 68.10 | ||||||||||
| Total Returnb | (25.44 | %) | (7.58 | %) | (22.12 | %) | (21.66 | %) | (40.55 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 561 | $ | 678 | $ | 752 | $ | 2,435 | $ | 1,858 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.44 | %) | (2.32 | %) | (2.37 | %) | (2.29 | %) | (2.33 | %) | ||||||||||
| Total expenses | 2.46 | % | 2.44 | % | 2.45 | % | 2.47 | % | 2.47 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 21, 2014 have been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 12 in Notes to Financial Statements. |
| 50 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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THE RYDEX FUNDS ANNUAL REPORT | 51
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 mid-cap securities on a daily basis. The Fund’s current benchmark is 150% of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2014, the Mid-Cap 1.5x Strategy Fund H-Class returned 29.76%. Over the same period, its benchmark, the S&P MidCap 400 Index, returned 21.24%. The Fund had a correlation of more than 99% to its benchmark of 150% of the daily price movement of the S&P MidCap 400 Index.
Industrials and Financials provided the most performance to the underlying index during the year. No sector detracted, but Telecommunication Services and Utilities contributed least to the performance of the underlying index.
Keurig Green Mountain, Inc., Vertex Pharmaceuticals, Inc. and Under Armour, Inc. Class A contributed most performance to the underlying index for the period. Rackspace Hosting, Inc., Equinix, Inc. and Rayonier, Inc. were the largest detractors from performance of the underlying index for the period.
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 contributed to the Fund’s 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.
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 Dates: | |
| A-Class | March 31, 2004 |
| C-Class | August 20, 2001 |
| H-Class | August 16, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | |
| Affiliated Managers Group, Inc. | 0.5% |
| Cimarex Energy Co. | 0.5% |
| Henry Schein, Inc. | 0.5% |
| Trimble Navigation Ltd. | 0.5% |
| SL Green Realty Corp. | 0.5% |
| Church & Dwight Company, Inc. | 0.5% |
| HollyFrontier Corp. | 0.5% |
| Endo International plc | 0.5% |
| Under Armour, Inc. — Class A | 0.4% |
| Advance Auto Parts, Inc. | 0.4% |
| Top Ten Total | 4.8% |
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
52 | THE RYDEX FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | |||
| 1 Year | 5 Year | 10 Year | |
| A-Class Shares | 29.75% | 34.41% | 9.56% |
| A-Class Shares with sales charge† | 23.58% | 33.12% | 9.03% |
| C-Class Shares | 28.80% | 33.45% | 8.76% |
| C-Class Shares with CDSC‡ | 27.80% | 33.45% | 8.76% |
| H-Class Shares | 29.76% | 34.45% | 9.57% |
| S&P MidCap 400 Index | 21.24% | 24.86% | 10.14% |
| * | 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 MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE RYDEX FUNDS ANNUAL REPORT | 53
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| MID-CAP 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| COMMON STOCKS† - 75.8% | ||||||||
| FINANCIALS - 17.4% | ||||||||
| Affiliated Managers Group, Inc.* | 680 | $ | 136,034 | |||||
| SL Green Realty Corp. | 1,217 | 122,455 | ||||||
| Realty Income Corp. | 2,818 | 115,144 | ||||||
| Fidelity National Financial, Inc. — Class A | 3,553 | 111,706 | ||||||
| Federal Realty Investment Trust | 859 | 98,544 | ||||||
| Everest Re Group Ltd. | 609 | 93,207 | ||||||
| New York Community Bancorp, Inc. | 5,682 | 91,309 | ||||||
| Raymond James Financial, Inc. | 1,586 | 88,705 | ||||||
| Alleghany Corp.* | 215 | 87,587 | ||||||
| Essex Property Trust, Inc. | 498 | 84,685 | ||||||
| UDR, Inc. | 3,226 | 83,328 | ||||||
| Arthur J Gallagher & Co. | 1,723 | 81,980 | ||||||
| Waddell & Reed Financial, Inc. — Class A | 1,090 | 80,246 | ||||||
| Signature Bank* | 607 | 76,234 | ||||||
| SVB Financial Group* | 590 | 75,980 | ||||||
| Rayonier, Inc. | 1,628 | 74,742 | ||||||
| Camden Property Trust | 1,094 | 73,670 | ||||||
| Reinsurance Group of America, Inc. — Class A | 909 | 72,384 | ||||||
| Duke Realty Corp. | 4,203 | 70,947 | ||||||
| Liberty Property Trust | 1,882 | 69,559 | ||||||
| Extra Space Storage, Inc. | 1,413 | 68,545 | ||||||
| Jones Lang LaSalle, Inc. | 568 | 67,308 | ||||||
| East West Bancorp, Inc. | 1,837 | 67,051 | ||||||
| Alexandria Real Estate Equities, Inc. | 923 | 66,973 | ||||||
| Mid-America Apartment Communities, Inc. | 966 | 65,949 | ||||||
| MSCI, Inc. — Class A* | 1,498 | 64,444 | ||||||
| CBOE Holdings, Inc. | 1,111 | 62,883 | ||||||
| BRE Properties, Inc. | 990 | 62,152 | ||||||
| Kilroy Realty Corp. | 1,050 | 61,509 | ||||||
| SEI Investments Co. | 1,829 | 61,473 | ||||||
| Regency Centers Corp. | 1,190 | 60,761 | ||||||
| Eaton Vance Corp. | 1,581 | 60,331 | ||||||
| HCC Insurance Holdings, Inc. | 1,279 | 58,182 | ||||||
| Taubman Centers, Inc. | 810 | 57,340 | ||||||
| WR Berkley Corp. | 1,338 | 55,688 | ||||||
| Hospitality Properties Trust | 1,926 | 55,315 | ||||||
| Senior Housing Properties Trust | 2,421 | 54,400 | ||||||
| National Retail Properties, Inc. | 1,570 | 53,882 | ||||||
| Omega Healthcare Investors, Inc. | 1,593 | 53,397 | ||||||
| American Financial Group, Inc. | 921 | 53,151 | ||||||
| Protective Life Corp. | 1,010 | 53,115 | ||||||
| Cullen/Frost Bankers, Inc. | 676 | 52,410 | ||||||
| RenaissanceRe Holdings Ltd. | 535 | 52,216 | ||||||
| Old Republic International Corp. | 3,113 | 51,053 | ||||||
| BioMed Realty Trust, Inc. | 2,478 | 50,774 | ||||||
| American Campus Communities, Inc. | 1,344 | 50,198 | ||||||
| Prosperity Bancshares, Inc. | 734 | 48,554 | ||||||
| Commerce Bancshares, Inc. | 1,043 | 48,416 | ||||||
| City National Corp. | 606 | 47,704 | ||||||
| Brown & Brown, Inc. | 1,535 | 47,217 | ||||||
| Corrections Corporation of America | 1,485 | 46,510 | ||||||
| Highwoods Properties, Inc. | 1,153 | 44,287 | ||||||
| FirstMerit Corp. | 2,123 | 44,222 | ||||||
| Home Properties, Inc. | 728 | 43,767 | ||||||
| Weingarten Realty Investors | 1,443 | 43,290 | ||||||
| First Niagara Financial Group, Inc. | 4,550 | 42,998 | ||||||
| Synovus Financial Corp. | 12,490 | 42,341 | ||||||
| Hancock Holding Co. | 1,055 | 38,666 | ||||||
| StanCorp Financial Group, Inc. | 562 | 37,542 | ||||||
| First Horizon National Corp. | 3,040 | 37,514 | ||||||
| Associated Banc-Corp. | 2,069 | 37,366 | ||||||
| Federated Investors, Inc. — Class B | 1,210 | 36,953 | ||||||
| First American Financial Corp. | 1,366 | 36,267 | ||||||
| Webster Financial Corp. | 1,161 | 36,061 | ||||||
| TCF Financial Corp. | 2,122 | 35,353 | ||||||
| Hanover Insurance Group, Inc. | 560 | 34,406 | ||||||
| Bank of Hawaii Corp. | 567 | 34,366 | ||||||
| Primerica, Inc. | 708 | 33,354 | ||||||
| Aspen Insurance Holdings Ltd. | 835 | 33,150 | ||||||
| Fulton Financial Corp. | 2,455 | 30,884 | ||||||
| Washington Federal, Inc. | 1,318 | 30,709 | ||||||
| Corporate Office Properties Trust | 1,120 | 29,837 | ||||||
| BancorpSouth, Inc. | 1,081 | 26,982 | ||||||
| Valley National Bancorp | 2,574 | 26,795 | ||||||
| Kemper Corp. | 655 | 25,656 | ||||||
| Cathay General Bancorp | 949 | 23,905 | ||||||
| Mack-Cali Realty Corp. | 1,141 | 23,721 | ||||||
| Alexander & Baldwin, Inc. | 549 | 23,365 | ||||||
| Trustmark Corp. | 864 | 21,902 | ||||||
| Janus Capital Group, Inc. | 1,939 | 21,077 | ||||||
| Mercury General Corp. | 466 | 21,007 | ||||||
| Potlatch Corp. | 521 | 20,157 | ||||||
| International Bancshares Corp. | 735 | 18,434 | ||||||
| Westamerica Bancorporation | 338 | 18,279 | ||||||
| Equity One, Inc. | 817 | 18,252 | ||||||
| Greenhill & Company, Inc. | 345 | 17,933 | ||||||
| Astoria Financial Corp. | 1,079 | 14,912 | ||||||
| Total Financials | 4,653,057 | |||||||
| INDUSTRIALS - 12.6% | ||||||||
| United Rentals, Inc.* | 1,199 | 113,832 | ||||||
| B/E Aerospace, Inc.* | 1,266 | 109,877 | ||||||
| Wabtec Corp. | 1,230 | 95,325 | ||||||
| Towers Watson & Co. — Class A | 824 | 93,978 | ||||||
| Fortune Brands Home & Security, Inc. | 2,124 | 89,378 | ||||||
| J.B. Hunt Transport Services, Inc. | 1,174 | 84,435 | ||||||
| Hubbell, Inc. — Class B | 695 | 83,309 | ||||||
| Alaska Air Group, Inc. | 882 | 82,299 | ||||||
| Manpowergroup, Inc. | 1,021 | 80,485 | ||||||
| IDEX Corp. | 1,043 | 76,024 | ||||||
| Lincoln Electric Holdings, Inc. | 1,038 | 74,746 | ||||||
| Kirby Corp.* | 726 | 73,507 | ||||||
| Acuity Brands, Inc. | 553 | 73,311 | ||||||
| Donaldson Company, Inc. | 1,716 | 72,758 | ||||||
| Trinity Industries, Inc. | 995 | 71,710 | ||||||
| Waste Connections, Inc. | 1,591 | 69,781 | ||||||
| Carlisle Companies, Inc. | 813 | 64,503 | ||||||
| Huntington Ingalls Industries, Inc. | 626 | 64,015 | ||||||
| Oshkosh Corp. | 1,081 | 63,638 | ||||||
| Genesee & Wyoming, Inc. — Class A* | 653 | 63,550 | ||||||
| Terex Corp. | 1,419 | 62,862 | ||||||
| AGCO Corp. | 1,119 | 61,724 | ||||||
| 54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| MID-CAP 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Timken Co. | 1,001 | $ | 58,839 | |||||
| Graco, Inc. | 780 | 58,297 | ||||||
| Alliant Techsystems, Inc. | 409 | 58,139 | ||||||
| SPX Corp. | 577 | 56,725 | ||||||
| Nordson Corp. | 772 | 54,418 | ||||||
| Lennox International, Inc. | 578 | 52,546 | ||||||
| MSC Industrial Direct Company, Inc. — Class A | 607 | 52,518 | ||||||
| Copart, Inc.* | 1,440 | 52,402 | ||||||
| Old Dominion Freight Line, Inc.* | 900 | 51,066 | ||||||
| Valmont Industries, Inc. | 342 | 50,903 | ||||||
| KBR, Inc. | 1,903 | 50,772 | ||||||
| ITT Corp. | 1,170 | 50,029 | ||||||
| Exelis, Inc. | 2,432 | 46,232 | ||||||
| RR Donnelley & Sons Co. | 2,545 | 45,556 | ||||||
| AO Smith Corp. | 986 | 45,376 | ||||||
| Kennametal, Inc. | 1,007 | 44,610 | ||||||
| Crane Co. | 626 | 44,540 | ||||||
| Esterline Technologies Corp.* | 410 | 43,681 | ||||||
| URS Corp. | 927 | 43,625 | ||||||
| Triumph Group, Inc. | 669 | 43,204 | ||||||
| Regal-Beloit Corp. | 581 | 42,245 | ||||||
| AECOM Technology Corp.* | 1,268 | 40,792 | ||||||
| GATX Corp. | 590 | 40,049 | ||||||
| Clean Harbors, Inc.* | 706 | 38,682 | ||||||
| CLARCOR, Inc. | 643 | 36,876 | ||||||
| Watsco, Inc. | 349 | 34,869 | ||||||
| Landstar System, Inc. | 585 | 34,644 | ||||||
| Deluxe Corp. | 647 | 33,948 | ||||||
| Woodward, Inc. | 768 | 31,895 | ||||||
| Corporate Executive Board Co. | 427 | 31,697 | ||||||
| Con-way, Inc. | 730 | 29,988 | ||||||
| JetBlue Airways Corp.* | 2,924 | 25,410 | ||||||
| Rollins, Inc. | 826 | 24,978 | ||||||
| Herman Miller, Inc. | 761 | 24,451 | ||||||
| Harsco Corp. | 1,039 | 24,344 | ||||||
| MSA Safety, Inc. | 406 | 23,142 | ||||||
| HNI Corp. | 578 | 21,132 | ||||||
| Granite Construction, Inc. | 467 | 18,647 | ||||||
| Brink’s Co. | 616 | 17,587 | ||||||
| FTI Consulting, Inc.* | 519 | 17,303 | ||||||
| General Cable Corp. | 633 | 16,211 | ||||||
| Werner Enterprises, Inc. | 585 | 14,923 | ||||||
| UTI Worldwide, Inc. | 1,169 | 12,380 | ||||||
| Total Industrials | 3,364,718 | |||||||
| INFORMATION TECHNOLOGY - 12.0% | ||||||||
| Trimble Navigation Ltd.* | 3,337 | 129,709 | ||||||
| Equinix, Inc.* | 635 | 117,374 | ||||||
| ANSYS, Inc.* | 1,187 | 91,422 | ||||||
| Skyworks Solutions, Inc.* | 2,429 | 91,137 | ||||||
| Cree, Inc.* | 1,559 | 88,177 | ||||||
| Avnet, Inc. | 1,778 | 82,731 | ||||||
| Gartner, Inc.* | 1,180 | 81,939 | ||||||
| NCR Corp.* | 2,145 | 78,400 | ||||||
| Arrow Electronics, Inc.* | 1,284 | 76,218 | ||||||
| Synopsys, Inc.* | 1,978 | 75,974 | ||||||
| 3D Systems Corp.*,1 | 1,232 | 72,873 | ||||||
| Global Payments, Inc. | 924 | 65,705 | ||||||
| Jack Henry & Associates, Inc. | 1,098 | 61,223 | ||||||
| Concur Technologies, Inc.* | 606 | 60,036 | ||||||
| SunEdison, Inc.* | 3,154 | 59,421 | ||||||
| Ingram Micro, Inc. — Class A* | 1,986 | 58,706 | ||||||
| Cadence Design Systems, Inc.* | 3,714 | 57,716 | ||||||
| Broadridge Financial Solutions, Inc. | 1,533 | 56,936 | ||||||
| Solera Holdings, Inc. | 882 | 55,866 | ||||||
| FactSet Research Systems, Inc. | 511 | 55,091 | ||||||
| PTC, Inc.* | 1,525 | 54,031 | ||||||
| Informatica Corp.* | 1,406 | 53,119 | ||||||
| MICROS Systems, Inc.* | 967 | 51,183 | ||||||
| Teradyne, Inc.* | 2,490 | 49,526 | ||||||
| Rackspace Hosting, Inc.* | 1,489 | 48,869 | ||||||
| VeriFone Systems, Inc.* | 1,425 | 48,194 | ||||||
| WEX, Inc.* | 500 | 47,525 | ||||||
| Atmel Corp.* | 5,464 | 45,679 | ||||||
| Zebra Technologies Corp. — Class A* | 650 | 45,117 | ||||||
| AOL, Inc.* | 1,024 | 44,820 | ||||||
| JDS Uniphase Corp.* | 3,000 | 42,001 | ||||||
| Riverbed Technology, Inc.* | 2,055 | 40,504 | ||||||
| TIBCO Software, Inc.* | 1,961 | 39,848 | ||||||
| Fortinet, Inc.* | 1,759 | 38,751 | ||||||
| CommVault Systems, Inc.* | 578 | 37,541 | ||||||
| Lexmark International, Inc. — Class A | 791 | 36,615 | ||||||
| National Instruments Corp. | 1,264 | 36,264 | ||||||
| SolarWinds, Inc.* | 844 | 35,980 | ||||||
| DST Systems, Inc. | 376 | 35,641 | ||||||
| CoreLogic, Inc.* | 1,173 | 35,237 | ||||||
| Knowles Corp.* | 1,092 | 34,475 | ||||||
| Acxiom Corp.* | 981 | 33,742 | ||||||
| Leidos Holdings, Inc. | 937 | 33,142 | ||||||
| Diebold, Inc. | 829 | 33,069 | ||||||
| Advanced Micro Devices, Inc.*,1 | 7,930 | 31,799 | ||||||
| Ciena Corp.* | 1,344 | 30,563 | ||||||
| Tech Data Corp.* | 489 | 29,809 | ||||||
| Compuware Corp. | 2,801 | 29,411 | ||||||
| ACI Worldwide, Inc.* | 490 | 29,003 | ||||||
| Rovi Corp.* | 1,265 | 28,817 | ||||||
| RF Micro Devices, Inc.* | 3,629 | 28,597 | ||||||
| Convergys Corp. | 1,295 | 28,373 | ||||||
| Mentor Graphics Corp. | 1,247 | 27,459 | ||||||
| Silicon Laboratories, Inc.* | 506 | 26,439 | ||||||
| Vishay Intertechnology, Inc. | 1,740 | 25,891 | ||||||
| NeuStar, Inc. — Class A* | 786 | 25,553 | ||||||
| International Rectifier Corp.* | 910 | 24,934 | ||||||
| Fair Isaac Corp. | 447 | 24,728 | ||||||
| Plantronics, Inc. | 552 | 24,536 | ||||||
| Polycom, Inc.* | 1,759 | 24,133 | ||||||
| Conversant, Inc.* | 814 | 22,914 | ||||||
| Semtech Corp.* | 880 | 22,299 | ||||||
| Fairchild Semiconductor | ||||||||
| International, Inc. — Class A* | 1,603 | 22,105 | ||||||
| Integrated Device Technology, Inc.* | 1,753 | 21,439 | ||||||
| Intersil Corp. — Class A | 1,637 | 21,150 | ||||||
| Science Applications International Corp. | 532 | 19,891 | ||||||
| Cypress Semiconductor Corp. | 1,820 | 18,691 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| MID-CAP 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Itron, Inc.* | 503 | $ | 17,877 | |||||
| ADTRAN, Inc. | 728 | 17,770 | ||||||
| InterDigital, Inc. | 520 | 17,217 | ||||||
| Advent Software, Inc. | 519 | 15,238 | ||||||
| ManTech International Corp. — Class A | 305 | 8,970 | ||||||
| Total Information Technology | 3,183,133 | |||||||
| CONSUMER DISCRETIONARY - 10.2% | ||||||||
| Under Armour, Inc. — Class A* | 1,033 | 118,422 | ||||||
| Advance Auto Parts, Inc. | 935 | 118,278 | ||||||
| Polaris Industries, Inc. | 840 | 117,357 | ||||||
| Signet Jewelers Ltd. | 1,031 | 109,143 | ||||||
| LKQ Corp.* | 3,876 | 102,133 | ||||||
| Hanesbrands, Inc. | 1,277 | 97,665 | ||||||
| Jarden Corp.* | 1,594 | 95,369 | ||||||
| Foot Locker, Inc. | 1,885 | 88,556 | ||||||
| Williams-Sonoma, Inc. | 1,127 | 75,103 | ||||||
| Toll Brothers, Inc.* | 2,055 | 73,775 | ||||||
| Dick’s Sporting Goods, Inc. | 1,313 | 71,703 | ||||||
| NVR, Inc.* | 53 | 60,791 | ||||||
| Panera Bread Co. — Class A* | 338 | 59,646 | ||||||
| Gentex Corp. | 1,867 | 58,867 | ||||||
| Kate Spade & Co.* | 1,580 | 58,602 | ||||||
| AMC Networks, Inc. — Class A* | 759 | 55,475 | ||||||
| Domino’s Pizza, Inc. | 716 | 55,111 | ||||||
| Tupperware Brands Corp. | 647 | 54,193 | ||||||
| Service Corporation International | 2,725 | 54,173 | ||||||
| Brunswick Corp. | 1,190 | 53,895 | ||||||
| Carter’s, Inc. | 689 | 53,501 | ||||||
| Brinker International, Inc. | 860 | 45,107 | ||||||
| Apollo Education Group, Inc. — Class A* | 1,274 | 43,622 | ||||||
| Lamar Advertising Co. — Class A* | 843 | 42,985 | ||||||
| Tempur Sealy International, Inc.* | 778 | 39,421 | ||||||
| Cabela’s, Inc.* | 599 | 39,240 | ||||||
| Cinemark Holdings, Inc. | 1,338 | 38,815 | ||||||
| Sotheby’s | 890 | 38,760 | ||||||
| Abercrombie & Fitch Co. — Class A | 980 | 37,730 | ||||||
| Deckers Outdoor Corp.* | 441 | 35,161 | ||||||
| Thor Industries, Inc. | 575 | 35,110 | ||||||
| John Wiley & Sons, Inc. — Class A | 598 | 34,469 | ||||||
| JC Penney Company, Inc.*,1 | 3,916 | 33,756 | ||||||
| Bally Technologies, Inc.* | 502 | 33,267 | ||||||
| Chico’s FAS, Inc. | 2,037 | 32,653 | ||||||
| DeVry Education Group, Inc. | 732 | 31,029 | ||||||
| Wendy’s Co. | 3,385 | 30,871 | ||||||
| CST Brands, Inc. | 968 | 30,240 | ||||||
| Cheesecake Factory, Inc. | 609 | 29,007 | ||||||
| Ascena Retail Group, Inc.* | 1,656 | 28,616 | ||||||
| Big Lots, Inc.* | 754 | 28,554 | ||||||
| Aaron’s, Inc. | 925 | 27,972 | ||||||
| New York Times Co. — Class A | 1,612 | 27,597 | ||||||
| American Eagle Outfitters, Inc. | 2,177 | 26,646 | ||||||
| Office Depot, Inc.* | 6,219 | 25,684 | ||||||
| HSN, Inc. | 429 | 25,624 | ||||||
| DreamWorks Animation SKG, Inc. — Class A* | 921 | 24,453 | ||||||
| ANN, Inc.* | 587 | 24,349 | ||||||
| Life Time Fitness, Inc.* | 498 | 23,954 | ||||||
| Murphy USA, Inc.* | 572 | 23,217 | ||||||
| Meredith Corp. | 476 | 22,101 | ||||||
| Guess?, Inc. | 763 | 21,059 | ||||||
| KB Home | 1,066 | 18,111 | ||||||
| Rent-A-Center, Inc. — Class A | 678 | 18,035 | ||||||
| Bob Evans Farms, Inc. | 317 | 15,860 | ||||||
| MDC Holdings, Inc. | 501 | 14,168 | ||||||
| Matthews International Corp. — Class A | 346 | 14,120 | ||||||
| International Speedway Corp. — Class A | 357 | 12,134 | ||||||
| Scientific Games Corp. — Class A* | 624 | 8,568 | ||||||
| Total Consumer Discretionary | 2,713,823 | |||||||
| HEALTH CARE - 7.2% | ||||||||
| Henry Schein, Inc.* | 1,098 | 131,069 | ||||||
| Endo International plc* | 1,766 | 121,236 | ||||||
| Universal Health Services, Inc. — Class B | 1,155 | 94,791 | ||||||
| Mettler-Toledo International, Inc.* | 378 | 89,087 | ||||||
| Salix Pharmaceuticals Ltd.* | 816 | 84,546 | ||||||
| Cooper Companies, Inc. | 615 | 84,476 | ||||||
| ResMed, Inc.1 | 1,816 | 81,157 | ||||||
| IDEXX Laboratories, Inc.* | 663 | 80,488 | ||||||
| MEDNAX, Inc.* | 1,298 | 80,450 | ||||||
| Omnicare, Inc. | 1,282 | 76,497 | ||||||
| Hologic, Inc.* | 3,527 | 75,831 | ||||||
| Covance, Inc.* | 723 | 75,120 | ||||||
| Cubist Pharmaceuticals, Inc.* | 957 | 70,004 | ||||||
| Community Health Systems, Inc.* | 1,454 | 56,953 | ||||||
| Teleflex, Inc. | 526 | 56,408 | ||||||
| United Therapeutics Corp.* | 597 | 56,136 | ||||||
| Sirona Dental Systems, Inc.* | 713 | 53,240 | ||||||
| Align Technology, Inc.* | 924 | 47,854 | ||||||
| Mallinckrodt plc* | 751 | 47,621 | ||||||
| Allscripts Healthcare Solutions, Inc.* | 2,051 | 36,980 | ||||||
| Charles River Laboratories International, Inc.* | 612 | 36,928 | ||||||
| VCA Antech, Inc.* | 1,130 | 36,420 | ||||||
| Techne Corp. | 425 | 36,282 | ||||||
| STERIS Corp. | 757 | 36,147 | ||||||
| WellCare Health Plans, Inc.* | 558 | 35,444 | ||||||
| Health Net, Inc.* | 1,028 | 34,962 | ||||||
| Bio-Rad Laboratories, Inc. — Class A* | 258 | 33,055 | ||||||
| LifePoint Hospitals, Inc.* | 605 | 33,003 | ||||||
| Hill-Rom Holdings, Inc. | 738 | 28,443 | ||||||
| Owens & Minor, Inc. | 811 | 28,409 | ||||||
| Thoratec Corp.* | 729 | 26,105 | ||||||
| HMS Holdings Corp.* | 1,124 | 21,412 | ||||||
| Masimo Corp.* | 659 | 17,997 | ||||||
| Total Health Care | 1,904,551 | |||||||
| MATERIALS - 5.5% | ||||||||
| Rock-Tenn Co. — Class A | 918 | 96,912 | ||||||
| Ashland, Inc. | 932 | 92,716 | ||||||
| Packaging Corporation of America | 1,259 | 88,596 | ||||||
| Martin Marietta Materials, Inc. | 591 | 75,855 | ||||||
| Valspar Corp. | 1,011 | 72,912 | ||||||
| RPM International, Inc. | 1,709 | 71,505 | ||||||
| 56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| MID-CAP 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Reliance Steel & Aluminum Co. | 998 | $ | 70,519 | |||||
| Albemarle Corp. | 1,021 | 67,815 | ||||||
| Eagle Materials, Inc. | 642 | 56,920 | ||||||
| AptarGroup, Inc. | 840 | 55,524 | ||||||
| NewMarket Corp. | 142 | 55,491 | ||||||
| Sonoco Products Co. | 1,317 | 54,023 | ||||||
| Royal Gold, Inc. | 838 | 52,476 | ||||||
| Steel Dynamics, Inc. | 2,865 | 50,968 | ||||||
| Domtar Corp. | 418 | 46,908 | ||||||
| Cabot Corp. | 767 | 45,299 | ||||||
| Carpenter Technology Corp. | 683 | 45,105 | ||||||
| Cytec Industries, Inc. | 453 | 44,217 | ||||||
| Sensient Technologies Corp. | 641 | 36,159 | ||||||
| Compass Minerals International, Inc. | 430 | 35,484 | ||||||
| Scotts Miracle-Gro Co. — Class A | 565 | 34,623 | ||||||
| Louisiana-Pacific Corp.* | 1,819 | 30,687 | ||||||
| Commercial Metals Co. | 1,506 | 28,433 | ||||||
| Minerals Technologies, Inc. | 440 | 28,406 | ||||||
| Olin Corp. | 1,020 | 28,162 | ||||||
| Silgan Holdings, Inc. | 566 | 28,028 | ||||||
| Worthington Industries, Inc. | 678 | 25,934 | ||||||
| Greif, Inc. — Class A | 392 | 20,576 | ||||||
| Intrepid Potash, Inc.* | 712 | 11,008 | ||||||
| Total Materials | 1,451,261 | |||||||
| ENERGY - 4.5% | ||||||||
| Cimarex Energy Co. | 1,115 | 132,808 | ||||||
| HollyFrontier Corp. | 2,553 | 121,472 | ||||||
| Oceaneering International, Inc. | 1,389 | 99,815 | ||||||
| Gulfport Energy Corp.* | 1,095 | 77,942 | ||||||
| Energen Corp. | 935 | 75,557 | ||||||
| Oil States International, Inc.* | 685 | 67,541 | ||||||
| Superior Energy Services, Inc. | 2,038 | 62,689 | ||||||
| SM Energy Co. | 865 | 61,666 | ||||||
| Dril-Quip, Inc.* | 523 | 58,628 | ||||||
| Patterson-UTI Energy, Inc. | 1,849 | 58,576 | ||||||
| Dresser-Rand Group, Inc.* | 979 | 57,183 | ||||||
| WPX Energy, Inc.* | 2,580 | 46,517 | ||||||
| World Fuel Services Corp. | 922 | 40,660 | ||||||
| Atwood Oceanics, Inc.* | 738 | 37,188 | ||||||
| Unit Corp.* | 562 | 36,744 | ||||||
| Rosetta Resources, Inc.* | 787 | 36,658 | ||||||
| CARBO Ceramics, Inc. | 259 | 35,739 | ||||||
| Tidewater, Inc. | 636 | 30,922 | ||||||
| Helix Energy Solutions Group, Inc.* | 1,258 | 28,909 | ||||||
| Bill Barrett Corp.* | 634 | 16,230 | ||||||
| Alpha Natural Resources, Inc.* | 2,842 | 12,079 | ||||||
| Total Energy | 1,195,523 | |||||||
| UTILITIES - 3.6% | ||||||||
| OGE Energy Corp. | 2,556 | 93,958 | ||||||
| MDU Resources Group, Inc. | 2,437 | 83,613 | ||||||
| Alliant Energy Corp. | 1,428 | 81,125 | ||||||
| National Fuel Gas Co. | 1,072 | 75,083 | ||||||
| UGI Corp. | 1,476 | 67,320 | ||||||
| Atmos Energy Corp. | 1,284 | 60,515 | ||||||
| Westar Energy, Inc. | 1,657 | 58,260 | ||||||
| Aqua America, Inc. | 2,267 | 56,834 | ||||||
| Questar Corp. | 2,247 | 53,434 | ||||||
| Great Plains Energy, Inc. | 1,972 | 53,323 | ||||||
| Vectren Corp. | 1,054 | 41,517 | ||||||
| Cleco Corp. | 778 | 39,351 | ||||||
| IDACORP, Inc. | 642 | 35,612 | ||||||
| Hawaiian Electric Industries, Inc. | 1,307 | 33,224 | ||||||
| Black Hills Corp. | 572 | 32,976 | ||||||
| PNM Resources, Inc. | 1,027 | 27,760 | ||||||
| WGL Holdings, Inc. | 666 | 26,680 | ||||||
| ONE Gas, Inc.* | 668 | 24,001 | ||||||
| Total Utilities | 944,586 | |||||||
| CONSUMER STAPLES - 2.5% | ||||||||
| Church & Dwight Company, Inc. | 1,762 | 121,702 | ||||||
| Energizer Holdings, Inc. | 807 | 81,297 | ||||||
| Ingredion, Inc. | 957 | 65,153 | ||||||
| WhiteWave Foods Co. — Class A* | 2,224 | 63,472 | ||||||
| Hain Celestial Group, Inc.* | 643 | 58,815 | ||||||
| Hillshire Brands Co. | 1,573 | 58,610 | ||||||
| Flowers Foods, Inc. | 2,252 | 48,305 | ||||||
| United Natural Foods, Inc.* | 635 | 45,034 | ||||||
| Post Holdings, Inc.* | 482 | 26,568 | ||||||
| Lancaster Colony Corp. | 249 | 24,756 | ||||||
| Dean Foods Co. | 1,219 | 18,846 | ||||||
| SUPERVALU, Inc.* | 2,536 | 17,346 | ||||||
| Universal Corp. | 298 | 16,655 | ||||||
| Tootsie Roll Industries, Inc. | 267 | 7,983 | ||||||
| Total Consumer Staples | 654,542 | |||||||
| TELECOMMUNICATION SERVICES - 0.3% | ||||||||
| tw telecom, Inc. — Class A* | 1,807 | 56,487 | ||||||
| Telephone & Data Systems, Inc. | 1,266 | 33,182 | ||||||
| Total Telecommunication Services | 89,669 | |||||||
| Total Common Stocks | ||||||||
| (Cost $13,064,761) | 20,154,863 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 16.5% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 2,387,810 | 2,387,810 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,007,574 | 1,007,574 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 681,356 | 681,356 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 317,455 | 317,455 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $4,394,195) | 4,394,195 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| MID-CAP 1.5x STRATEGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.6% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | $ | 72,382 | $ | 72,382 | ||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 64,587 | 64,587 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05%-0.08% | ||||||||
| due 04/01/14 | 12,176 | 12,176 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $149,145) | 149,145 | |||||||
| Total Investments - 92.9% | ||||||||
| (Cost $17,608,101) | $ | 24,698,203 | ||||||
| Other Assets & Liabilities, net - 7.1% | 1,895,253 | |||||||
| Total Net Assets - 100.0% | $ | 26,593,456 | ||||||
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 S&P MidCap 400 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of Contracts $8,928,400) | 65 | $ | 54,878 | |||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Goldman Sachs International | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/29/144 | ||||||||
| (Notional Value $5,958,547) | 4,322 | $ | 107,750 | |||||
| Barclays Bank plc | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/30/144 | ||||||||
| (Notional Value $1,540,424) | 1,117 | 22,822 | ||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/28/144 | ||||||||
| (Notional Value $3,277,723) | 2,378 | 17,725 | ||||||
| (Total Notional Value | ||||||||
| $10,776,694) | $ | 148,297 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Total Return based on S&P MidCap 400 Index +/- financing at a variable rate. |
| plc — Public Limited Company |
| 58 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Investments, at value - including $146,050 of securities loaned | ||||
| (cost $13,064,761) | $ | 20,154,863 | ||
| Repurchase agreements, at value | ||||
| (cost $4,543,340) | 4,543,340 | |||
| Total investments | ||||
| (cost $17,608,101) | 24,698,203 | |||
| Segregated cash with broker | 1,872,138 | |||
| Unrealized appreciation on swap agreements | 148,297 | |||
| Receivables: | ||||
| Fund shares sold | 589,588 | |||
| Variation margin | 103,525 | |||
| Swap settlement | 16,346 | |||
| Dividends | 15,944 | |||
| Securities lending income | 320 | |||
| Interest | 3 | |||
| Total assets | 27,444,364 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 638,214 | |||
| Upon return of securities loaned | 149,145 | |||
| Management fees | 19,037 | |||
| Distribution and service fees | 7,871 | |||
| Transfer agent and administrative fees | 5,288 | |||
| Portfolio accounting fees | 2,115 | |||
| Miscellaneous | 29,238 | |||
| Total liabilities | 850,908 | |||
| Net assets | $ | 26,593,456 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 20,376,955 | ||
| Accumulated net investment loss | (68,833 | ) | ||
| Accumulated net realized loss on investments | (1,007,943 | ) | ||
| Net unrealized appreciation on investments | 7,293,277 | |||
| Net assets | $ | 26,593,456 | ||
| A-Class: | ||||
| Net assets | $ | 2,631,833 | ||
| Capital shares outstanding | 45,005 | |||
| Net asset value per share | $ | 58.48 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 61.40 | ||
| C-Class: | ||||
| Net assets | $ | 4,549,063 | ||
| Capital shares outstanding | 86,204 | |||
| Net asset value per share | $ | 52.77 | ||
| H-Class: | ||||
| Net assets | $ | 19,412,560 | ||
| Capital shares outstanding | 331,521 | |||
| Net asset value per share | $ | 58.56 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends | $ | 483,439 | ||
| Interest | 4,033 | |||
| Income from securities lending, net | 3,309 | |||
| Total investment income | 490,781 | |||
| Expenses: | ||||
| Management fees | 434,190 | |||
| Transfer agent and administrative fees | 120,608 | |||
| Distribution and service fees: | ||||
| A-Class | 5,398 | |||
| C-Class | 41,817 | |||
| H-Class | 104,756 | |||
| Portfolio accounting fees | 48,243 | |||
| Custodian fees | 5,450 | |||
| Trustees’ fees* | 4,476 | |||
| Miscellaneous | 74,964 | |||
| Total expenses | 839,902 | |||
| Net investment loss | (349,121 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 7,300,530 | |||
| Swap agreements | 1,432,186 | |||
| Futures contracts | 2,781,382 | |||
| Net realized gain | 11,514,098 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (1,959,340 | ) | ||
| Swap agreements | (64,442 | ) | ||
| Futures contracts | (624,939 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (2,648,721 | ) | ||
| Net realized and unrealized gain | 8,865,377 | |||
| Net increase in net assets resulting from operations | $ | 8,516,256 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 59 |
MID-CAP 1.5x STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (349,121 | ) | $ | (182,679 | ) | ||
| Net realized gain on investments | 11,514,098 | 8,380,359 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (2,648,721 | ) | 4,856,908 | |||||
| Net increase in net assets resulting from operations | 8,516,256 | 13,054,588 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 5,147,333 | 6,093,533 | ||||||
| C-Class | 2,786,279 | 5,836,319 | ||||||
| H-Class | 351,619,280 | 306,913,190 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (5,193,473 | ) | (6,186,951 | ) | ||||
| C-Class | (4,325,407 | ) | (6,337,463 | ) | ||||
| H-Class | (396,329,575 | ) | (278,786,299 | ) | ||||
| Net increase (decrease) from capital share transactions | (46,295,563 | ) | 27,532,329 | |||||
| Net increase (decrease) in net assets | (37,779,307 | ) | 40,586,917 | |||||
| Net assets: | ||||||||
| Beginning of year | 64,372,763 | 23,785,846 | ||||||
| End of year | $ | 26,593,456 | $ | 64,372,763 | ||||
| Accumulated net investment loss at end of year | $ | (68,833 | ) | $ | (151,408 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 98,241 | 150,735 | ||||||
| C-Class | 61,396 | 171,185 | ||||||
| H-Class | 6,703,452 | 8,203,357 | ||||||
| Shares redeemed | ||||||||
| A-Class | (102,024 | ) | (157,070 | ) | ||||
| C-Class | (99,832 | ) | (191,671 | ) | ||||
| H-Class | (7,636,463 | ) | (7,406,790 | ) | ||||
| Net increase (decrease) in shares | (975,230 | ) | 769,746 | |||||
| 60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MID-CAP 1.5x STRATEGY FUND
FINANCIAL HIGHLIGHTS
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.07 | $ | 36.23 | $ | 37.14 | $ | 26.89 | $ | 13.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.35 | ) | (.16 | ) | (.23 | ) | (.26 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 13.76 | 9.00 | (.68 | ) | 10.51 | 13.72 | ||||||||||||||
| Total from investment operations | 13.41 | 8.84 | (.91 | ) | 10.25 | 13.56 | ||||||||||||||
| Net asset value, end of period | $ | 58.48 | $ | 45.07 | $ | 36.23 | $ | 37.14 | $ | 26.89 | ||||||||||
| Total Returnb | 29.75 | % | 24.40 | % | (2.45 | %) | 38.12 | % | 101.73 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,632 | $ | 2,199 | $ | 1,997 | $ | 1,877 | $ | 1,567 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.68 | %) | (0.43 | %) | (0.68 | %) | (0.88 | %) | (0.79 | %) | ||||||||||
| Total expenses | 1.67 | % | 1.66 | % | 1.66 | % | 1.70 | % | 1.69 | % | ||||||||||
| Portfolio turnover rate | 563 | % | 447 | % | 141 | % | 211 | % | 219 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 40.97 | $ | 33.18 | $ | 34.26 | $ | 24.98 | $ | 12.47 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.64 | ) | (.41 | ) | (.43 | ) | (.43 | ) | (.27 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 12.44 | 8.20 | (.65 | ) | 9.71 | 12.78 | ||||||||||||||
| Total from investment operations | 11.80 | 7.79 | (1.08 | ) | 9.28 | 12.51 | ||||||||||||||
| Net asset value, end of period | $ | 52.77 | $ | 40.97 | $ | 33.18 | $ | 34.26 | $ | 24.98 | ||||||||||
| Total Returnb | 28.80 | % | 23.48 | % | (3.15 | %) | 37.15 | % | 100.32 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,549 | $ | 5,107 | $ | 4,815 | $ | 6,045 | $ | 4,069 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.40 | %) | (1.23 | %) | (1.42 | %) | (1.59 | %) | (1.43 | %) | ||||||||||
| Total expenses | 2.42 | % | 2.40 | % | 2.41 | % | 2.44 | % | 2.44 | % | ||||||||||
| Portfolio turnover rate | 563 | % | 447 | % | 141 | % | 211 | % | 219 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
MID-CAP 1.5x STRATEGY FUND
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 45.13 | $ | 36.27 | $ | 37.12 | $ | 26.89 | $ | 13.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.34 | ) | (.15 | ) | (.24 | ) | (.28 | ) | (.15 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 13.77 | 9.01 | (.61 | ) | 10.51 | 13.71 | ||||||||||||||
| Total from investment operations | 13.43 | 8.86 | (.85 | ) | 10.23 | 13.56 | ||||||||||||||
| Net asset value, end of period | $ | 58.56 | $ | 45.13 | $ | 36.27 | $ | 37.12 | $ | 26.89 | ||||||||||
| Total Returnb | 29.76 | % | 24.43 | % | (2.29 | %) | 38.04 | % | 101.73 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 19,413 | $ | 57,067 | $ | 16,974 | $ | 42,647 | $ | 30,825 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.66 | %) | (0.41 | %) | (0.72 | %) | (0.91 | %) | (0.73 | %) | ||||||||||
| Total expenses | 1.68 | % | 1.67 | % | 1.66 | % | 1.70 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | 563 | % | 447 | % | 141 | % | 211 | % | 219 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| 62 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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THE RYDEX FUNDS ANNUAL REPORT | 63
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
INVERSE MID-CAP STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match, before fees and expenses, the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is the inverse (opposite) of the performance of the S&P MidCap 400® Index (the “underlying index”). The Fund does not seek to achieve its investment objective over a period of time greater than one day.
For the one-year period ended March 31, 2014, Inverse Mid-Cap Strategy Fund H-Class returned -20.39%. Over the same period, its benchmark, the S&P MidCap 400 Index, returned 21.24%. Inverse Mid-Cap Strategy Fund achieved a daily correlation of 99% to its benchmark of -100% of the daily price movement of the S&P MidCap 400 Index.
Industrials and Financials provided the most performance to the underlying index during the year. No sector detracted, but Telecommunication Services and Utilities contributed least to the performance of the underlying index.
Keurig Green Mountain, Inc., Vertex Pharmaceuticals, Inc. and Under Armour, Inc. Class A contributed most performance to the underlying index for the period. Rackspace Hosting, Inc., Equinix, Inc. and Rayonier, Inc. were the largest detractors from performance of the underlying index for the period.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | |
| A-Class | March 31, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
64 | THE RYDEX FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | |||
| 1 Year | 5 Year | 10 Year | |
| A-Class Shares | -20.36% | -24.47% | -12.24% |
| A-Class Shares with sales charge† | -24.14% | -25.20% | -12.66% |
| C-Class Shares | -20.99% | -25.06% | -12.92% |
| C-Class Shares with CDSC‡ | -21.78% | -25.06% | -12.92% |
| H-Class Shares | -20.39% | -24.50% | -12.25% |
| S&P MidCap 400 Index | 21.24% | 24.86% | 10.14% |
| * | 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 MidCap 400 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE RYDEX FUNDS ANNUAL REPORT | 65
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE MID-CAP STRATEGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 99.0% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 2,178,554 | $ | 2,178,554 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 919,274 | 919,274 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 621,645 | 621,645 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 289,634 | 289,634 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $4,009,107) | 4,009,107 | |||||||
| Total Investments - 99.0% | ||||||||
| (Cost $4,009,107) | $ | 4,009,107 | ||||||
| Other Assets & Liabilities, net - 1.0% | 39,952 | |||||||
| Total Net Assets - 100.0% | $ | 4,049,059 | ||||||
| Unrealized | ||||||||
| Units | Loss | |||||||
| OTC EQUITY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/28/142 | ||||||||
| (Notional Value $848,027) | 615 | $ | (4,586 | ) | ||||
| Goldman Sachs International | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/29/142 | ||||||||
| (Notional Value $586,359) | 425 | (10,618 | ) | |||||
| Barclays Bank plc | ||||||||
| April 2014 S&P MidCap 400 Index | ||||||||
| Swap, Terminating 04/30/142 | ||||||||
| (Notional Value $2,573,519) | 1,867 | (38,063 | ) | |||||
| (Total Notional Value | ||||||||
| $4,007,905) | $ | (53,267 | ) | |||||
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreements — See Note 5. |
| 2 | Total Return based on S&P MidCap 400 Index +/- financing at a variable rate. |
| plc — Public Limited Company |
| 66 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE MID-CAP STRATEGY FUND
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $4,009,107) | $ | 4,009,107 | ||
| Segregated cash with broker | 235,875 | |||
| Receivables: | ||||
| Fund shares sold | 39,559 | |||
| Interest | 3 | |||
| Total assets | 4,284,544 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 53,267 | |||
| Payable for: | ||||
| Fund shares redeemed | 170,824 | |||
| Swap settlement | 4,123 | |||
| Management fees | 2,786 | |||
| Distribution and service fees | 852 | |||
| Transfer agent and administrative fees | 774 | |||
| Portfolio accounting fees | 310 | |||
| Miscellaneous | 2,549 | |||
| Total liabilities | 235,485 | |||
| Net assets | $ | 4,049,059 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 20,990,642 | ||
| Accumulated net investment loss | (15,573 | ) | ||
| Accumulated net realized loss on investments | (16,872,743 | ) | ||
| Net unrealized depreciation on investments | (53,267 | ) | ||
| Net assets | $ | 4,049,059 | ||
| A-Class: | ||||
| Net assets | $ | 92,714 | ||
| Capital shares outstanding | 2,608 | |||
| Net asset value per share | $ | 35.55 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 37.32 | ||
| C-Class: | ||||
| Net assets | $ | 131,111 | ||
| Capital shares outstanding | 3,999 | |||
| Net asset value per share | $ | 32.78 | ||
| H-Class: | ||||
| Net assets | $ | 3,825,234 | ||
| Capital shares outstanding | 107,795 | |||
| Net asset value per share | $ | 35.49 |
STATEMENT OF
OPERATIONS
Year Ended March 31, 2014
| Investment Income: | ||||
| Interest | $ | 908 | ||
| Total investment income | 908 | |||
| Expenses: | ||||
| Management fees | 35,106 | |||
| Transfer agent and administrative fees | 9,752 | |||
| Distribution and service fees: | ||||
| A-Class | 100 | |||
| C-Class | 1,991 | |||
| H-Class | 9,154 | |||
| Portfolio accounting fees | 3,900 | |||
| Custodian fees | 447 | |||
| Trustees’ fees* | 368 | |||
| Miscellaneous | 5,966 | |||
| Total expenses | 66,784 | |||
| Net investment loss | (65,876 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | (711,420 | ) | ||
| Futures contracts | (307,841 | ) | ||
| Net realized loss | (1,019,261 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Swap agreements | (47,768 | ) | ||
| Futures contracts | 29,490 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | (18,278 | ) | ||
| Net realized and unrealized loss | (1,037,539 | ) | ||
| Net decrease in net assets resulting from operations | $ | (1,103,415 | ) | |
* 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 | 67 |
INVERSE MID-CAP STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (65,876 | ) | $ | (62,762 | ) | ||
| Net realized loss on investments | (1,019,261 | ) | (835,742 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | (18,278 | ) | (40,001 | ) | ||||
| Net decrease in net assets resulting from operations | (1,103,415 | ) | (938,505 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 581,605 | 25,409 | ||||||
| C-Class | 465,260 | 2,334,604 | ||||||
| H-Class | 36,107,700 | 37,209,370 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (499,127 | ) | (107,844 | ) | ||||
| C-Class | (494,432 | ) | (2,099,321 | ) | ||||
| H-Class | (32,658,493 | ) | (36,588,355 | ) | ||||
| Net increase from capital share transactions | 3,502,513 | 773,863 | ||||||
| Net increase (decrease) in net assets | 2,399,098 | (164,642 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 1,649,961 | 1,814,603 | ||||||
| End of year | $ | 4,049,059 | $ | 1,649,961 | ||||
| Accumulated net investment loss at end of year | $ | (15,573 | ) | $ | (11,126 | ) | ||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| A-Class | 15,265 | 492 | ||||||
| C-Class | 11,703 | 44,783 | ||||||
| H-Class | 900,020 | 687,573 | ||||||
| Shares redeemed | ||||||||
| A-Class | (13,229 | ) | (2,034 | ) | ||||
| C-Class | (12,899 | ) | (41,950 | ) | ||||
| H-Class | (823,824 | ) | (684,896 | ) | ||||
| Net increase in shares | 77,036 | 3,968 | ||||||
| * | Capital share activity for the period presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements. |
| 68 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 44.64 | $ | 54.64 | $ | 61.14 | $ | 82.10 | $ | 144.64 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.64 | ) | (.84 | ) | (1.02 | ) | (1.17 | ) | (1.56 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (8.45 | ) | (9.16 | ) | (5.48 | ) | (19.79 | ) | (60.98 | ) | ||||||||||
| Total from investment operations | (9.09 | ) | (10.00 | ) | (6.50 | ) | (20.96 | ) | (62.54 | ) | ||||||||||
| Net asset value, end of period | $ | 35.55 | $ | 44.64 | $ | 54.64 | $ | 61.14 | $ | 82.10 | ||||||||||
| Total Returnb | (20.36 | %) | (18.29 | %) | (10.65 | %) | (25.54 | %) | (43.23 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 93 | $ | 26 | $ | 115 | $ | 268 | $ | 733 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.65 | %) | (1.52 | %) | (1.63 | %) | (1.54 | %) | (1.56 | %) | ||||||||||
| Total expenses | 1.67 | % | 1.64 | % | 1.66 | % | 1.69 | % | 1.69 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | c | 2013 | c | 2012 | c | 2011 | c | 2010 | c | ||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.49 | $ | 51.18 | $ | 57.72 | $ | 78.09 | $ | 138.72 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.90 | ) | (1.14 | ) | (1.44 | ) | (1.65 | ) | (2.25 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (7.81 | ) | (8.55 | ) | (5.10 | ) | (18.72 | ) | (58.38 | ) | ||||||||||
| Total from investment operations | (8.71 | ) | (9.69 | ) | (6.54 | ) | (20.37 | ) | (60.63 | ) | ||||||||||
| Net asset value, end of period | $ | 32.78 | $ | 41.49 | $ | 51.18 | $ | 57.72 | $ | 78.09 | ||||||||||
| Total Returnb | (20.99 | %) | (18.93 | %) | (11.33 | %) | (26.09 | %) | (43.71 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 131 | $ | 216 | $ | 121 | $ | 337 | $ | 268 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.40 | %) | (2.29 | %) | (2.39 | %) | (2.29 | %) | (2.30 | %) | ||||||||||
| Total expenses | 2.42 | % | 2.40 | % | 2.42 | % | 2.44 | % | 2.43 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
| INVERSE MID-CAP STRATEGY FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | c | 2013 | c | 2012 | c | 2011 | c | 2010 | c | ||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 44.59 | $ | 54.57 | $ | 61.08 | $ | 82.06 | $ | 144.62 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.66 | ) | (.81 | ) | (1.05 | ) | (1.20 | ) | (1.65 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (8.44 | ) | (9.17 | ) | (5.46 | ) | (19.78 | ) | (60.91 | ) | ||||||||||
| Total from investment operations | (9.10 | ) | (9.98 | ) | (6.51 | ) | (20.98 | ) | (62.56 | ) | ||||||||||
| Net asset value, end of period | $ | 35.49 | $ | 44.59 | $ | 54.57 | $ | 61.08 | $ | 82.06 | ||||||||||
| Total Returnb | (20.39 | %) | (18.31 | %) | (10.66 | %) | (25.56 | %) | (43.27 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,825 | $ | 1,409 | $ | 1,578 | $ | 1,845 | $ | 2,891 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.65 | %) | (1.53 | %) | (1.64 | %) | (1.53 | %) | (1.55 | %) | ||||||||||
| Total expenses | 1.67 | % | 1.65 | % | 1.67 | % | 1.69 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements. |
| 70 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 71 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 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 March 31, 2014, 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 H-Class returned 35.40%, while the Russell 2000 Index returned 24.90% over the same time period.
Among sectors, the biggest performance contributors to the underlying index during the period were Information Technology and Health Care. No sector detracted. Telecommunication Services contributed least to performance of the underlying index for the period, followed by the Utilities sector.
SunEdison, Inc., Isis Pharmaceuticals, Inc. and Rite Aid Corp. were the largest contributors to performance of the underlying index for the year. Axiall Corp., Infinity Pharmaceuticals, Inc. and Coeur Mining, Inc. were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | |
| A-Class | March 31, 2004 |
| C-Class | January 23, 2001 |
| H-Class | November 1, 2000 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| athenahealth, Inc. | 0.3 | % | ||
| Acuity Brands, Inc. | 0.3 | % | ||
| Middleby Corp. | 0.2 | % | ||
| CoStar Group, Inc. | 0.2 | % | ||
| SunEdison, Inc. | 0.2 | % | ||
| Isis Pharmaceuticals, Inc. | 0.2 | % | ||
| Rite Aid Corp. | 0.2 | % | ||
| NorthStar Realty Finance Corp. | 0.2 | % | ||
| Kate Spade & Co. | 0.2 | % | ||
| FEI Co. | 0.2 | % | ||
| Top Ten Total | 2.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 72 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
| Average Annual Returns* | |||
| Periods Ended March 31, 2014 | |||
| 1 Year | 5 Year | 10 Year | ||||||||||
| A-Class Shares | 35.38 | % | 33.63 | % | 7.83 | % | ||||||
| A-Class Shares with sales charge† | 28.95 | % | 32.35 | % | 7.31 | % | ||||||
| C-Class Shares | 34.38 | % | 32.64 | % | 7.00 | % | ||||||
| C-Class Shares with CDSC‡ | 33.38 | % | 32.64 | % | 7.00 | % | ||||||
| H-Class Shares | 35.40 | % | 33.63 | % | 7.81 | % | ||||||
| Russell 2000 Index | 24.90 | % | 24.31 | % | 8.53 | % | ||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
| THE RYDEX FUNDS ANNUAL REPORT | 73 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| COMMON STOCKS† - 73.0% | ||||||||
| FINANCIALS - 16.9% | ||||||||
| NorthStar Realty Finance Corp. | 2,653 | $ | 42,819 | |||||
| Prosperity Bancshares, Inc. | 568 | 37,573 | ||||||
| CNO Financial Group, Inc. | 2,075 | 37,558 | ||||||
| FirstMerit Corp. | 1,567 | 32,641 | ||||||
| Highwoods Properties, Inc. | 833 | 31,996 | ||||||
| RLJ Lodging Trust | 1,163 | 31,098 | ||||||
| LaSalle Hotel Properties | 989 | 30,966 | ||||||
| Hancock Holding Co. | 803 | 29,430 | ||||||
| Stifel Financial Corp.* | 587 | 29,208 | ||||||
| Prospect Capital Corp. | 2,608 | 28,165 | ||||||
| Portfolio Recovery Associates, Inc.* | 478 | 27,656 | ||||||
| First American Financial Corp. | 1,009 | 26,788 | ||||||
| Webster Financial Corp. | 850 | 26,401 | ||||||
| MGIC Investment Corp.* | 3,040 | 25,902 | ||||||
| EPR Properties | 484 | 25,841 | ||||||
| Texas Capital Bancshares, Inc.* | 394 | 25,586 | ||||||
| Primerica, Inc. | 529 | 24,921 | ||||||
| Radian Group, Inc. | 1,619 | 24,334 | ||||||
| Financial Engines, Inc. | 458 | 23,256 | ||||||
| Sunstone Hotel Investors, Inc. | 1,673 | 22,970 | ||||||
| BancorpSouth, Inc. | 891 | 22,239 | ||||||
| UMB Financial Corp. | 336 | 21,739 | ||||||
| Healthcare Realty Trust, Inc. | 894 | 21,590 | ||||||
| DCT Industrial Trust, Inc. | 2,722 | 21,450 | ||||||
| Sovran Self Storage, Inc. | 292 | 21,447 | ||||||
| CubeSmart | 1,247 | 21,399 | ||||||
| DiamondRock Hospitality Co. | 1,820 | 21,385 | ||||||
| Geo Group, Inc. | 658 | 21,214 | ||||||
| MarketAxess Holdings, Inc. | 358 | 21,201 | ||||||
| Invesco Mortgage Capital, Inc. | 1,264 | 20,818 | ||||||
| Bank of the Ozarks, Inc. | 298 | 20,282 | ||||||
| American Realty Capital Properties, Inc. | 1,446 | 20,274 | ||||||
| Susquehanna Bancshares, Inc. | 1,739 | 19,807 | ||||||
| Pebblebrook Hotel Trust | 585 | 19,755 | ||||||
| First Industrial Realty Trust, Inc. | 1,014 | 19,590 | ||||||
| Glacier Bancorp, Inc. | 673 | 19,564 | ||||||
| Medical Properties Trust, Inc. | 1,519 | 19,428 | ||||||
| Umpqua Holdings Corp. | 1,037 | 19,330 | ||||||
| IBERIABANK Corp. | 272 | 19,081 | ||||||
| United Bankshares, Inc. | 618 | 18,923 | ||||||
| First Financial Bankshares, Inc. | 306 | 18,908 | ||||||
| FNB Corp. | 1,410 | 18,894 | ||||||
| PrivateBancorp, Inc. — Class A | 608 | 18,550 | ||||||
| Cathay General Bancorp | 734 | 18,489 | ||||||
| Lexington Realty Trust | 1,675 | 18,274 | ||||||
| Cousins Properties, Inc. | 1,585 | 18,180 | ||||||
| RLI Corp. | 410 | 18,138 | ||||||
| Ryman Hospitality Properties, Inc. | 415 | 17,646 | ||||||
| Apollo Investment Corp. | 2,111 | 17,542 | ||||||
| Capitol Federal Financial, Inc. | 1,390 | 17,445 | ||||||
| Strategic Hotels & Resorts, Inc.* | 1,695 | 17,272 | ||||||
| Wintrust Financial Corp. | 354 | 17,226 | ||||||
| Chambers Street Properties | 2,213 | 17,195 | ||||||
| Alexander & Baldwin, Inc. | 404 | 17,194 | ||||||
| EastGroup Properties, Inc. | 273 | 17,174 | ||||||
| Evercore Partners, Inc. — Class A | 310 | 17,127 | ||||||
| Western Alliance Bancorporation* | 684 | 16,826 | ||||||
| Altisource Residential Corp. | 516 | 16,285 | ||||||
| Platinum Underwriters Holdings Ltd. | 270 | 16,227 | ||||||
| PennyMac Mortgage Investment Trust | 675 | 16,133 | ||||||
| MB Financial, Inc. | 521 | 16,130 | ||||||
| Trustmark Corp. | 636 | 16,123 | ||||||
| National Health Investors, Inc. | 263 | 15,901 | ||||||
| Redwood Trust, Inc. | 764 | 15,494 | ||||||
| Colony Financial, Inc. | 702 | 15,409 | ||||||
| Symetra Financial Corp. | 776 | 15,380 | ||||||
| New Residential Investment Corp. | 2,374 | 15,360 | ||||||
| Janus Capital Group, Inc. | 1,395 | 15,164 | ||||||
| PS Business Parks, Inc. | 181 | 15,135 | ||||||
| First Financial Holdings, Inc. | 241 | 15,091 | ||||||
| PacWest Bancorp | 349 | 15,010 | ||||||
| EverBank Financial Corp. | 753 | 14,857 | ||||||
| Washington Real Estate Investment Trust | 621 | 14,829 | ||||||
| American Equity Investment Life Holding Co. | 621 | 14,668 | ||||||
| Sun Communities, Inc. | 325 | 14,654 | ||||||
| Potlatch Corp. | 378 | 14,625 | ||||||
| Home BancShares, Inc. | 423 | 14,560 | ||||||
| Community Bank System, Inc. | 372 | 14,515 | ||||||
| ARMOUR Residential REIT, Inc. | 3,509 | 14,457 | ||||||
| Home Loan Servicing Solutions Ltd. | 669 | 14,450 | ||||||
| Old National Bancorp | 953 | 14,209 | ||||||
| PHH Corp.* | 545 | 14,083 | ||||||
| Hilltop Holdings, Inc.* | 590 | 14,036 | ||||||
| Acadia Realty Trust | 530 | 13,982 | ||||||
| DuPont Fabros Technology, Inc. | 570 | 13,720 | ||||||
| Westamerica Bancorporation | 253 | 13,682 | ||||||
| CVB Financial Corp. | 854 | 13,579 | ||||||
| Columbia Banking System, Inc. | 476 | 13,576 | ||||||
| Glimcher Realty Trust | 1,348 | 13,520 | ||||||
| Kennedy-Wilson Holdings, Inc. | 599 | 13,483 | ||||||
| First Cash Financial Services, Inc.* | 267 | 13,473 | ||||||
| CYS Investments, Inc. | 1,624 | 13,414 | ||||||
| Greenhill & Company, Inc. | 254 | 13,203 | ||||||
| Government Properties Income Trust | 523 | 13,180 | ||||||
| Investors Bancorp, Inc. | 471 | 13,018 | ||||||
| Northwest Bancshares, Inc. | 884 | 12,906 | ||||||
| Ambac Financial Group, Inc.* | 414 | 12,846 | ||||||
| Enstar Group Ltd.* | 94 | 12,813 | ||||||
| Equity One, Inc. | 573 | 12,801 | ||||||
| BBCN Bancorp, Inc. | 742 | 12,718 | ||||||
| Montpelier Re Holdings Ltd. | 422 | 12,559 | ||||||
| Selective Insurance Group, Inc. | 531 | 12,383 | ||||||
| LTC Properties, Inc. | 329 | 12,380 | ||||||
| WisdomTree Investments, Inc.* | 939 | 12,320 | ||||||
| International Bancshares Corp. | 491 | 12,314 | ||||||
| Fifth Street Finance Corp. | 1,282 | 12,128 | ||||||
| Pinnacle Financial Partners, Inc. | 323 | 12,109 | ||||||
| Main Street Capital Corp. | 365 | 11,994 | ||||||
| Chesapeake Lodging Trust | 464 | 11,939 | ||||||
| First Midwest Bancorp, Inc. | 692 | 11,819 | ||||||
| Virtus Investment Partners, Inc.* | 68 | 11,776 | ||||||
| 74 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| iStar Financial, Inc.* | 793 | $ | 11,705 | |||||
| Argo Group International Holdings Ltd. | 253 | 11,613 | ||||||
| Astoria Financial Corp. | 835 | 11,540 | ||||||
| National Penn Bancshares, Inc. | 1,098 | 11,474 | ||||||
| Capstead Mortgage Corp. | 905 | 11,457 | ||||||
| Pennsylvania Real Estate Investment Trust | 634 | 11,444 | ||||||
| Empire State Realty Trust, Inc. — Class A | 755 | 11,408 | ||||||
| Hersha Hospitality Trust — Class A | 1,904 | 11,100 | ||||||
| Horace Mann Educators Corp. | 381 | 11,049 | ||||||
| ViewPoint Financial Group, Inc. | 381 | 10,992 | ||||||
| AmTrust Financial Services, Inc. | 290 | 10,907 | ||||||
| Encore Capital Group, Inc.* | 235 | 10,740 | ||||||
| Sterling Financial Corp. | 322 | 10,732 | ||||||
| Franklin Street Properties Corp. | 847 | 10,672 | ||||||
| American Assets Trust, Inc. | 315 | 10,628 | ||||||
| Hudson Pacific Properties, Inc. | 460 | 10,612 | ||||||
| FelCor Lodging Trust, Inc. | 1,167 | 10,550 | ||||||
| Education Realty Trust, Inc. | 1,065 | 10,512 | ||||||
| Walter Investment Management Corp.* | 349 | 10,411 | ||||||
| Union First Market Bankshares Corp. | 408 | 10,371 | ||||||
| Cash America International, Inc. | 266 | 10,300 | ||||||
| NBT Bancorp, Inc. | 421 | 10,298 | ||||||
| Provident Financial Services, Inc. | 553 | 10,159 | ||||||
| Alexander’s, Inc. | 28 | 10,108 | ||||||
| HFF, Inc. — Class A | 300 | 10,083 | ||||||
| Ramco-Gershenson Properties Trust | 611 | 9,959 | ||||||
| Boston Private Financial Holdings, Inc. | 736 | 9,958 | ||||||
| Credit Acceptance Corp.* | 70 | 9,951 | ||||||
| Retail Opportunity Investments Corp. | 666 | 9,950 | ||||||
| BofI Holding, Inc.* | 116 | 9,947 | ||||||
| Parkway Properties, Inc. | 545 | 9,946 | ||||||
| Sterling Bancorp | 781 | 9,887 | ||||||
| First Financial Bancorp | 540 | 9,709 | ||||||
| Sabra Health Care REIT, Inc. | 346 | 9,650 | ||||||
| American Capital Mortgage Investment Corp. | 511 | 9,591 | ||||||
| Solar Capital Ltd. | 433 | 9,431 | ||||||
| STAG Industrial, Inc. | 388 | 9,351 | ||||||
| Associated Estates Realty Corp. | 536 | 9,080 | ||||||
| Nelnet, Inc. — Class A | 222 | 9,080 | ||||||
| Independent Bank Corp. | 230 | 9,055 | ||||||
| Chemical Financial Corp. | 279 | 9,054 | ||||||
| eHealth, Inc.* | 177 | 8,991 | ||||||
| Greenlight Capital Re Ltd. — Class A* | 269 | 8,823 | ||||||
| National Bank Holdings Corp. — Class A | 434 | 8,710 | ||||||
| Renasant Corp. | 297 | 8,628 | ||||||
| Investors Real Estate Trust | 958 | 8,603 | ||||||
| Inland Real Estate Corp. | 800 | 8,440 | ||||||
| First Commonwealth Financial Corp. | 917 | 8,290 | ||||||
| WesBanco, Inc. | 260 | 8,276 | ||||||
| Park National Corp. | 107 | 8,227 | ||||||
| Hercules Technology Growth Capital, Inc. | 573 | 8,062 | ||||||
| Eagle Bancorp, Inc.* | 223 | 8,050 | ||||||
| KCG Holdings, Inc. — Class A* | 667 | 7,957 | ||||||
| United Community Banks, Inc.* | 405 | 7,861 | ||||||
| Infinity Property & Casualty Corp. | 116 | 7,845 | ||||||
| BGC Partners, Inc. — Class A | 1,191 | 7,789 | ||||||
| Banner Corp. | 186 | 7,665 | ||||||
| Banco Latinoamericano de Comercio | ||||||||
| Exterior S.A. — Class E | 289 | 7,632 | ||||||
| OFG Bancorp | 435 | 7,478 | ||||||
| AMERISAFE, Inc. | 168 | 7,377 | ||||||
| Stewart Information Services Corp. | 209 | 7,342 | ||||||
| ICG Group, Inc.* | 357 | 7,290 | ||||||
| First Merchants Corp. | 335 | 7,249 | ||||||
| Kite Realty Group Trust | 1,194 | 7,164 | ||||||
| First Potomac Realty Trust | 553 | 7,145 | ||||||
| Cohen & Steers, Inc. | 179 | 7,133 | ||||||
| Piper Jaffray Cos.* | 154 | 7,053 | ||||||
| Northfield Bancorp, Inc. | 547 | 7,034 | ||||||
| PennantPark Investment Corp. | 629 | 6,950 | ||||||
| Investment Technology Group, Inc.* | 344 | 6,949 | ||||||
| Wilshire Bancorp, Inc. | 624 | 6,926 | ||||||
| Hanmi Financial Corp. | 296 | 6,897 | ||||||
| Summit Hotel Properties, Inc. | 740 | 6,867 | ||||||
| City Holding Co. | 152 | 6,819 | ||||||
| Lakeland Financial Corp. | 169 | 6,797 | ||||||
| Triangle Capital Corp. | 262 | 6,783 | ||||||
| Anworth Mortgage Asset Corp. | 1,366 | 6,775 | ||||||
| Oritani Financial Corp. | 419 | 6,624 | ||||||
| Resource Capital Corp. | 1,181 | 6,578 | ||||||
| Select Income REIT | 217 | 6,569 | ||||||
| Ashford Hospitality Trust, Inc. | 581 | 6,548 | ||||||
| S&T Bancorp, Inc. | 272 | 6,446 | ||||||
| Berkshire Hills Bancorp, Inc. | 247 | 6,392 | ||||||
| BlackRock Kelso Capital Corp. | 696 | 6,382 | ||||||
| Tompkins Financial Corp. | 130 | 6,365 | ||||||
| Safety Insurance Group, Inc. | 118 | 6,354 | ||||||
| RAIT Financial Trust | 742 | 6,300 | ||||||
| Golub Capital BDC, Inc. | 350 | 6,244 | ||||||
| TrustCo Bank Corp. NY | 881 | 6,202 | ||||||
| Brookline Bancorp, Inc. | 657 | 6,189 | ||||||
| Navigators Group, Inc.* | 100 | 6,139 | ||||||
| United Fire Group, Inc. | 200 | 6,070 | ||||||
| Flushing Financial Corp. | 288 | 6,068 | ||||||
| New Mountain Finance Corp. | 416 | 6,053 | ||||||
| CoreSite Realty Corp. | 193 | 5,983 | ||||||
| Bancorp, Inc.* | 316 | 5,944 | ||||||
| Sandy Spring Bancorp, Inc. | 235 | 5,870 | ||||||
| National Western Life | ||||||||
| Insurance Co. — Class A | 24 | 5,868 | ||||||
| Forestar Group, Inc.* | 328 | 5,838 | ||||||
| Apollo Commercial Real Estate | ||||||||
| Finance, Inc. | 351 | 5,837 | ||||||
| Excel Trust, Inc. | 459 | 5,820 | ||||||
| World Acceptance Corp.* | 77 | 5,781 | ||||||
| Employers Holdings, Inc. | 285 | 5,766 | ||||||
| Capital Bank Financial Corp. — Class A* | 229 | 5,750 | ||||||
| Maiden Holdings Ltd. | 456 | 5,691 | ||||||
| PICO Holdings, Inc.* | 218 | 5,666 | ||||||
| Simmons First National Corp. — Class A | 152 | 5,665 | ||||||
| Springleaf Holdings, Inc.* | 222 | 5,583 | ||||||
| Ameris Bancorp* | 236 | 5,499 | ||||||
| TCP Capital Corp. | 329 | 5,445 | ||||||
| New York Mortgage Trust, Inc. | 692 | 5,384 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 75 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Campus Crest Communities, Inc. | 616 | $ | 5,347 | |||||
| Southside Bancshares, Inc. | 168 | 5,272 | ||||||
| State Bank Financial Corp. | 298 | 5,272 | ||||||
| Universal Health Realty Income Trust | 124 | 5,238 | ||||||
| Community Trust Bancorp, Inc. | 126 | 5,226 | ||||||
| Cardinal Financial Corp. | 293 | 5,224 | ||||||
| GAMCO Investors, Inc. — Class A | 67 | 5,203 | ||||||
| EZCORP, Inc. — Class A* | 481 | 5,190 | ||||||
| Washington Trust Bancorp, Inc. | 138 | 5,171 | ||||||
| Westwood Holdings Group, Inc. | 82 | 5,141 | ||||||
| FXCM, Inc. — Class A | 345 | 5,096 | ||||||
| Dime Community Bancshares, Inc. | 295 | 5,009 | ||||||
| Medley Capital Corp. | 368 | 5,008 | ||||||
| Chatham Lodging Trust | 244 | 4,934 | ||||||
| WSFS Financial Corp. | 69 | 4,929 | ||||||
| TICC Capital Corp. | 503 | 4,919 | ||||||
| Apollo Residential Mortgage, Inc. | 303 | 4,918 | ||||||
| Western Asset Mortgage Capital Corp. | 309 | 4,833 | ||||||
| Green Dot Corp. — Class A* | 247 | 4,824 | ||||||
| First Interstate Bancsystem, Inc. — Class A | 170 | 4,797 | ||||||
| Urstadt Biddle Properties, Inc. — Class A | 232 | 4,793 | ||||||
| Capital Southwest Corp. | 137 | 4,757 | ||||||
| AG Mortgage Investment Trust, Inc. | 270 | 4,728 | ||||||
| Getty Realty Corp. | 247 | 4,666 | ||||||
| Essent Group Ltd.* | 206 | 4,627 | ||||||
| 1st Source Corp. | 144 | 4,621 | ||||||
| THL Credit, Inc. | 331 | 4,568 | ||||||
| Dynex Capital, Inc. | 509 | 4,556 | ||||||
| Terreno Realty Corp. | 239 | 4,519 | ||||||
| Customers Bancorp, Inc.* | 207 | 4,320 | ||||||
| Safeguard Scientifics, Inc.* | 193 | 4,281 | ||||||
| Flagstar Bancorp, Inc.* | 191 | 4,244 | ||||||
| Central Pacific Financial Corp. | 209 | 4,222 | ||||||
| Tejon Ranch Co.* | 124 | 4,195 | ||||||
| Arlington Asset Investment Corp. — Class A | 158 | 4,184 | ||||||
| Cedar Realty Trust, Inc. | 680 | 4,155 | ||||||
| Rouse Properties, Inc. | 239 | 4,120 | ||||||
| SY Bancorp, Inc. | 129 | 4,082 | ||||||
| Trico Bancshares | 156 | 4,045 | ||||||
| Agree Realty Corp. | 132 | 4,014 | ||||||
| Monmouth Real Estate Investment | ||||||||
| Corp. — Class A | 419 | 3,997 | ||||||
| Cowen Group, Inc. — Class A* | 905 | 3,991 | ||||||
| Beneficial Mutual Bancorp, Inc.* | 300 | 3,957 | ||||||
| Diamond Hill Investment Group, Inc. | 30 | 3,943 | ||||||
| FBL Financial Group, Inc. — Class A | 91 | 3,942 | ||||||
| First Busey Corp. | 678 | 3,932 | ||||||
| CoBiz Financial, Inc. | 339 | 3,905 | ||||||
| Bryn Mawr Bank Corp. | 135 | 3,879 | ||||||
| Taylor Capital Group, Inc.* | 162 | 3,875 | ||||||
| Lakeland Bancorp, Inc. | 343 | 3,859 | ||||||
| Third Point Reinsurance Ltd.* | 243 | 3,852 | ||||||
| BancFirst Corp. | 68 | 3,851 | ||||||
| CyrusOne, Inc. | 180 | 3,749 | ||||||
| Saul Centers, Inc. | 79 | 3,741 | ||||||
| First BanCorp* | 685 | 3,726 | ||||||
| TowneBank | 240 | 3,722 | ||||||
| Heartland Financial USA, Inc. | 136 | 3,671 | ||||||
| Enterprise Financial Services Corp. | 180 | 3,613 | ||||||
| German American Bancorp, Inc. | 121 | 3,496 | ||||||
| Federal Agricultural Mortgage | ||||||||
| Corp. — Class C | 105 | 3,491 | ||||||
| First Financial Corp. | 103 | 3,469 | ||||||
| Rockville Financial, Inc. | 255 | 3,465 | ||||||
| Winthrop Realty Trust | 299 | 3,465 | ||||||
| First Bancorp | 181 | 3,439 | ||||||
| OneBeacon Insurance Group Ltd. — Class A | 222 | 3,432 | ||||||
| NewStar Financial, Inc.* | 247 | 3,423 | ||||||
| HCI Group, Inc. | 94 | 3,422 | ||||||
| MainSource Financial Group, Inc. | 199 | 3,403 | ||||||
| First of Long Island Corp. | 83 | 3,371 | ||||||
| DFC Global Corp.* | 375 | 3,311 | ||||||
| Univest Corporation of Pennsylvania | 160 | 3,283 | ||||||
| Camden National Corp. | 79 | 3,255 | ||||||
| United Financial Bancorp, Inc. | 175 | 3,218 | ||||||
| QTS Realty Trust, Inc. — Class A | 128 | 3,212 | ||||||
| Centerstate Banks, Inc. | 288 | 3,145 | ||||||
| HomeTrust Bancshares, Inc.* | 198 | 3,124 | ||||||
| Hudson Valley Holding Corp. | 164 | 3,124 | ||||||
| Preferred Bank/Los Angeles CA* | 120 | 3,115 | ||||||
| BNC Bancorp | 179 | 3,102 | ||||||
| AmREIT, Inc. — Class B | 187 | 3,099 | ||||||
| Southwest Bancorp, Inc. | 175 | 3,091 | ||||||
| State Auto Financial Corp. | 145 | 3,090 | ||||||
| Universal Insurance Holdings, Inc. | 237 | 3,010 | ||||||
| Financial Institutions, Inc. | 129 | 2,970 | ||||||
| Whitestone REIT — Class B | 202 | 2,917 | ||||||
| Citizens, Inc.* | 394 | 2,916 | ||||||
| RE/MAX Holdings, Inc. — Class A* | 101 | 2,912 | ||||||
| Pacific Premier Bancorp, Inc.* | 180 | 2,905 | ||||||
| MVC Capital, Inc. | 213 | 2,886 | ||||||
| Ladenburg Thalmann Financial Services, Inc.* | 955 | 2,884 | ||||||
| Great Southern Bancorp, Inc. | 96 | 2,883 | ||||||
| Arrow Financial Corp. | 109 | 2,882 | ||||||
| Gramercy Property Trust, Inc. | 558 | 2,879 | ||||||
| Park Sterling Corp. | 429 | 2,853 | ||||||
| Yadkin Financial Corp.* | 132 | 2,826 | ||||||
| Bank Mutual Corp. | 443 | 2,809 | ||||||
| Meadowbrook Insurance Group, Inc. | 479 | 2,793 | ||||||
| Suffolk Bancorp* | 124 | 2,765 | ||||||
| Washington Banking Co. | 154 | 2,738 | ||||||
| Crawford & Co. — Class B | 250 | 2,728 | ||||||
| Metro Bancorp, Inc.* | 128 | 2,706 | ||||||
| National Bankshares, Inc. | 74 | 2,702 | ||||||
| Peoples Bancorp, Inc. | 108 | 2,671 | ||||||
| Bridge Bancorp, Inc. | 99 | 2,644 | ||||||
| Phoenix Companies, Inc.* | 51 | 2,639 | ||||||
| Oppenheimer Holdings, Inc. — Class A | 94 | 2,637 | ||||||
| Citizens & Northern Corp. | 133 | 2,621 | ||||||
| Physicians Realty Trust | 188 | 2,617 | ||||||
| Medallion Financial Corp. | 198 | 2,616 | ||||||
| Meta Financial Group, Inc. | 58 | 2,601 | ||||||
| One Liberty Properties, Inc. | 122 | 2,601 | ||||||
| First Community Bancshares, Inc. | 158 | 2,585 | ||||||
| 76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Heritage Financial Corp. | 152 | $ | 2,572 | |||||
| Ares Commercial Real Estate Corp. | 191 | 2,561 | ||||||
| Ashford Hospitality Prime, Inc. | 169 | 2,555 | ||||||
| Aviv REIT, Inc. | 104 | 2,543 | ||||||
| Baldwin & Lyons, Inc. — Class B | 96 | 2,524 | ||||||
| HomeStreet, Inc. | 129 | 2,522 | ||||||
| Gladstone Commercial Corp. | 145 | 2,514 | ||||||
| MCG Capital Corp. | 659 | 2,498 | ||||||
| Walker & Dunlop, Inc.* | 152 | 2,485 | ||||||
| CNB Financial Corp. | 140 | 2,475 | ||||||
| First Defiance Financial Corp. | 91 | 2,468 | ||||||
| Independent Bank Group, Inc. | 42 | 2,468 | ||||||
| First Connecticut Bancorp, Inc. | 157 | 2,459 | ||||||
| Rexford Industrial Realty, Inc. | 172 | 2,439 | ||||||
| Fidus Investment Corp. | 126 | 2,433 | ||||||
| International. FCStone, Inc.* | 127 | 2,389 | ||||||
| OmniAmerican Bancorp, Inc. | 104 | 2,370 | ||||||
| GFI Group, Inc. | 660 | 2,343 | ||||||
| Consolidated-Tomoka Land Co. | 58 | 2,336 | ||||||
| Manning & Napier, Inc. — Class A | 139 | 2,331 | ||||||
| Pacific Continental Corp. | 169 | 2,325 | ||||||
| Center Bancorp, Inc. | 122 | 2,318 | ||||||
| Silver Bay Realty Trust Corp. | 149 | 2,312 | ||||||
| Calamos Asset Management, Inc. — Class A | 178 | 2,302 | ||||||
| FBR & Co.* | 89 | 2,299 | ||||||
| American Residential Properties, Inc.* | 127 | 2,283 | ||||||
| Charter Financial Corp. | 211 | 2,281 | ||||||
| Home Federal Bancorp, Inc. | 146 | 2,272 | ||||||
| Territorial Bancorp, Inc. | 105 | 2,268 | ||||||
| OceanFirst Financial Corp. | 128 | 2,264 | ||||||
| KCAP Financial, Inc. | 257 | 2,226 | ||||||
| Global Indemnity plc — Class A* | 84 | 2,213 | ||||||
| Bank of Marin Bancorp | 49 | 2,206 | ||||||
| Penns Woods Bancorp, Inc. | 44 | 2,146 | ||||||
| Guaranty Bancorp | 150 | 2,138 | ||||||
| JAVELIN Mortgage Investment Corp. | 159 | 2,132 | ||||||
| 1st United Bancorp, Inc. | 275 | 2,107 | ||||||
| Meridian Interstate Bancorp, Inc.* | 82 | 2,097 | ||||||
| Gladstone Investment Corp. | 251 | 2,076 | ||||||
| West Bancorporation, Inc. | 136 | 2,066 | ||||||
| Republic Bancorp, Inc. — Class A | 91 | 2,057 | ||||||
| Peapack Gladstone Financial Corp. | 93 | 2,046 | ||||||
| BankFinancial Corp. | 205 | 2,046 | ||||||
| SWS Group, Inc.* | 272 | 2,035 | ||||||
| Bridge Capital Holdings* | 85 | 2,020 | ||||||
| Franklin Financial Corp.* | 103 | 2,015 | ||||||
| Kearny Financial Corp.* | 136 | 2,010 | ||||||
| Fidelity Southern Corp. | 140 | 1,956 | ||||||
| Gladstone Capital Corp. | 194 | 1,956 | ||||||
| JGWPT Holdings, Inc. — Class A* | 107 | 1,954 | ||||||
| Kansas City Life Insurance Co. | 40 | 1,928 | ||||||
| Tree.com, Inc.* | 62 | 1,924 | ||||||
| Hannon Armstrong Sustainable | ||||||||
| Infrastructure Capital, Inc. | 134 | 1,923 | ||||||
| Fox Chase Bancorp, Inc. | 114 | 1,921 | ||||||
| Bank of Kentucky Financial Corp. | 51 | 1,915 | ||||||
| Armada Hoffler Properties, Inc. | 189 | 1,898 | ||||||
| Ames National Corp. | 86 | 1,895 | ||||||
| Seacoast Banking Corporation of Florida* | 171 | 1,881 | ||||||
| PennyMac Financial Services, | ||||||||
| Inc. — Class A* | 113 | 1,880 | ||||||
| Horizon Bancorp | 84 | 1,872 | ||||||
| United Community Financial Corp.* | 475 | 1,862 | ||||||
| PennantPark Floating Rate Capital Ltd. | 134 | 1,852 | ||||||
| Sierra Bancorp | 116 | 1,847 | ||||||
| MidWestOne Financial Group, Inc. | 73 | 1,843 | ||||||
| Solar Senior Capital Ltd. | 107 | 1,831 | ||||||
| GSV Capital Corp.* | 180 | 1,825 | ||||||
| CU Bancorp* | 98 | 1,803 | ||||||
| Banc of California, Inc. | 146 | 1,791 | ||||||
| First Bancorp, Inc. | 106 | 1,728 | ||||||
| Northrim BanCorp, Inc. | 66 | 1,696 | ||||||
| American National Bankshares, Inc. | 72 | 1,693 | ||||||
| Firsthand Technology Value Fund, Inc. | 79 | 1,687 | ||||||
| Marlin Business Services Corp. | 81 | 1,686 | ||||||
| NewBridge Bancorp* | 235 | 1,678 | ||||||
| ESB Financial Corp. | 128 | 1,673 | ||||||
| Stellus Capital Investment Corp. | 116 | 1,668 | ||||||
| Enterprise Bancorp, Inc. | 82 | 1,668 | ||||||
| National Interstate Corp. | 61 | 1,635 | ||||||
| Heritage Commerce Corp. | 201 | 1,620 | ||||||
| Farmers Capital Bank Corp.* | 72 | 1,617 | ||||||
| AV Homes, Inc.* | 89 | 1,610 | ||||||
| Mercantile Bank Corp. | 78 | 1,608 | ||||||
| Capital City Bank Group, Inc. | 120 | 1,594 | ||||||
| Bar Harbor Bankshares | 41 | 1,572 | ||||||
| Heritage Oaks Bancorp* | 191 | 1,543 | ||||||
| UMH Properties, Inc. | 155 | 1,516 | ||||||
| Nicholas Financial, Inc. | 96 | 1,510 | ||||||
| Merchants Bancshares, Inc. | 46 | 1,500 | ||||||
| EMC Insurance Group, Inc. | 42 | 1,492 | ||||||
| First Financial Northwest, Inc. | 143 | 1,451 | ||||||
| BBX Capital Corp. — Class A* | 74 | 1,439 | ||||||
| Tower Group International Ltd. | 529 | 1,428 | ||||||
| Provident Financial Holdings, Inc. | 90 | 1,388 | ||||||
| NGP Capital Resources Co. | 199 | 1,345 | ||||||
| First NBC Bank Holding Co.* | 37 | 1,290 | ||||||
| Sun Bancorp, Inc.* | 382 | 1,284 | ||||||
| First Security Group, Inc.* | 605 | 1,258 | ||||||
| Intervest Bancshares Corp. — Class A* | 167 | 1,244 | ||||||
| Pzena Investment Management, | ||||||||
| Inc. — Class A | 105 | 1,236 | ||||||
| Westfield Financial, Inc. | 165 | 1,229 | ||||||
| LCNB Corp. | 71 | 1,228 | ||||||
| Century Bancorp, Inc. — Class A | 36 | 1,228 | ||||||
| MidSouth Bancorp, Inc. | 72 | 1,212 | ||||||
| Home Bancorp, Inc.* | 57 | 1,196 | ||||||
| Ellington Residential Mortgage REIT | 70 | 1,184 | ||||||
| Macatawa Bank Corp. | 235 | 1,184 | ||||||
| Hallmark Financial Services, Inc.* | 142 | 1,180 | ||||||
| Regional Management Corp.* | 47 | 1,159 | ||||||
| Silvercrest Asset Management Group, | ||||||||
| Inc. — Class A | 63 | 1,152 | ||||||
| Horizon Technology Finance Corp. | 92 | 1,151 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Marcus & Millichap, Inc.* | 64 | $ | 1,142 | |||||
| Consumer Portfolio Services, Inc.* | 166 | 1,135 | ||||||
| C&F Financial Corp. | 34 | 1,127 | ||||||
| Gain Capital Holdings, Inc. | 103 | 1,113 | ||||||
| CommunityOne Bancorp* | 96 | 1,077 | ||||||
| Stonegate Mortgage Corp.* | 72 | 1,070 | ||||||
| Investors Title Co. | 14 | 1,063 | ||||||
| JMP Group, Inc. | 149 | 1,059 | ||||||
| Access National Corp. | 65 | 1,054 | ||||||
| Donegal Group, Inc. — Class A | 72 | 1,050 | ||||||
| Blue Capital Reinsurance Holdings Ltd.* | 60 | 1,043 | ||||||
| Clifton Bancorp, Inc. | 87 | 1,020 | ||||||
| ESSA Bancorp, Inc. | 93 | 1,011 | ||||||
| NASB Financial, Inc. | 40 | 1,008 | ||||||
| ZAIS Financial Corp. | 59 | 983 | ||||||
| Middleburg Financial Corp. | 55 | 969 | ||||||
| Independence Holding Co. | 71 | 953 | ||||||
| WhiteHorse Finance, Inc. | 66 | 929 | ||||||
| Resource America, Inc. — Class A | 108 | 926 | ||||||
| Tristate Capital Holdings, Inc.* | 65 | 924 | ||||||
| Imperial Holdings, Inc.* | 159 | 914 | ||||||
| VantageSouth Bancshares, Inc.* | 126 | 886 | ||||||
| Waterstone Financial, Inc.* | 82 | 852 | ||||||
| Chemung Financial Corp. | 30 | 814 | ||||||
| Capitala Finance Corp. | 41 | 790 | ||||||
| Garrison Capital, Inc. | 52 | 735 | ||||||
| ConnectOne Bancorp, Inc.* | 14 | 685 | ||||||
| Hingham Institution for Savings | 8 | 628 | ||||||
| CIFC Corp. | 75 | 611 | ||||||
| Palmetto Bancshares, Inc.* | 42 | 592 | ||||||
| RCS Capital Corp. — Class A | 14 | 545 | ||||||
| Doral Financial Corp.* | 62 | 538 | ||||||
| First Marblehead Corp.* | 85 | 513 | ||||||
| Hampton Roads Bankshares, Inc.* | 310 | 493 | ||||||
| Health Insurance Innovations, | ||||||||
| Inc. — Class A* | 44 | 455 | ||||||
| California First National Bancorp | 26 | 399 | ||||||
| Fortegra Financial Corp.* | 56 | 394 | ||||||
| Cascade Bancorp* | 69 | 386 | ||||||
| First Federal Bancshares of Arkansas, Inc.* | 22 | 202 | ||||||
| Total Financials | 3,614,023 | |||||||
| INFORMATION TECHNOLOGY - 13.0% | ||||||||
| CoStar Group, Inc.* | 262 | 48,926 | ||||||
| SunEdison, Inc.* | 2,499 | 47,082 | ||||||
| FEI Co. | 393 | 40,487 | ||||||
| PTC, Inc.* | 1,129 | 39,999 | ||||||
| Aspen Technology, Inc.* | 892 | 37,785 | ||||||
| Ultimate Software Group, Inc.* | 263 | 36,031 | ||||||
| WEX, Inc.* | 376 | 35,738 | ||||||
| ARRIS Group, Inc.* | 1,094 | 30,828 | ||||||
| MAXIMUS, Inc. | 640 | 28,711 | ||||||
| CommVault Systems, Inc.* | 434 | 28,187 | ||||||
| Belden, Inc. | 401 | 27,909 | ||||||
| Cognex Corp.* | 814 | 27,562 | ||||||
| ViaSat, Inc.* | 382 | 26,373 | ||||||
| Anixter International, Inc. | 254 | 25,787 | ||||||
| Manhattan Associates, Inc.* | 718 | 25,152 | ||||||
| Tyler Technologies, Inc.* | 295 | 24,686 | ||||||
| Acxiom Corp.* | 686 | 23,595 | ||||||
| Finisar Corp.* | 877 | 23,249 | ||||||
| Yelp, Inc. — Class A* | 300 | 23,080 | ||||||
| Verint Systems, Inc.* | 487 | 22,855 | ||||||
| ACI Worldwide, Inc.* | 381 | 22,551 | ||||||
| Guidewire Software, Inc.* | 456 | 22,367 | ||||||
| Microsemi Corp.* | 877 | 21,950 | ||||||
| Ciena Corp.* | 961 | 21,853 | ||||||
| SS&C Technologies Holdings, Inc.* | 544 | 21,771 | ||||||
| Convergys Corp. | 990 | 21,690 | ||||||
| j2 Global, Inc. | 427 | 21,372 | ||||||
| Cavium, Inc.* | 488 | 21,339 | ||||||
| Qlik Technologies, Inc.* | 801 | 21,299 | ||||||
| GT Advanced Technologies, Inc.*,1 | 1,230 | 20,972 | ||||||
| RF Micro Devices, Inc.* | 2,631 | 20,732 | ||||||
| TriQuint Semiconductor, Inc.* | 1,536 | 20,567 | ||||||
| Aruba Networks, Inc.* | 1,067 | 20,006 | ||||||
| Littelfuse, Inc. | 213 | 19,946 | ||||||
| Zillow, Inc. — Class A* | 226 | 19,911 | ||||||
| Hittite Microwave Corp. | 311 | 19,605 | ||||||
| Euronet Worldwide, Inc.* | 471 | 19,589 | ||||||
| Dealertrack Technologies, Inc.* | 396 | 19,479 | ||||||
| Mentor Graphics Corp. | 883 | 19,444 | ||||||
| Electronics for Imaging, Inc.* | 444 | 19,230 | ||||||
| Fair Isaac Corp. | 338 | 18,698 | ||||||
| Conversant, Inc.* | 648 | 18,241 | ||||||
| Plantronics, Inc. | 410 | 18,225 | ||||||
| Cornerstone OnDemand, Inc.* | 378 | 18,095 | ||||||
| Power Integrations, Inc. | 274 | 18,024 | ||||||
| Synaptics, Inc.* | 299 | 17,946 | ||||||
| International Rectifier Corp.* | 645 | 17,673 | ||||||
| Sapient Corp.* | 1,019 | 17,384 | ||||||
| OpenTable, Inc.* | 224 | 17,232 | ||||||
| Take-Two Interactive Software, Inc.* | 757 | 16,600 | ||||||
| CACI International, Inc. — Class A* | 222 | 16,384 | ||||||
| Cardtronics, Inc.* | 417 | 16,200 | ||||||
| Semtech Corp.* | 639 | 16,192 | ||||||
| Entegris, Inc.* | 1,300 | 15,743 | ||||||
| TiVo, Inc.* | 1,189 | 15,730 | ||||||
| Veeco Instruments, Inc.* | 365 | 15,304 | ||||||
| Intersil Corp. — Class A | 1,180 | 15,246 | ||||||
| SYNNEX Corp.* | 250 | 15,153 | ||||||
| Integrated Device Technology, Inc.* | 1,233 | 15,080 | ||||||
| Coherent, Inc.* | 229 | 14,965 | ||||||
| MKS Instruments, Inc. | 497 | 14,855 | ||||||
| Vistaprint N.V.* | 301 | 14,815 | ||||||
| PMC-Sierra, Inc.* | 1,915 | 14,573 | ||||||
| Cray, Inc.* | 379 | 14,144 | ||||||
| Cypress Semiconductor Corp. | 1,374 | 14,111 | ||||||
| Monolithic Power Systems, Inc.* | 363 | 14,074 | ||||||
| Heartland Payment Systems, Inc. | 330 | 13,679 | ||||||
| Sanmina Corp.* | 768 | 13,401 | ||||||
| ADTRAN, Inc. | 549 | 13,401 | ||||||
| Web.com Group, Inc.* | 393 | 13,374 | ||||||
| Itron, Inc.* | 376 | 13,363 | ||||||
| Plexus Corp.* | 333 | 13,343 | ||||||
| 78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
Shares | Value | |||||||
| Blackbaud, Inc. | 426 | $ | 13,334 | |||||
| Syntel, Inc.* | 148 | 13,305 | ||||||
| NetScout Systems, Inc.* | 348 | 13,078 | ||||||
| InterDigital, Inc. | 393 | 13,012 | ||||||
| SunPower Corp. — Class A* | 401 | 12,936 | ||||||
| InvenSense, Inc. — Class A* | 538 | 12,734 | ||||||
| Unisys Corp.* | 413 | 12,580 | ||||||
| Bottomline Technologies de, Inc.* | 350 | 12,303 | ||||||
| NETGEAR, Inc.* | 357 | 12,042 | ||||||
| NIC, Inc. | 617 | 11,914 | ||||||
| Universal Display Corp.* | 372 | 11,871 | ||||||
| Cirrus Logic, Inc.* | 594 | 11,803 | ||||||
| Tessera Technologies, Inc. | 497 | 11,744 | ||||||
| WebMD Health Corp. — Class A* | 282 | 11,675 | ||||||
| Benchmark Electronics, Inc.* | 503 | 11,393 | ||||||
| Rambus, Inc.* | 1,043 | 11,212 | ||||||
| comScore, Inc.* | 341 | 11,181 | ||||||
| ScanSource, Inc.* | 274 | 11,171 | ||||||
| OSI Systems, Inc.* | 186 | 11,134 | ||||||
| Monotype Imaging Holdings, Inc. | 369 | 11,122 | ||||||
| Demandware, Inc.* | 171 | 10,954 | ||||||
| Interactive Intelligence Group, Inc.* | 151 | 10,948 | ||||||
| Imperva, Inc.* | 195 | 10,862 | ||||||
| Methode Electronics, Inc. | 347 | 10,639 | ||||||
| QLogic Corp.* | 833 | 10,621 | ||||||
| Insight Enterprises, Inc.* | 420 | 10,546 | ||||||
| iGATE Corp.* | 334 | 10,534 | ||||||
| Progress Software Corp.* | 482 | 10,508 | ||||||
| MTS Systems Corp. | 150 | 10,274 | ||||||
| ATMI, Inc.* | 302 | 10,271 | ||||||
| Rogers Corp.* | 163 | 10,174 | ||||||
| LogMeIn, Inc.* | 224 | 10,055 | ||||||
| Infinera Corp.* | 1,092 | 9,915 | ||||||
| Measurement Specialties, Inc.* | 145 | 9,838 | ||||||
| MicroStrategy, Inc. — Class A* | 85 | 9,808 | ||||||
| Cabot Microelectronics Corp.* | 219 | 9,636 | ||||||
| Infoblox, Inc.* | 480 | 9,629 | ||||||
| ExlService Holdings, Inc.* | 303 | 9,366 | ||||||
| CalAmp Corp.* | 333 | 9,281 | ||||||
| OmniVision Technologies, Inc.* | 512 | 9,062 | ||||||
| Advanced Energy Industries, Inc.* | 369 | 9,041 | ||||||
| SPS Commerce, Inc.* | 147 | 9,033 | ||||||
| Synchronoss Technologies, Inc.* | 263 | 9,018 | ||||||
| Advent Software, Inc. | 305 | 8,955 | ||||||
| Trulia, Inc.* | 269 | 8,931 | ||||||
| Envestnet, Inc.* | 218 | 8,759 | ||||||
| Diodes, Inc.* | 333 | 8,698 | ||||||
| CSG Systems International, Inc. | 329 | 8,567 | ||||||
| Lattice Semiconductor Corp.* | 1,086 | 8,514 | ||||||
| FARO Technologies, Inc.* | 158 | 8,374 | ||||||
| Proofpoint, Inc.* | 222 | 8,232 | ||||||
| Newport Corp.* | 384 | 7,941 | ||||||
| Fusion-io, Inc.* | 746 | 7,848 | ||||||
| RealPage, Inc.*,1 | 428 | 7,772 | ||||||
| Ultratech, Inc.* | 265 | 7,735 | ||||||
| Badger Meter, Inc. | 140 | 7,714 | ||||||
| Blucora, Inc.* | 390 | 7,679 | ||||||
| Spansion, Inc. — Class A* | 437 | 7,613 | ||||||
| Monster Worldwide, Inc.* | 1,016 | 7,600 | ||||||
| Sykes Enterprises, Inc.* | 378 | 7,511 | ||||||
| Bankrate, Inc.* | 437 | 7,403 | ||||||
| II-VI, Inc.* | 476 | 7,345 | ||||||
| Comverse, Inc.* | 210 | 7,262 | ||||||
| Constant Contact, Inc.* | 295 | 7,216 | ||||||
| Virtusa Corp.* | 207 | 6,937 | ||||||
| Ellie Mae, Inc.* | 240 | 6,922 | ||||||
| EPAM Systems, Inc.* | 210 | 6,909 | ||||||
| Brooks Automation, Inc. | 631 | 6,897 | ||||||
| BroadSoft, Inc.* | 256 | 6,843 | ||||||
| EVERTEC, Inc. | 277 | 6,842 | ||||||
| Sonus Networks, Inc.* | 2,024 | 6,821 | ||||||
| PROS Holdings, Inc.* | 216 | 6,806 | ||||||
| CTS Corp. | 325 | 6,786 | ||||||
| Harmonic, Inc.* | 950 | 6,783 | ||||||
| Applied Micro Circuits Corp.* | 675 | 6,683 | ||||||
| Ixia* | 534 | 6,675 | ||||||
| Accelrys, Inc.* | 524 | 6,529 | ||||||
| ManTech International Corp. — Class A | 220 | 6,470 | ||||||
| Rofin-Sinar Technologies, Inc.* | 270 | 6,469 | ||||||
| LivePerson, Inc.* | 518 | 6,252 | ||||||
| Liquidity Services, Inc.* | 239 | 6,226 | ||||||
| SciQuest, Inc.* | 222 | 5,997 | ||||||
| Park Electrochemical Corp. | 196 | 5,855 | ||||||
| Fabrinet* | 280 | 5,816 | ||||||
| Digital River, Inc.* | 331 | 5,769 | ||||||
| Emulex Corp.* | 775 | 5,727 | ||||||
| Perficient, Inc.* | 311 | 5,635 | ||||||
| Tangoe, Inc.* | 297 | 5,521 | ||||||
| VirnetX Holding Corp.* | 385 | 5,459 | ||||||
| FleetMatics Group plc* | 163 | 5,452 | ||||||
| Pegasystems, Inc. | 154 | 5,439 | ||||||
| Cass Information Systems, Inc. | 105 | 5,414 | ||||||
| Shutterstock, Inc.* | 72 | 5,228 | ||||||
| Comtech Telecommunications Corp. | 164 | 5,225 | ||||||
| Super Micro Computer, Inc.* | 299 | 5,194 | ||||||
| Checkpoint Systems, Inc.* | 386 | 5,180 | ||||||
| Ruckus Wireless, Inc.* | 425 | 5,168 | ||||||
| Extreme Networks, Inc.* | 874 | 5,069 | ||||||
| Ebix, Inc. | 294 | 5,019 | ||||||
| Ubiquiti Networks, Inc.* | 110 | 5,002 | ||||||
| Forrester Research, Inc. | 139 | 4,983 | ||||||
| ServiceSource International, Inc.* | 587 | 4,954 | ||||||
| Angie’s List, Inc.* | 403 | 4,909 | ||||||
| Silicon Image, Inc.* | 709 | 4,892 | ||||||
| Photronics, Inc.* | 570 | 4,862 | ||||||
| Micrel, Inc. | 434 | 4,809 | ||||||
| Daktronics, Inc. | 333 | 4,792 | ||||||
| Ambarella, Inc.* | 179 | 4,781 | ||||||
| TeleTech Holdings, Inc.* | 191 | 4,681 | ||||||
| AVG Technologies N.V.* | 223 | 4,674 | ||||||
| ShoreTel, Inc.* | 538 | 4,627 | ||||||
| Callidus Software, Inc.* | 369 | 4,620 | ||||||
| Amkor Technology, Inc.* | 655 | 4,493 | ||||||
| Stamps.com, Inc.* | 133 | 4,463 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| PDF Solutions, Inc.* | 238 | $ | 4,324 | |||||
| Global Cash Access Holdings, Inc.* | 623 | 4,274 | ||||||
| Integrated Silicon Solution, Inc.* | 274 | 4,261 | ||||||
| RealD, Inc.* | 380 | 4,245 | ||||||
| Exar Corp.* | 355 | 4,242 | ||||||
| Move, Inc.* | 366 | 4,231 | ||||||
| TTM Technologies, Inc.* | 497 | 4,200 | ||||||
| Global Eagle Entertainment, Inc.* | 261 | 4,119 | ||||||
| Mercury Systems, Inc.* | 305 | 4,029 | ||||||
| Black Box Corp. | 165 | 4,016 | ||||||
| Parkervision, Inc.* | 835 | 4,008 | ||||||
| Epiq Systems, Inc. | 294 | 4,007 | ||||||
| Silicon Graphics International Corp.* | 320 | 3,930 | ||||||
| Inphi Corp.* | 243 | 3,910 | ||||||
| LTX-Credence Corp.* | 438 | 3,903 | ||||||
| Nanometrics, Inc.* | 216 | 3,882 | ||||||
| Maxwell Technologies, Inc.* | 291 | 3,760 | ||||||
| Ceva, Inc.* | 214 | 3,758 | ||||||
| Lionbridge Technologies, Inc.* | 556 | 3,731 | ||||||
| Intralinks Holdings, Inc.* | 357 | 3,652 | ||||||
| GSI Group, Inc.* | 274 | 3,578 | ||||||
| Qualys, Inc.* | 140 | 3,560 | ||||||
| Internap Network Services Corp.* | 502 | 3,554 | ||||||
| MoneyGram International, Inc.* | 201 | 3,548 | ||||||
| EarthLink Holdings Corp. | 966 | 3,487 | ||||||
| Rudolph Technologies, Inc.* | 305 | 3,480 | ||||||
| E2open, Inc.* | 147 | 3,465 | ||||||
| Entropic Communications, Inc.* | 844 | 3,452 | ||||||
| Supertex, Inc.* | 103 | 3,397 | ||||||
| DTS, Inc.* | 170 | 3,359 | ||||||
| Bazaarvoice, Inc.* | 458 | 3,343 | ||||||
| FormFactor, Inc.* | 513 | 3,278 | ||||||
| Seachange International, Inc.* | 310 | 3,236 | ||||||
| CIBER, Inc.* | 699 | 3,201 | ||||||
| Electro Rent Corp. | 182 | 3,201 | ||||||
| Oplink Communications, Inc.* | 178 | 3,197 | ||||||
| Calix, Inc.* | 367 | 3,094 | ||||||
| Jive Software, Inc.* | 371 | 2,972 | ||||||
| Glu Mobile, Inc.* | 612 | 2,901 | ||||||
| Ultra Clean Holdings, Inc.* | 219 | 2,880 | ||||||
| Immersion Corp.* | 264 | 2,785 | ||||||
| Dice Holdings, Inc.* | 369 | 2,753 | ||||||
| Brightcove, Inc.* | 275 | 2,703 | ||||||
| Gigamon, Inc.* | 87 | 2,644 | ||||||
| PLX Technology, Inc.* | 437 | 2,644 | ||||||
| Actuate Corp.* | 438 | 2,637 | ||||||
| Digi International, Inc.* | 259 | 2,629 | ||||||
| IXYS Corp. | 226 | 2,565 | ||||||
| Cohu, Inc. | 237 | 2,545 | ||||||
| Endurance International | ||||||||
| Group Holdings, Inc.* | 195 | 2,537 | ||||||
| Blackhawk Network Holdings, Inc.* | 104 | 2,537 | ||||||
| Mesa Laboratories, Inc. | 28 | 2,527 | ||||||
| Datalink Corp.* | 180 | 2,507 | ||||||
| Computer Task Group, Inc. | 146 | 2,481 | ||||||
| XO Group, Inc.* | 243 | 2,464 | ||||||
| ChannelAdvisor Corp.* | 65 | 2,453 | ||||||
| KEMET Corp.* | 422 | 2,452 | ||||||
| Quantum Corp.* | 1,991 | 2,429 | ||||||
| Zix Corp.* | 586 | 2,426 | ||||||
| Zygo Corp.* | 158 | 2,400 | ||||||
| Kopin Corp.* | 634 | 2,397 | ||||||
| NVE Corp.* | 42 | 2,396 | ||||||
| Marketo, Inc.* | 72 | 2,352 | ||||||
| Vocus, Inc.* | 176 | 2,346 | ||||||
| American Software, Inc. — Class A | 226 | 2,298 | ||||||
| Bel Fuse, Inc. — Class B | 103 | 2,256 | ||||||
| Millennial Media, Inc.* | 324 | 2,242 | ||||||
| Electro Scientific Industries, Inc. | 223 | 2,197 | ||||||
| Rubicon Technology, Inc.* | 194 | 2,190 | ||||||
| Marchex, Inc. — Class B | 207 | 2,176 | ||||||
| Vringo, Inc.* | 626 | 2,172 | ||||||
| Axcelis Technologies, Inc.* | 1,010 | 2,172 | ||||||
| Cvent, Inc.* | 60 | 2,169 | ||||||
| Higher One Holdings, Inc.* | 298 | 2,155 | ||||||
| MaxLinear, Inc. — Class A* | 227 | 2,152 | ||||||
| Tessco Technologies, Inc. | 57 | 2,130 | ||||||
| Vishay Precision Group, Inc.* | 121 | 2,103 | ||||||
| Gogo, Inc.* | 102 | 2,095 | ||||||
| PC Connection, Inc. | 101 | 2,052 | ||||||
| Procera Networks, Inc.* | 197 | 2,047 | ||||||
| VASCO Data Security International, Inc.* | 271 | 2,043 | ||||||
| M/A-COM Technology Solutions | ||||||||
| Holdings, Inc.* | 99 | 2,034 | ||||||
| KVH Industries, Inc.* | 154 | 2,027 | ||||||
| MoSys, Inc.* | 439 | 1,993 | ||||||
| Unwired Planet, Inc.* | 917 | 1,990 | ||||||
| Benefitfocus, Inc.* | 42 | 1,973 | ||||||
| Rocket Fuel, Inc.* | 45 | 1,930 | ||||||
| Digimarc Corp. | 61 | 1,915 | ||||||
| QuinStreet, Inc.* | 288 | 1,912 | ||||||
| Imation Corp.* | 330 | 1,904 | ||||||
| Agilysys, Inc.* | 142 | 1,903 | ||||||
| ePlus, Inc.* | 34 | 1,896 | ||||||
| PRGX Global, Inc.* | 270 | 1,871 | ||||||
| Guidance Software, Inc.* | 158 | 1,747 | ||||||
| Pericom Semiconductor Corp.* | 220 | 1,723 | ||||||
| Demand Media, Inc.* | 352 | 1,707 | ||||||
| Xoom Corp.* | 87 | 1,698 | ||||||
| RealNetworks, Inc.* | 220 | 1,668 | ||||||
| Wix.com Ltd.* | 72 | 1,654 | ||||||
| Travelzoo, Inc.* | 71 | 1,626 | ||||||
| Textura Corp.* | 63 | 1,588 | ||||||
| Numerex Corp. — Class A* | 143 | 1,563 | ||||||
| PC-Telephone, Inc. | 179 | 1,563 | ||||||
| Westell Technologies, Inc. — Class A* | 423 | 1,561 | ||||||
| Speed Commerce, Inc.* | 428 | 1,558 | ||||||
| DSP Group, Inc.* | 179 | 1,547 | ||||||
| NeoPhotonics Corp.* | 195 | 1,546 | ||||||
| Luxoft Holding, Inc.* | 44 | 1,543 | ||||||
| Alliance Fiber Optic Products, Inc. | 106 | 1,534 | ||||||
| Aeroflex Holding Corp.* | 184 | 1,529 | ||||||
| Peregrine Semiconductor Corp.* | 251 | 1,519 | ||||||
| Reis, Inc.* | 83 | 1,498 | ||||||
| 80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| Neonode, Inc.* | 256 | $ | 1,457 | |||||
| ModusLink Global Solutions, Inc.* | 344 | 1,455 | ||||||
| Hackett Group, Inc. | 237 | 1,417 | ||||||
| Sapiens International Corporation N.V.* | 174 | 1,411 | ||||||
| Barracuda Networks, Inc.* | 41 | 1,392 | ||||||
| GSI Technology, Inc.* | 199 | 1,375 | ||||||
| Rosetta Stone, Inc.* | 122 | 1,369 | ||||||
| Sigma Designs, Inc.* | 284 | 1,352 | ||||||
| United Online, Inc. | 116 | 1,341 | ||||||
| ANADIGICS, Inc.* | 772 | 1,312 | ||||||
| support.com, Inc.* | 480 | 1,224 | ||||||
| Alpha & Omega Semiconductor Ltd.* | 162 | 1,192 | ||||||
| Carbonite, Inc.* | 117 | 1,192 | ||||||
| Richardson Electronics Ltd. | 107 | 1,151 | ||||||
| QAD, Inc. — Class A | 56 | 1,144 | ||||||
| Audience, Inc.* | 88 | 1,100 | ||||||
| Limelight Networks, Inc.* | 500 | 1,090 | ||||||
| Silver Spring Networks, Inc.* | 62 | 1,078 | ||||||
| Planet Payment, Inc.* | 389 | 1,066 | ||||||
| TeleCommunication Systems, Inc. — Class A* | 446 | 1,026 | ||||||
| Rally Software Development Corp.* | 76 | 1,017 | ||||||
| Applied Optoelectronics, Inc.* | 41 | 1,011 | ||||||
| Mavenir Systems, Inc.* | 55 | 985 | ||||||
| Telenav, Inc.* | 165 | 983 | ||||||
| Chegg, Inc.* | 139 | 973 | ||||||
| Multi-Fineline Electronix, Inc.* | 76 | 973 | ||||||
| Control4 Corp.* | 44 | 933 | ||||||
| Aviat Networks, Inc.* | 576 | 916 | ||||||
| Mitek Systems, Inc.* | 236 | 913 | ||||||
| Marin Software, Inc.* | 85 | 898 | ||||||
| eGain Corp.* | 124 | 875 | ||||||
| Spark Networks, Inc.* | 163 | 852 | ||||||
| TechTarget, Inc.* | 113 | 815 | ||||||
| Model N, Inc.* | 80 | 809 | ||||||
| Radisys Corp.* | 211 | 757 | ||||||
| Uni-Pixel, Inc.* | 91 | 697 | ||||||
| Violin Memory, Inc.* | 166 | 664 | ||||||
| Hutchinson Technology, Inc.* | 224 | 634 | ||||||
| Covisint Corp.* | 71 | 520 | ||||||
| Viasystems Group, Inc.* | 40 | 501 | ||||||
| Intermolecular, Inc.* | 165 | 462 | ||||||
| YuMe, Inc.* | 57 | 417 | ||||||
| Tremor Video, Inc.* | 74 | 305 | ||||||
| Cyan, Inc.* | 69 | 295 | ||||||
| Net Element, Inc.* | 21 | 73 | ||||||
| Total Information Technology | 2,804,793 | |||||||
| INDUSTRIALS - 10.6% | ||||||||
| Acuity Brands, Inc. | 399 | 52,894 | ||||||
| Middleby Corp.* | 189 | 49,935 | ||||||
| HEICO Corp. | 626 | 37,660 | ||||||
| Teledyne Technologies, Inc.* | 355 | 34,552 | ||||||
| Spirit Airlines, Inc.* | 566 | 33,620 | ||||||
| EnerSys, Inc. | 444 | 30,764 | ||||||
| Esterline Technologies Corp.* | 285 | 30,364 | ||||||
| EMCOR Group, Inc. | 646 | 30,226 | ||||||
| Curtiss-Wright Corp. | 448 | 28,466 | ||||||
| Moog, Inc. — Class A* | 426 | 27,907 | ||||||
| Generac Holdings, Inc. | 471 | 27,774 | ||||||
| Woodward, Inc. | 638 | 26,495 | ||||||
| CLARCOR, Inc. | 462 | 26,495 | ||||||
| Corporate Executive Board Co. | 338 | 25,090 | ||||||
| Deluxe Corp. | 472 | 24,766 | ||||||
| MasTec, Inc.* | 563 | 24,457 | ||||||
| Watsco, Inc. | 243 | 24,278 | ||||||
| Actuant Corp. — Class A | 683 | 23,324 | ||||||
| USG Corp.* | 710 | 23,231 | ||||||
| Chart Industries, Inc.* | 280 | 22,274 | ||||||
| Advisory Board Co.* | 341 | 21,909 | ||||||
| DigitalGlobe, Inc.* | 703 | 20,394 | ||||||
| Swift Transportation Co. — Class A* | 787 | 19,478 | ||||||
| Franklin Electric Company, Inc. | 451 | 19,177 | ||||||
| Barnes Group, Inc. | 495 | 19,043 | ||||||
| JetBlue Airways Corp.* | 2,181 | 18,953 | ||||||
| Healthcare Services Group, Inc. | 641 | 18,627 | ||||||
| Applied Industrial Technologies, Inc. | 383 | 18,476 | ||||||
| Tetra Tech, Inc.* | 619 | 18,317 | ||||||
| Beacon Roofing Supply, Inc.* | 455 | 17,590 | ||||||
| Herman Miller, Inc. | 539 | 17,318 | ||||||
| On Assignment, Inc.* | 426 | 16,438 | ||||||
| United Stationers, Inc. | 392 | 16,099 | ||||||
| Allegiant Travel Co. — Class A | 143 | 16,006 | ||||||
| Orbital Sciences Corp.* | 563 | 15,708 | ||||||
| Mobile Mini, Inc. | 361 | 15,653 | ||||||
| Watts Water Technologies, Inc. — Class A | 266 | 15,612 | ||||||
| HNI Corp. | 424 | 15,501 | ||||||
| Mueller Industries, Inc. | 506 | 15,175 | ||||||
| Polypore International, Inc.* | 441 | 15,087 | ||||||
| ABM Industries, Inc. | 519 | 14,916 | ||||||
| Granite Construction, Inc. | 371 | 14,814 | ||||||
| UniFirst Corp. | 134 | 14,732 | ||||||
| MSA Safety, Inc. | 255 | 14,535 | ||||||
| Hub Group, Inc. — Class A* | 360 | 14,395 | ||||||
| Huron Consulting Group, Inc.* | 227 | 14,387 | ||||||
| TriMas Corp.* | 426 | 14,143 | ||||||
| EnPro Industries, Inc.* | 194 | 14,098 | ||||||
| Mueller Water Products, Inc. — Class A | 1,479 | 14,051 | ||||||
| Simpson Manufacturing Company, Inc. | 390 | 13,779 | ||||||
| WageWorks, Inc.* | 241 | 13,523 | ||||||
| TAL International Group, Inc. | 315 | 13,504 | ||||||
| RBC Bearings, Inc.* | 211 | 13,441 | ||||||
| Korn/Ferry International* | 450 | 13,397 | ||||||
| Steelcase, Inc. — Class A | 783 | 13,006 | ||||||
| Forward Air Corp. | 279 | 12,865 | ||||||
| FTI Consulting, Inc.* | 384 | 12,803 | ||||||
| Brink’s Co. | 442 | 12,619 | ||||||
| Knight Transportation, Inc. | 540 | 12,490 | ||||||
| Aircastle Ltd. | 639 | 12,384 | ||||||
| CIRCOR International, Inc. | 164 | 12,026 | ||||||
| GrafTech International Ltd.* | 1,091 | 11,914 | ||||||
| Brady Corp. — Class A | 434 | 11,783 | ||||||
| General Cable Corp. | 459 | 11,755 | ||||||
| Trex Company, Inc.* | 158 | 11,559 | ||||||
| Tennant Co. | 176 | 11,549 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 81 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| Interface, Inc. — Class A | 561 | $ | 11,529 | |||||
| Lindsay Corp. | 130 | 11,463 | ||||||
| TrueBlue, Inc.* | 387 | 11,324 | ||||||
| Meritor, Inc.* | 916 | 11,221 | ||||||
| H&E Equipment Services, Inc.* | 277 | 11,205 | ||||||
| Werner Enterprises, Inc. | 439 | 11,199 | ||||||
| G&K Services, Inc. — Class A | 180 | 11,011 | ||||||
| AZZ, Inc. | 242 | 10,813 | ||||||
| Raven Industries, Inc. | 330 | 10,808 | ||||||
| Proto Labs, Inc.* | 158 | 10,692 | ||||||
| Universal Forest Products, Inc. | 192 | 10,625 | ||||||
| Rush Enterprises, Inc. — Class A* | 326 | 10,588 | ||||||
| GenCorp, Inc.* | 567 | 10,359 | ||||||
| Hyster-Yale Materials Handling, Inc. | 106 | 10,335 | ||||||
| Tutor Perini Corp.* | 355 | 10,178 | ||||||
| Greenbrier Companies, Inc.* | 223 | 10,169 | ||||||
| Dycom Industries, Inc.* | 318 | 10,052 | ||||||
| Kaman Corp. | 247 | 10,048 | ||||||
| Exponent, Inc. | 133 | 9,983 | ||||||
| Heartland Express, Inc. | 437 | 9,916 | ||||||
| Encore Wire Corp. | 203 | 9,848 | ||||||
| Briggs & Stratton Corp. | 440 | 9,790 | ||||||
| Primoris Services Corp. | 324 | 9,714 | ||||||
| Cubic Corp. | 190 | 9,703 | ||||||
| Matson, Inc. | 391 | 9,654 | ||||||
| AAR Corp. | 370 | 9,602 | ||||||
| Titan International, Inc. | 489 | 9,286 | ||||||
| Albany International Corp. — Class A | 260 | 9,240 | ||||||
| DXP Enterprises, Inc.* | 96 | 9,113 | ||||||
| UTI Worldwide, Inc. | 859 | 9,097 | ||||||
| Arkansas Best Corp. | 246 | 9,090 | ||||||
| Navigant Consulting, Inc.* | 487 | 9,087 | ||||||
| Sun Hydraulics Corp. | 209 | 9,052 | ||||||
| Altra Industrial Motion Corp. | 251 | 8,961 | ||||||
| Aegion Corp. — Class A* | 354 | 8,960 | ||||||
| Apogee Enterprises, Inc. | 269 | 8,939 | ||||||
| Federal Signal Corp.* | 598 | 8,910 | ||||||
| Wabash National Corp.* | 643 | 8,848 | ||||||
| Taser International, Inc.* | 477 | 8,724 | ||||||
| Astronics Corp.* | 137 | 8,687 | ||||||
| Astec Industries, Inc. | 197 | 8,650 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 245 | 8,641 | ||||||
| Wesco Aircraft Holdings, Inc.* | 391 | 8,606 | ||||||
| McGrath RentCorp | 246 | 8,600 | ||||||
| Saia, Inc.* | 223 | 8,521 | ||||||
| Team, Inc.* | 198 | 8,486 | ||||||
| Rexnord Corp.* | 292 | 8,462 | ||||||
| John Bean Technologies Corp. | 272 | 8,405 | ||||||
| Knoll, Inc. | 462 | 8,404 | ||||||
| ESCO Technologies, Inc. | 238 | 8,375 | ||||||
| XPO Logistics, Inc.* | 275 | 8,088 | ||||||
| Textainer Group Holdings Ltd. | 199 | 7,616 | ||||||
| ICF International, Inc.* | 190 | 7,564 | ||||||
| US Ecology, Inc. | 200 | 7,424 | ||||||
| Aerovironment, Inc.* | 183 | 7,366 | ||||||
| AAON, Inc. | 259 | 7,218 | ||||||
| Engility Holdings, Inc.* | 159 | 7,163 | ||||||
| Acacia Research Corp. | 464 | 7,090 | ||||||
| Quanex Building Products Corp. | 340 | 7,031 | ||||||
| Hawaiian Holdings, Inc.* | 496 | 6,924 | ||||||
| Nortek, Inc.* | 84 | 6,906 | ||||||
| Insperity, Inc. | 216 | 6,692 | ||||||
| ACCO Brands Corp.* | 1,062 | 6,542 | ||||||
| Standex International Corp. | 119 | 6,376 | ||||||
| Powell Industries, Inc. | 98 | 6,350 | ||||||
| American Railcar Industries, Inc. | 88 | 6,163 | ||||||
| Capstone Turbine Corp.* | 2,853 | 6,077 | ||||||
| SkyWest, Inc. | 475 | 6,061 | ||||||
| Kelly Services, Inc. — Class A | 253 | 6,004 | ||||||
| Thermon Group Holdings, Inc.* | 259 | 6,004 | ||||||
| Quad/Graphics, Inc. | 241 | 5,651 | ||||||
| EnerNOC, Inc.* | 249 | 5,548 | ||||||
| Gorman-Rupp Co. | 174 | 5,531 | ||||||
| Aceto Corp. | 275 | 5,525 | ||||||
| Blount International, Inc.* | 463 | 5,510 | ||||||
| KEYW Holding Corp.* | 294 | 5,501 | ||||||
| Resources Connection, Inc. | 389 | 5,481 | ||||||
| Kforce, Inc. | 257 | 5,479 | ||||||
| Gibraltar Industries, Inc.* | 287 | 5,416 | ||||||
| Comfort Systems USA, Inc. | 354 | 5,395 | ||||||
| Kimball International, Inc. — Class B | 296 | 5,361 | ||||||
| American Science & Engineering, Inc. | 79 | 5,306 | ||||||
| Great Lakes Dredge & Dock Corp.* | 564 | 5,149 | ||||||
| MYR Group, Inc.* | 201 | 5,089 | ||||||
| Griffon Corp. | 426 | 5,086 | ||||||
| RPX Corp.* | 310 | 5,047 | ||||||
| Marten Transport Ltd. | 231 | 4,971 | ||||||
| Park-Ohio Holdings Corp.* | 88 | 4,941 | ||||||
| Columbus McKinnon Corp.* | 182 | 4,876 | ||||||
| PowerSecure International, Inc.* | 205 | 4,805 | ||||||
| West Corp. | 200 | 4,786 | ||||||
| Celadon Group, Inc. | 193 | 4,640 | ||||||
| Roadrunner Transportation Systems, Inc.* | 182 | 4,594 | ||||||
| LB Foster Co. — Class A | 97 | 4,544 | ||||||
| Viad Corp. | 187 | 4,495 | ||||||
| Republic Airways Holdings, Inc.* | 455 | 4,159 | ||||||
| Ennis, Inc. | 247 | 4,093 | ||||||
| FuelCell Energy, Inc.* | 1,646 | 4,082 | ||||||
| GP Strategies Corp.* | 149 | 4,057 | ||||||
| Barrett Business Services, Inc. | 68 | 4,051 | ||||||
| Multi-Color Corp. | 115 | 4,025 | ||||||
| CAI International, Inc.* | 162 | 3,997 | ||||||
| SP Plus Corp.* | 152 | 3,993 | ||||||
| Argan, Inc. | 131 | 3,895 | ||||||
| Builders FirstSource, Inc.* | 423 | 3,854 | ||||||
| Alamo Group, Inc. | 70 | 3,803 | ||||||
| Air Transport Services Group, Inc.* | 474 | 3,721 | ||||||
| Kadant, Inc. | 102 | 3,720 | ||||||
| Douglas Dynamics, Inc. | 212 | 3,693 | ||||||
| Lydall, Inc.* | 157 | 3,591 | ||||||
| National Presto Industries, Inc. | 46 | 3,590 | ||||||
| NCI Building Systems, Inc.* | 203 | 3,544 | ||||||
| PGT, Inc.* | 301 | 3,465 | ||||||
| Insteel Industries, Inc. | 176 | 3,462 | ||||||
| 82 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| Heidrick & Struggles International, Inc. | 172 | $ | 3,452 | |||||
| Mistras Group, Inc.* | 151 | 3,438 | ||||||
| Furmanite Corp.* | 349 | 3,427 | ||||||
| InnerWorkings, Inc.* | 422 | 3,233 | ||||||
| Orion Marine Group, Inc.* | 257 | 3,230 | ||||||
| Layne Christensen Co.* | 177 | 3,220 | ||||||
| Northwest Pipe Co.* | 89 | 3,218 | ||||||
| RR Donnelley & Sons Co. | 178 | 3,186 | ||||||
| American Woodmark Corp.* | 94 | 3,164 | ||||||
| CBIZ, Inc.* | 345 | 3,160 | ||||||
| Global Power Equipment Group, Inc. | 157 | 3,123 | ||||||
| Kratos Defense & Security Solutions, Inc.* | 414 | 3,122 | ||||||
| NN, Inc. | 158 | 3,113 | ||||||
| Echo Global Logistics, Inc.* | 169 | 3,096 | ||||||
| Graham Corp. | 95 | 3,026 | ||||||
| Pacer International, Inc.* | 337 | 3,020 | ||||||
| CECO Environmental Corp. | 167 | 2,771 | ||||||
| Pendrell Corp.* | 1,509 | 2,761 | ||||||
| Patrick Industries, Inc.* | 62 | 2,748 | ||||||
| ARC Document Solutions, Inc.* | 359 | 2,671 | ||||||
| Ducommun, Inc.* | 106 | 2,656 | ||||||
| Sparton Corp.* | 90 | 2,635 | ||||||
| Pike Corp.* | 242 | 2,604 | ||||||
| Titan Machinery, Inc.* | 165 | 2,586 | ||||||
| FreightCar America, Inc. | 111 | 2,580 | ||||||
| YRC Worldwide, Inc.* | 114 | 2,565 | ||||||
| Quality Distribution, Inc.* | 196 | 2,546 | ||||||
| Schawk, Inc. — Class A | 124 | 2,479 | ||||||
| Dynamic Materials Corp. | 125 | 2,380 | ||||||
| Patriot Transportation Holding, Inc.* | 65 | 2,343 | ||||||
| Houston Wire & Cable Co. | 170 | 2,232 | ||||||
| Energy Recovery, Inc.* | 416 | 2,213 | ||||||
| CDI Corp. | 127 | 2,178 | ||||||
| Twin Disc, Inc. | 82 | 2,160 | ||||||
| Miller Industries, Inc. | 110 | 2,148 | ||||||
| Commercial Vehicle Group, Inc.* | 233 | 2,125 | ||||||
| ExOne Co.* | 58 | 2,078 | ||||||
| Manitex International, Inc.* | 127 | 2,070 | ||||||
| CRA International, Inc.* | 94 | 2,065 | ||||||
| VSE Corp. | 39 | 2,055 | ||||||
| Ply Gem Holdings, Inc.* | 158 | 1,996 | ||||||
| Performant Financial Corp.* | 214 | 1,937 | ||||||
| Casella Waste Systems, Inc. — Class A* | 365 | 1,865 | ||||||
| Preformed Line Products Co. | 26 | 1,782 | ||||||
| Odyssey Marine Exploration, Inc.* | 768 | 1,759 | ||||||
| International Shipholding Corp. | 59 | 1,737 | ||||||
| Ampco-Pittsburgh Corp. | 91 | 1,717 | ||||||
| Accuride Corp.* | 379 | 1,679 | ||||||
| Vicor Corp.* | 164 | 1,673 | ||||||
| LSI Industries, Inc. | 203 | 1,663 | ||||||
| Franklin Covey Co.* | 84 | 1,661 | ||||||
| Universal Truckload Services, Inc. | 57 | 1,647 | ||||||
| Xerium Technologies, Inc.* | 99 | 1,589 | ||||||
| Courier Corp. | 102 | 1,571 | ||||||
| Hardinge, Inc. | 108 | 1,555 | ||||||
| Cenveo, Inc.* | 506 | 1,538 | ||||||
| Hurco Companies, Inc. | 57 | 1,521 | ||||||
| Stock Building Supply Holdings, Inc.* | 74 | 1,504 | ||||||
| Power Solutions International, Inc.* | 20 | 1,503 | ||||||
| Ameresco, Inc. — Class A* | 187 | 1,414 | ||||||
| Heritage-Crystal Clean, Inc.* | 77 | 1,396 | ||||||
| LMI Aerospace, Inc.* | 99 | 1,396 | ||||||
| Sterling Construction Company, Inc.* | 154 | 1,335 | ||||||
| Global Brass & Copper Holdings, Inc. | 81 | 1,277 | ||||||
| Tecumseh Products Co. — Class A* | 176 | 1,214 | ||||||
| Norcraft Companies, Inc.* | 71 | 1,202 | ||||||
| Enphase Energy, Inc.* | 163 | 1,200 | ||||||
| PMFG, Inc.* | 198 | 1,182 | ||||||
| Innovative Solutions & Support, Inc.* | 138 | 1,039 | ||||||
| TRC Companies, Inc.* | 156 | 1,037 | ||||||
| Revolution Lighting Technologies, Inc.* | 284 | 895 | ||||||
| API Technologies Corp.* | 294 | 861 | ||||||
| Erickson Air-Crane, Inc.* | 42 | 811 | ||||||
| American Superconductor Corp.* | 460 | 741 | ||||||
| Acorn Energy, Inc. | 210 | 712 | ||||||
| NL Industries, Inc. | 65 | 705 | ||||||
| Omega Flex, Inc. | 29 | 622 | ||||||
| Ultrapetrol Bahamas Ltd.* | 200 | 620 | ||||||
| Intersections, Inc. | 93 | 549 | ||||||
| Swisher Hygiene, Inc.* | 1,065 | 479 | ||||||
| BlueLinx Holdings, Inc.* | 310 | 403 | ||||||
| Compx International, Inc. | 14 | 143 | ||||||
| Total Industrials | 2,282,762 | |||||||
| HEALTH CARE - 9.7% | ||||||||
| athenahealth, Inc.* | 333 | 53,359 | ||||||
| Isis Pharmaceuticals, Inc.* | 1,056 | 45,629 | ||||||
| Alnylam Pharmaceuticals, Inc.* | 547 | 36,725 | ||||||
| Align Technology, Inc.* | 690 | 35,736 | ||||||
| Centene Corp.* | 517 | 32,183 | ||||||
| Cepheid, Inc.* | 622 | 32,082 | ||||||
| Questcor Pharmaceuticals, Inc. | 487 | 31,622 | ||||||
| HealthSouth Corp. | 817 | 29,355 | ||||||
| West Pharmaceutical Services, Inc. | 659 | 29,030 | ||||||
| Team Health Holdings, Inc.* | 644 | 28,818 | ||||||
| PAREXEL International Corp.* | 526 | 28,451 | ||||||
| NPS Pharmaceuticals, Inc.* | 929 | 27,804 | ||||||
| Medidata Solutions, Inc.* | 508 | 27,605 | ||||||
| InterMune, Inc.* | 823 | 27,545 | ||||||
| DexCom, Inc.* | 662 | 27,381 | ||||||
| STERIS Corp. | 554 | 26,454 | ||||||
| WellCare Health Plans, Inc.* | 406 | 25,789 | ||||||
| Intercept Pharmaceuticals, Inc.* | 76 | 25,063 | ||||||
| Insulet Corp.* | 506 | 23,995 | ||||||
| Puma Biotechnology, Inc.* | 200 | 20,828 | ||||||
| Owens & Minor, Inc. | 594 | 20,808 | ||||||
| Air Methods Corp.* | 382 | 20,409 | ||||||
| Thoratec Corp.* | 534 | 19,123 | ||||||
| MWI Veterinary Supply, Inc.* | 119 | 18,519 | ||||||
| Pacira Pharmaceuticals, Inc.* | 262 | 18,338 | ||||||
| Cyberonics, Inc.* | 268 | 17,487 | ||||||
| Medicines Co.* | 605 | 17,194 | ||||||
| Impax Laboratories, Inc.* | 648 | 17,120 | ||||||
| Chemed Corp. | 186 | 16,638 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 83 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| OPKO Health, Inc.*,1 | 1,776 | $ | 16,552 | |||||
| ACADIA Pharmaceuticals, Inc.* | 653 | 15,887 | ||||||
| NuVasive, Inc.* | 413 | 15,863 | ||||||
| HMS Holdings Corp.* | 825 | 15,716 | ||||||
| Haemonetics Corp.* | 472 | 15,382 | ||||||
| Magellan Health Services, Inc.* | 257 | 15,253 | ||||||
| Acadia Healthcare Company, Inc.* | 338 | 15,251 | ||||||
| Neogen Corp.* | 336 | 15,103 | ||||||
| Synageva BioPharma Corp.* | 181 | 15,018 | ||||||
| Acorda Therapeutics, Inc.* | 392 | 14,861 | ||||||
| HeartWare International, Inc.* | 154 | 14,442 | ||||||
| Celldex Therapeutics, Inc.* | 815 | 14,401 | ||||||
| Amsurg Corp. — Class A* | 298 | 14,030 | ||||||
| Nektar Therapeutics* | 1,148 | 13,914 | ||||||
| MedAssets, Inc.* | 562 | 13,887 | ||||||
| Keryx Biopharmaceuticals, Inc.* | 814 | 13,871 | ||||||
| Globus Medical, Inc. — Class A* | 504 | 13,401 | ||||||
| Prestige Brands Holdings, Inc.* | 477 | 12,998 | ||||||
| Arena Pharmaceuticals, Inc.*,1 | 2,043 | 12,871 | ||||||
| Aegerion Pharmaceuticals, Inc.* | 278 | 12,821 | ||||||
| Auxilium Pharmaceuticals, Inc.* | 463 | 12,584 | ||||||
| Masimo Corp.* | 452 | 12,344 | ||||||
| ArthroCare Corp.* | 254 | 12,240 | ||||||
| Emeritus Corp.* | 387 | 12,167 | ||||||
| CONMED Corp. | 280 | 12,166 | ||||||
| ImmunoGen, Inc.* | 808 | 12,063 | ||||||
| Kindred Healthcare, Inc. | 514 | 12,038 | ||||||
| Akorn, Inc.* | 545 | 11,990 | ||||||
| Wright Medical Group, Inc.* | 382 | 11,869 | ||||||
| Spectranetics Corp.* | 385 | 11,669 | ||||||
| Clovis Oncology, Inc.* | 168 | 11,637 | ||||||
| Ligand Pharmaceuticals, Inc. — Class B* | 166 | 11,165 | ||||||
| Fluidigm Corp.* | 248 | 10,929 | ||||||
| Halozyme Therapeutics, Inc.* | 853 | 10,833 | ||||||
| PDL BioPharma, Inc. | 1,303 | 10,828 | ||||||
| Ironwood Pharmaceuticals, Inc. — Class A* | 864 | 10,644 | ||||||
| Hanger, Inc.* | 314 | 10,576 | ||||||
| Cantel Medical Corp. | 309 | 10,419 | ||||||
| Sangamo BioSciences, Inc.* | 565 | 10,215 | ||||||
| Neurocrine Biosciences, Inc.* | 634 | 10,207 | ||||||
| Dyax Corp.* | 1,134 | 10,183 | ||||||
| Molina Healthcare, Inc.* | 271 | 10,179 | ||||||
| Greatbatch, Inc.* | 221 | 10,148 | ||||||
| Volcano Corp.* | 506 | 9,973 | ||||||
| ExamWorks Group, Inc.* | 283 | 9,908 | ||||||
| Integra LifeSciences Holdings Corp.* | 213 | 9,796 | ||||||
| Exact Sciences Corp.* | 672 | 9,522 | ||||||
| ABIOMED, Inc.* | 360 | 9,374 | ||||||
| Omnicell, Inc.* | 326 | 9,330 | ||||||
| Analogic Corp. | 112 | 9,196 | ||||||
| Meridian Bioscience, Inc. | 401 | 8,738 | ||||||
| IPC The Hospitalist Company, Inc.* | 171 | 8,393 | ||||||
| Sarepta Therapeutics, Inc.* | 348 | 8,362 | ||||||
| Ensign Group, Inc. | 188 | 8,204 | ||||||
| PharMerica Corp.* | 284 | 7,946 | ||||||
| Novavax, Inc.* | 1,749 | 7,923 | ||||||
| Abaxis, Inc.* | 203 | 7,893 | ||||||
| Depomed, Inc.* | 537 | 7,787 | ||||||
| Endologix, Inc.* | 592 | 7,619 | ||||||
| Natus Medical, Inc.* | 295 | 7,611 | ||||||
| Cardiovascular Systems, Inc.* | 225 | 7,153 | ||||||
| Quidel Corp.* | 262 | 7,153 | ||||||
| Horizon Pharma, Inc.* | 471 | 7,122 | ||||||
| NxStage Medical, Inc.* | 558 | 7,109 | ||||||
| ICU Medical, Inc.* | 117 | 7,006 | ||||||
| Capital Senior Living Corp.* | 257 | 6,679 | ||||||
| Accuray, Inc.* | 690 | 6,624 | ||||||
| Emergent Biosolutions, Inc.* | 262 | 6,621 | ||||||
| Staar Surgical Co.* | 350 | 6,580 | ||||||
| Lannett Company, Inc.* | 184 | 6,572 | ||||||
| Endocyte, Inc.* | 275 | 6,548 | ||||||
| Luminex Corp.* | 361 | 6,538 | ||||||
| Computer Programs & Systems, Inc. | 100 | 6,460 | ||||||
| Quality Systems, Inc. | 377 | 6,364 | ||||||
| Exelixis, Inc.*,1 | 1,782 | 6,308 | ||||||
| Bio-Reference Labs, Inc.* | 226 | 6,256 | ||||||
| Insmed, Inc.* | 328 | 6,245 | ||||||
| AMN Healthcare Services, Inc.* | 448 | 6,156 | ||||||
| Orexigen Therapeutics, Inc.* | 929 | 6,039 | ||||||
| National Healthcare Corp. | 107 | 5,967 | ||||||
| Corvel Corp.* | 118 | 5,872 | ||||||
| Merit Medical Systems, Inc.* | 403 | 5,763 | ||||||
| Raptor Pharmaceutical Corp.* | 565 | 5,650 | ||||||
| Invacare Corp. | 295 | 5,626 | ||||||
| MannKind Corp.* | 1,396 | 5,612 | ||||||
| Orthofix International N.V.* | 186 | 5,608 | ||||||
| Vivus, Inc.* | 944 | 5,607 | ||||||
| Select Medical Holdings Corp. | 450 | 5,603 | ||||||
| Idenix Pharmaceuticals, Inc.* | 927 | 5,590 | ||||||
| Healthways, Inc.* | 319 | 5,468 | ||||||
| Cambrex Corp.* | 287 | 5,416 | ||||||
| Cynosure, Inc. — Class A* | 184 | 5,391 | ||||||
| Array BioPharma, Inc.* | 1,135 | 5,335 | ||||||
| Infinity Pharmaceuticals, Inc.* | 444 | 5,279 | ||||||
| Tornier N.V.* | 247 | 5,241 | ||||||
| Furiex Pharmaceuticals, Inc.* | 60 | 5,220 | ||||||
| Momenta Pharmaceuticals, Inc.* | 441 | 5,138 | ||||||
| TherapeuticsMD, Inc.* | 810 | 5,111 | ||||||
| Vanda Pharmaceuticals, Inc.* | 314 | 5,103 | ||||||
| HealthStream, Inc.* | 191 | 5,100 | ||||||
| MiMedx Group, Inc.* | 829 | 5,082 | ||||||
| KYTHERA Biopharmaceuticals, Inc.* | 126 | 5,010 | ||||||
| AVANIR Pharmaceuticals, Inc. — Class A* | 1,356 | 4,977 | ||||||
| Prothena Corporation plc* | 128 | 4,904 | ||||||
| Affymetrix, Inc.* | 668 | 4,763 | ||||||
| Spectrum Pharmaceuticals, Inc.* | 596 | 4,673 | ||||||
| Rockwell Medical, Inc.* | 367 | 4,646 | ||||||
| Merrimack Pharmaceuticals, Inc.* | 910 | 4,586 | ||||||
| Anacor Pharmaceuticals, Inc.* | 229 | 4,582 | ||||||
| Anika Therapeutics, Inc.* | 111 | 4,562 | ||||||
| NewLink Genetics Corp.* | 158 | 4,487 | ||||||
| Dendreon Corp.*,1 | 1,480 | 4,425 | ||||||
| Hi-Tech Pharmacal Company, Inc.* | 102 | 4,420 | ||||||
| Amedisys, Inc.* | 293 | 4,363 | ||||||
| 84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| Dynavax Technologies Corp.* | 2,402 | $ | 4,324 | |||||
| Atrion Corp. | 14 | 4,286 | ||||||
| Albany Molecular Research, Inc.* | 226 | 4,201 | ||||||
| OraSure Technologies, Inc.* | 522 | 4,160 | ||||||
| Vascular Solutions, Inc.* | 158 | 4,138 | ||||||
| Sagent Pharmaceuticals, Inc.* | 177 | 4,136 | ||||||
| Genomic Health, Inc.* | 155 | 4,083 | ||||||
| Cell Therapeutics, Inc.* | 1,189 | 4,043 | ||||||
| TESARO, Inc.* | 136 | 4,009 | ||||||
| Landauer, Inc. | 88 | 3,989 | ||||||
| Chelsea Therapeutics International Ltd.* | 722 | 3,985 | ||||||
| Synergy Pharmaceuticals, Inc.* | 741 | 3,935 | ||||||
| AMAG Pharmaceuticals, Inc.* | 203 | 3,928 | ||||||
| US Physical Therapy, Inc. | 112 | 3,872 | ||||||
| AtriCure, Inc.* | 203 | 3,818 | ||||||
| Repros Therapeutics, Inc.* | 215 | 3,814 | ||||||
| Unilife Corp.* | 924 | 3,761 | ||||||
| Antares Pharma, Inc.* | 1,064 | 3,724 | ||||||
| BioScrip, Inc.* | 533 | 3,720 | ||||||
| Repligen Corp.* | 289 | 3,717 | ||||||
| Triple-S Management Corp. — Class B* | 230 | 3,712 | ||||||
| XOMA Corp.* | 708 | 3,689 | ||||||
| Lexicon Pharmaceuticals, Inc.* | 2,128 | 3,681 | ||||||
| Symmetry Medical, Inc.* | 365 | 3,672 | ||||||
| AngioDynamics, Inc.* | 230 | 3,623 | ||||||
| ZIOPHARM Oncology, Inc.* | 738 | 3,380 | ||||||
| GenMark Diagnostics, Inc.* | 340 | 3,380 | ||||||
| Omeros Corp.* | 272 | 3,283 | ||||||
| Zeltiq Aesthetics, Inc.* | 164 | 3,216 | ||||||
| Vocera Communications, Inc.* | 196 | 3,201 | ||||||
| Surgical Care Affiliates, Inc.* | 104 | 3,198 | ||||||
| Rigel Pharmaceuticals, Inc.* | 817 | 3,170 | ||||||
| Cerus Corp.* | 654 | 3,139 | ||||||
| Achillion Pharmaceuticals, Inc.* | 902 | 2,968 | ||||||
| Immunomedics, Inc.* | 680 | 2,863 | ||||||
| SurModics, Inc.* | 126 | 2,848 | ||||||
| Peregrine Pharmaceuticals, Inc.* | 1,466 | 2,785 | ||||||
| Intrexon Corp.* | 105 | 2,760 | ||||||
| Providence Service Corp.* | 97 | 2,743 | ||||||
| Insys Therapeutics, Inc.* | 66 | 2,734 | ||||||
| Ophthotech Corp.* | 76 | 2,716 | ||||||
| Universal American Corp. | 379 | 2,680 | ||||||
| CryoLife, Inc. | 266 | 2,649 | ||||||
| Sequenom, Inc.*,1 | 1,081 | 2,648 | ||||||
| Agios Pharmaceuticals, Inc.* | 67 | 2,623 | ||||||
| Receptos, Inc.* | 62 | 2,600 | ||||||
| Gentiva Health Services, Inc.* | 285 | 2,599 | ||||||
| AcelRx Pharmaceuticals, Inc.* | 216 | 2,594 | ||||||
| XenoPort, Inc.* | 497 | 2,569 | ||||||
| PTC Therapeutics, Inc.* | 98 | 2,562 | ||||||
| Zogenix, Inc.* | 897 | 2,552 | ||||||
| Portola Pharmaceuticals, Inc.* | 98 | 2,538 | ||||||
| Geron Corp.* | 1,216 | 2,529 | ||||||
| LHC Group, Inc.* | 112 | 2,471 | ||||||
| Accelerate Diagnostics, Inc.* | 112 | 2,443 | ||||||
| Galena Biopharma, Inc.* | 960 | 2,400 | ||||||
| BioDelivery Sciences International, Inc.* | 283 | 2,389 | ||||||
| Cytokinetics, Inc.* | 247 | 2,347 | ||||||
| Pacific Biosciences of California, Inc.* | 438 | 2,343 | ||||||
| Chindex International, Inc.* | 122 | 2,328 | ||||||
| Karyopharm Therapeutics, Inc.* | 75 | 2,317 | ||||||
| SciClone Pharmaceuticals, Inc.* | 509 | 2,316 | ||||||
| Progenics Pharmaceuticals, Inc.* | 565 | 2,311 | ||||||
| Hyperion Therapeutics, Inc.* | 89 | 2,296 | ||||||
| Derma Sciences, Inc.* | 180 | 2,282 | ||||||
| Curis, Inc.* | 788 | 2,222 | ||||||
| Exactech, Inc.* | 98 | 2,211 | ||||||
| Cempra, Inc.* | 188 | 2,171 | ||||||
| Threshold Pharmaceuticals, Inc.* | 453 | 2,156 | ||||||
| Corcept Therapeutics, Inc.* | 489 | 2,132 | ||||||
| PhotoMedex, Inc.* | 133 | 2,105 | ||||||
| RTI Surgical, Inc.* | 514 | 2,097 | ||||||
| Foundation Medicine, Inc.* | 64 | 2,072 | ||||||
| Acceleron Pharma, Inc.* | 60 | 2,070 | ||||||
| Navidea Biopharmaceuticals, Inc.* | 1,115 | 2,063 | ||||||
| Utah Medical Products, Inc. | 35 | 2,024 | ||||||
| Osiris Therapeutics, Inc.* | 153 | 2,009 | ||||||
| Sunesis Pharmaceuticals, Inc.* | 303 | 2,003 | ||||||
| Cross Country Healthcare, Inc.* | 248 | 2,001 | ||||||
| Synta Pharmaceuticals Corp.*,1 | 458 | 1,974 | ||||||
| Pozen, Inc. | 243 | 1,944 | ||||||
| Five Star Quality Care, Inc.* | 398 | 1,934 | ||||||
| LDR Holding Corp.* | 55 | 1,888 | ||||||
| Ampio Pharmaceuticals, Inc.* | 295 | 1,873 | ||||||
| Stemline Therapeutics, Inc.* | 92 | 1,873 | ||||||
| Almost Family, Inc.* | 81 | 1,871 | ||||||
| Chimerix, Inc.* | 81 | 1,850 | ||||||
| Tandem Diabetes Care, Inc.* | 83 | 1,833 | ||||||
| TearLab Corp.* | 270 | 1,825 | ||||||
| Verastem, Inc.* | 166 | 1,791 | ||||||
| Durata Therapeutics, Inc.*,†† | 132 | 1,778 | ||||||
| OncoGenex Pharmaceutical, Inc.* | 149 | 1,752 | ||||||
| Enanta Pharmaceuticals, Inc.* | 43 | 1,720 | ||||||
| Alliance HealthCare Services, Inc.* | 49 | 1,643 | ||||||
| ChemoCentryx, Inc.* | 239 | 1,585 | ||||||
| Relypsa, Inc.* | 53 | 1,580 | ||||||
| Cutera, Inc.* | 141 | 1,578 | ||||||
| Cytori Therapeutics, Inc.* | 581 | 1,569 | ||||||
| MacroGenics, Inc.* | 55 | 1,531 | ||||||
| Bluebird Bio, Inc.* | 67 | 1,524 | ||||||
| National Research Corp. — Class A* | 91 | 1,510 | ||||||
| Merge Healthcare, Inc.* | 613 | 1,496 | ||||||
| OncoMed Pharmaceuticals, Inc.* | 44 | 1,481 | ||||||
| Aerie Pharmaceuticals, Inc.* | 68 | 1,441 | ||||||
| Tetraphase Pharmaceuticals, Inc.* | 131 | 1,427 | ||||||
| Supernus Pharmaceuticals, Inc.* | 148 | 1,323 | ||||||
| MEI Pharma, Inc.* | 114 | 1,269 | ||||||
| Targacept, Inc.* | 265 | 1,259 | ||||||
| Addus HomeCare Corp.* | 54 | 1,245 | ||||||
| Epizyme, Inc.* | 54 | 1,230 | ||||||
| Alimera Sciences, Inc.* | 154 | 1,215 | ||||||
| Harvard Bioscience, Inc.* | 245 | 1,161 | ||||||
| Arqule, Inc.* | 566 | 1,160 | ||||||
| BioTime, Inc.* | 351 | 1,155 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Fibrocell Science, Inc.* | 215 | $ | 1,124 | |||||
| Nanosphere, Inc.* | 523 | 1,124 | ||||||
| Aratana Therapeutics, Inc.* | 60 | 1,114 | ||||||
| NeoGenomics, Inc.* | 316 | 1,097 | ||||||
| Five Prime Therapeutics, Inc.* | 55 | 1,081 | ||||||
| SIGA Technologies, Inc.* | 348 | 1,079 | ||||||
| Oxford Immunotec Global plc* | 53 | 1,064 | ||||||
| TG Therapeutics, Inc.* | 153 | 1,056 | ||||||
| Skilled Healthcare Group, Inc. — Class A* | 190 | 1,001 | ||||||
| Vical, Inc.* | 719 | 928 | ||||||
| Medical Action Industries, Inc.* | 131 | 913 | ||||||
| Regulus Therapeutics, Inc.* | 99 | 893 | ||||||
| Sucampo Pharmaceuticals, Inc. — Class A* | 124 | 887 | ||||||
| Pernix Therapeutics Holdings* | 164 | 877 | ||||||
| Alphatec Holdings, Inc.* | 572 | 858 | ||||||
| OvaScience, Inc.* | 93 | 831 | ||||||
| Biolase, Inc.* | 322 | 775 | ||||||
| AVEO Pharmaceuticals, Inc.* | 489 | 731 | ||||||
| Veracyte, Inc.* | 42 | 719 | ||||||
| Esperion Therapeutics, Inc.* | 47 | 711 | ||||||
| Amicus Therapeutics, Inc.* | 280 | 580 | ||||||
| BIND Therapeutics, Inc.* | 48 | 574 | ||||||
| Conatus Pharmaceuticals, Inc.* | 67 | 545 | ||||||
| Harvard Apparatus Regenerative | ||||||||
| Technology, Inc.* | 60 | 544 | ||||||
| Cellular Dynamics International, Inc.* | 35 | 523 | ||||||
| Coronado Biosciences, Inc.* | 248 | 491 | ||||||
| GTx, Inc.* | 238 | 364 | ||||||
| Enzon Pharmaceuticals, Inc. | 347 | 357 | ||||||
| Onconova Therapeutics, Inc.* | 52 | 330 | ||||||
| KaloBios Pharmaceuticals, Inc.* | 121 | 328 | ||||||
| USMD Holdings, Inc.* | 17 | 217 | ||||||
| ContraVir Pharmaceuticals, Inc.* | 76 | 171 | ||||||
| Total Health Care | 2,099,294 | |||||||
| CONSUMER DISCRETIONARY - 9.6% | ||||||||
| Kate Spade & Co.* | 1,134 | 42,061 | ||||||
| Brunswick Corp. | 842 | 38,133 | ||||||
| Tenneco, Inc.* | 580 | 33,682 | ||||||
| Dana Holding Corp. | 1,373 | 31,950 | ||||||
| Live Nation Entertainment, Inc.* | 1,322 | 28,753 | ||||||
| Sotheby’s | 646 | 28,133 | ||||||
| Pool Corp. | 450 | 27,594 | ||||||
| Wolverine World Wide, Inc. | 944 | 26,952 | ||||||
| Buffalo Wild Wings, Inc.* | 174 | 25,908 | ||||||
| Lumber Liquidators Holdings, Inc.* | 266 | 24,950 | ||||||
| Jack in the Box, Inc.* | 407 | 23,989 | ||||||
| Vail Resorts, Inc. | 337 | 23,488 | ||||||
| Cheesecake Factory, Inc. | 493 | 23,482 | ||||||
| Men’s Wearhouse, Inc. | 451 | 22,090 | ||||||
| Helen of Troy Ltd.* | 301 | 20,838 | ||||||
| New York Times Co. — Class A | 1,195 | 20,458 | ||||||
| Iconix Brand Group, Inc.* | 520 | 20,420 | ||||||
| Steven Madden Ltd.* | 564 | 20,293 | ||||||
| Outerwall, Inc.* | 273 | 19,793 | ||||||
| Life Time Fitness, Inc.* | 408 | 19,625 | ||||||
| Grand Canyon Education, Inc.* | 420 | 19,614 | ||||||
| HSN, Inc. | 313 | 18,695 | ||||||
| Office Depot, Inc.* | 4,514 | 18,642 | ||||||
| ANN, Inc.* | 436 | 18,085 | ||||||
| Genesco, Inc.* | 234 | 17,449 | ||||||
| Sinclair Broadcast Group, Inc. — Class A | 643 | 17,419 | ||||||
| Penske Automotive Group, Inc. | 404 | 17,276 | ||||||
| Cracker Barrel Old Country Store, Inc. | 177 | 17,211 | ||||||
| Ryland Group, Inc. | 427 | 17,049 | ||||||
| Jos. A. Bank Clothiers, Inc.* | 265 | 17,040 | ||||||
| Pier 1 Imports, Inc. | 888 | 16,765 | ||||||
| Hillenbrand, Inc. | 511 | 16,521 | ||||||
| Asbury Automotive Group, Inc.* | 296 | 16,372 | ||||||
| Monro Muffler Brake, Inc. | 285 | 16,211 | ||||||
| Shutterfl y, Inc.* | 371 | 15,833 | ||||||
| Papa John’s International, Inc. | 302 | 15,737 | ||||||
| Meredith Corp. | 338 | 15,693 | ||||||
| Marriott Vacations Worldwide Corp.* | 274 | 15,319 | ||||||
| Bob Evans Farms, Inc. | 304 | 15,209 | ||||||
| Texas Roadhouse, Inc. — Class A | 583 | 15,205 | ||||||
| Dorman Products, Inc.* | 254 | 15,001 | ||||||
| Meritage Homes Corp.* | 350 | 14,658 | ||||||
| Cooper Tire & Rubber Co. | 600 | 14,580 | ||||||
| Skechers U.S.A., Inc. — Class A* | 383 | 13,995 | ||||||
| Group 1 Automotive, Inc. | 211 | 13,854 | ||||||
| Lithia Motors, Inc. — Class A | 205 | 13,624 | ||||||
| Rent-A-Center, Inc. — Class A | 505 | 13,434 | ||||||
| La-Z-Boy, Inc. | 494 | 13,388 | ||||||
| KB Home | 781 | 13,269 | ||||||
| Vitamin Shoppe, Inc.* | 279 | 13,258 | ||||||
| Restoration Hardware Holdings, Inc.* | 180 | 13,246 | ||||||
| Pinnacle Entertainment, Inc.* | 550 | 13,036 | ||||||
| Crocs, Inc.* | 834 | 13,010 | ||||||
| Hibbett Sports, Inc.* | 245 | 12,956 | ||||||
| Orient-Express Hotels Ltd. — Class A* | 892 | 12,854 | ||||||
| Five Below, Inc.* | 300 | 12,744 | ||||||
| Express, Inc.* | 802 | 12,736 | ||||||
| Bloomin’ Brands, Inc.* | 521 | 12,556 | ||||||
| G-III Apparel Group Ltd.* | 175 | 12,527 | ||||||
| Finish Line, Inc. — Class A | 449 | 12,163 | ||||||
| Buckle, Inc. | 265 | 12,137 | ||||||
| DineEquity, Inc. | 155 | 12,101 | ||||||
| American Axle & Manufacturing | ||||||||
| Holdings, Inc.* | 643 | 11,908 | ||||||
| Sonic Corp.* | 516 | 11,760 | ||||||
| Gentherm, Inc.* | 337 | 11,701 | ||||||
| Churchill Downs, Inc. | 128 | 11,686 | ||||||
| Drew Industries, Inc. | 215 | 11,653 | ||||||
| Standard Pacific Corp.* | 1,390 | 11,551 | ||||||
| Jones Group, Inc. | 765 | 11,452 | ||||||
| Ascent Capital Group, Inc. — Class A* | 150 | 11,332 | ||||||
| iRobot Corp.* | 270 | 11,084 | ||||||
| Krispy Kreme Doughnuts, Inc.* | 613 | 10,868 | ||||||
| Sturm Ruger & Company, Inc. | 180 | 10,764 | ||||||
| Children’s Place Retail Stores, Inc. | 216 | 10,759 | ||||||
| Matthews International Corp. — Class A | 263 | 10,733 | ||||||
| Brown Shoe Company, Inc. | 403 | 10,696 | ||||||
| MDC Holdings, Inc. | 374 | 10,577 | ||||||
| 86 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND | |
| Shares | Value | |||||||
| Tumi Holdings, Inc.* | 456 | $ | 10,319 | |||||
| Nexstar Broadcasting Group, Inc. — Class A | 271 | 10,168 | ||||||
| Oxford Industries, Inc. | 129 | 10,088 | ||||||
| Columbia Sportswear Co. | 117 | 9,670 | ||||||
| Interval Leisure Group, Inc. | 369 | 9,646 | ||||||
| LifeLock, Inc.* | 556 | 9,513 | ||||||
| Select Comfort Corp.* | 521 | 9,420 | ||||||
| Fiesta Restaurant Group, Inc.* | 205 | 9,346 | ||||||
| International Speedway Corp. — Class A | 273 | 9,279 | ||||||
| Red Robin Gourmet Burgers, Inc.* | 129 | 9,247 | ||||||
| Quiksilver, Inc.* | 1,224 | 9,192 | ||||||
| Popeyes Louisiana Kitchen, Inc.* | 219 | 8,900 | ||||||
| Loral Space & Communications, Inc.* | 122 | 8,629 | ||||||
| Boyd Gaming Corp.* | 647 | 8,540 | ||||||
| Sonic Automotive, Inc. — Class A | 378 | 8,497 | ||||||
| Biglari Holdings, Inc.* | 17 | 8,287 | ||||||
| Scholastic Corp. | 240 | 8,275 | ||||||
| National CineMedia, Inc. | 548 | 8,220 | ||||||
| MDC Partners, Inc. — Class A | 358 | 8,170 | ||||||
| Conn’s, Inc.* | 205 | 7,964 | ||||||
| Barnes & Noble, Inc.* | 374 | 7,817 | ||||||
| World Wrestling Entertainment, | ||||||||
| Inc. — Class A | 269 | 7,769 | ||||||
| Multimedia Games Holding Company, Inc.* | 264 | 7,667 | ||||||
| Smith & Wesson Holding Corp.* | 521 | 7,617 | ||||||
| Core-Mark Holding Company, Inc. | 104 | 7,551 | ||||||
| BJ’s Restaurants, Inc.* | 229 | 7,491 | ||||||
| Cato Corp. — Class A | 277 | 7,490 | ||||||
| Movado Group, Inc. | 164 | 7,470 | ||||||
| Francesca’s Holdings Corp.* | 409 | 7,419 | ||||||
| Stage Stores, Inc. | 302 | 7,384 | ||||||
| Winnebago Industries, Inc.* | 267 | 7,313 | ||||||
| Caesars Entertainment Corp.* | 381 | 7,243 | ||||||
| Steiner Leisure Ltd.* | 149 | 6,891 | ||||||
| Capella Education Co. | 108 | 6,820 | ||||||
| Callaway Golf Co. | 663 | 6,776 | ||||||
| Carmike Cinemas, Inc.* | 223 | 6,659 | ||||||
| Modine Manufacturing Co.* | 451 | 6,607 | ||||||
| Chuy’s Holdings, Inc.* | 152 | 6,557 | ||||||
| Ethan Allen Interiors, Inc. | 254 | 6,464 | ||||||
| ITT Educational Services, Inc.* | 224 | 6,424 | ||||||
| Standard Motor Products, Inc. | 177 | 6,331 | ||||||
| Zale Corp.* | 300 | 6,273 | ||||||
| Scientific Games Corp. — Class A* | 456 | 6,261 | ||||||
| Fred’s, Inc. — Class A | 347 | 6,249 | ||||||
| Pep Boys-Manny Moe & Jack* | 489 | 6,220 | ||||||
| Regis Corp. | 452 | 6,192 | ||||||
| Rentrak Corp.* | 100 | 6,028 | ||||||
| Mattress Firm Holding Corp.* | 125 | 5,979 | ||||||
| K12, Inc.* | 261 | 5,912 | ||||||
| American Public Education, Inc.* | 167 | 5,858 | ||||||
| Tuesday Morning Corp.* | 408 | 5,773 | ||||||
| Arctic Cat, Inc. | 118 | 5,639 | ||||||
| Denny’s Corp.* | 862 | 5,543 | ||||||
| Libbey, Inc.* | 212 | 5,512 | ||||||
| Cumulus Media, Inc. — Class A* | 797 | 5,507 | ||||||
| Universal Electronics, Inc.* | 143 | 5,490 | ||||||
| FTD Companies, Inc.* | 169 | 5,376 | ||||||
| Cavco Industries, Inc.* | 68 | 5,335 | ||||||
| M/I Homes, Inc.* | 237 | 5,314 | ||||||
| Vera Bradley, Inc.* | 196 | 5,290 | ||||||
| Haverty Furniture Companies, Inc. | 176 | 5,227 | ||||||
| EW Scripps Co. — Class A* | 293 | 5,192 | ||||||
| Strayer Education, Inc.* | 110 | 5,107 | ||||||
| Hovnanian Enterprises, Inc. — Class A* | 1,056 | 4,995 | ||||||
| Zumiez, Inc.* | 206 | 4,993 | ||||||
| Gray Television, Inc.* | 481 | 4,988 | ||||||
| Beazer Homes USA, Inc.* | 237 | 4,759 | ||||||
| Bright Horizons Family Solutions, Inc.* | 120 | 4,693 | ||||||
| Container Store Group, Inc.* | 135 | 4,583 | ||||||
| LeapFrog Enterprises, Inc. — Class A* | 591 | 4,433 | ||||||
| Superior Industries International, Inc. | 210 | 4,303 | ||||||
| Blue Nile, Inc.* | 121 | 4,211 | ||||||
| Ruth’s Hospitality Group, Inc. | 337 | 4,074 | ||||||
| Burlington Stores, Inc.* | 136 | 4,015 | ||||||
| Houghton Mifflin Harcourt Co.* | 191 | 3,883 | ||||||
| NutriSystem, Inc. | 257 | 3,873 | ||||||
| Stein Mart, Inc. | 276 | 3,867 | ||||||
| Destination Maternity Corp. | 138 | 3,781 | ||||||
| Aeropostale, Inc.* | 752 | 3,775 | ||||||
| Career Education Corp.* | 504 | 3,760 | ||||||
| Journal Communications, Inc. — Class A* | 414 | 3,668 | ||||||
| ClubCorp Holdings, Inc. | 194 | 3,667 | ||||||
| Harte-Hanks, Inc. | 412 | 3,642 | ||||||
| McClatchy Co. — Class A* | 559 | 3,589 | ||||||
| Entravision Communications Corp. — Class A | 524 | 3,511 | ||||||
| William Lyon Homes — Class A* | 125 | 3,451 | ||||||
| MarineMax, Inc.* | 223 | 3,387 | ||||||
| Unifi, Inc.* | 145 | 3,346 | ||||||
| Shoe Carnival, Inc. | 144 | 3,318 | ||||||
| Federal-Mogul Corp.* | 177 | 3,312 | ||||||
| Bridgepoint Education, Inc.* | 218 | 3,246 | ||||||
| Media General, Inc. — Class A* | 176 | 3,233 | ||||||
| Ruby Tuesday, Inc.* | 571 | 3,203 | ||||||
| RetailMeNot, Inc.* | 98 | 3,136 | ||||||
| Marcus Corp. | 184 | 3,073 | ||||||
| Remy International, Inc. | 127 | 3,000 | ||||||
| Daily Journal Corp.* | 17 | 2,940 | ||||||
| Stoneridge, Inc.* | 261 | 2,931 | ||||||
| Nautilus, Inc.* | 298 | 2,870 | ||||||
| America’s Car-Mart, Inc.* | 75 | 2,754 | ||||||
| Del Frisco’s Restaurant Group, Inc.* | 98 | 2,734 | ||||||
| Carriage Services, Inc. — Class A | 149 | 2,718 | ||||||
| Diamond Resorts International, Inc.* | 159 | 2,695 | ||||||
| Universal Technical Institute, Inc. | 208 | 2,694 | ||||||
| Vince Holding Corp.* | 101 | 2,662 | ||||||
| PetMed Express, Inc. | 193 | 2,588 | ||||||
| Bravo Brio Restaurant Group, Inc.* | 183 | 2,582 | ||||||
| Black Diamond, Inc.* | 211 | 2,581 | ||||||
| Tile Shop Holdings, Inc.* | 166 | 2,565 | ||||||
| Big 5 Sporting Goods Corp. | 159 | 2,552 | ||||||
| Sizmek, Inc.* | 234 | 2,487 | ||||||
| Kirkland’s, Inc.* | 133 | 2,459 | ||||||
| Noodles & Co.* | 62 | 2,447 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| Shares | Value | |||||||
| VOXX International Corp. — Class A* | 177 | $ | 2,421 | |||||
| Citi Trends, Inc.* | 145 | 2,362 | ||||||
| Entercom Communications Corp. — Class A* | 232 | 2,336 | ||||||
| Saga Communications, Inc. — Class A | 46 | 2,286 | ||||||
| Overstock.com, Inc.* | 115 | 2,266 | ||||||
| Destination XL Group, Inc.* | 399 | 2,250 | ||||||
| TRI Pointe Homes, Inc.* | 138 | 2,240 | ||||||
| CSS Industries, Inc. | 81 | 2,187 | ||||||
| Christopher & Banks Corp.* | 329 | 2,175 | ||||||
| Central European Media | ||||||||
| Enterprises Ltd. — Class A* | 713 | 2,096 | ||||||
| NACCO Industries, Inc. — Class A | 38 | 2,060 | ||||||
| Speedway Motorsports, Inc. | 109 | 2,042 | ||||||
| AH Belo Corp. — Class A | 175 | 2,027 | ||||||
| Morgans Hotel Group Co.* | 251 | 2,018 | ||||||
| Town Sports International Holdings, Inc. | 236 | 2,004 | ||||||
| bebe stores, Inc. | 326 | 1,995 | ||||||
| RadioShack Corp.*,1 | 925 | 1,961 | ||||||
| Sears Hometown and Outlet Stores, Inc.* | 81 | 1,916 | ||||||
| Winmark Corp. | 25 | 1,892 | ||||||
| Tower International, Inc.* | 69 | 1,878 | ||||||
| Jamba, Inc.* | 155 | 1,859 | ||||||
| West Marine, Inc.* | 161 | 1,831 | ||||||
| ValueVision Media, Inc. — Class A* | 372 | 1,808 | ||||||
| Orbitz Worldwide, Inc.* | 228 | 1,788 | ||||||
| Flexsteel Industries, Inc. | 47 | 1,768 | ||||||
| RG Barry Corp. | 92 | 1,737 | ||||||
| Spartan Motors, Inc. | 337 | 1,732 | ||||||
| Perry Ellis International, Inc.* | 126 | 1,731 | ||||||
| Fox Factory Holding Corp.* | 88 | 1,663 | ||||||
| Systemax, Inc.* | 110 | 1,640 | ||||||
| Lifetime Brands, Inc. | 91 | 1,625 | ||||||
| Global Sources Ltd.* | 181 | 1,622 | ||||||
| Carrols Restaurant Group, Inc.* | 225 | 1,613 | ||||||
| Skullcandy, Inc.* | 174 | 1,597 | ||||||
| Weyco Group, Inc. | 58 | 1,567 | ||||||
| Culp, Inc. | 79 | 1,559 | ||||||
| Hooker Furniture Corp. | 97 | 1,519 | ||||||
| Bon-Ton Stores, Inc. | 138 | 1,515 | ||||||
| Dex Media, Inc.* | 164 | 1,509 | ||||||
| Fuel Systems Solutions, Inc.* | 140 | 1,506 | ||||||
| Isle of Capri Casinos, Inc.* | 196 | 1,503 | ||||||
| LGI Homes, Inc.* | 86 | 1,484 | ||||||
| Monarch Casino & Resort, Inc.* | 80 | 1,482 | ||||||
| Vitacost.com, Inc.* | 206 | 1,461 | ||||||
| Bassett Furniture Industries, Inc. | 96 | 1,426 | ||||||
| Nathan’s Famous, Inc.* | 29 | 1,421 | ||||||
| Potbelly Corp.* | 79 | 1,412 | ||||||
| 1-800-Flowers.com, Inc. — Class A* | 249 | 1,402 | ||||||
| ZAGG, Inc.* | 302 | 1,395 | ||||||
| hhgregg, Inc.* | 143 | 1,374 | ||||||
| JTH Holding, Inc. — Class A* | 49 | 1,359 | ||||||
| WCI Communities, Inc.* | 67 | 1,324 | ||||||
| JAKKS Pacific, Inc. | 182 | 1,314 | ||||||
| UCP, Inc. — Class A* | 87 | 1,310 | ||||||
| SFX Entertainment, Inc.* | 181 | 1,276 | ||||||
| Pacific Sunwear of California, Inc.* | 425 | 1,262 | ||||||
| Tilly’s, Inc. — Class A* | 107 | 1,252 | ||||||
| Crown Media Holdings, Inc. — Class A* | 323 | 1,240 | ||||||
| Johnson Outdoors, Inc. — Class A | 48 | 1,220 | ||||||
| Reading International, Inc. — Class A* | 166 | 1,217 | ||||||
| Shiloh Industries, Inc.* | 68 | 1,206 | ||||||
| New York & Company, Inc.* | 269 | 1,181 | ||||||
| Martha Stewart Living | ||||||||
| Omnimedia, Inc. — Class A* | 258 | 1,169 | ||||||
| Luby’s, Inc.* | 182 | 1,121 | ||||||
| Education Management Corp.* | 230 | 1,120 | ||||||
| Wet Seal, Inc. — Class A* | 831 | 1,097 | ||||||
| Hemisphere Media Group, Inc.* | 86 | 1,083 | ||||||
| Corinthian Colleges, Inc.* | 736 | 1,016 | ||||||
| Einstein Noah Restaurant Group, Inc. | 61 | 1,004 | ||||||
| Salem Communications Corp. — Class A | 100 | 999 | ||||||
| Ignite Restaurant Group, Inc.* | 67 | 943 | ||||||
| Blyth, Inc. | 87 | 934 | ||||||
| ReachLocal, Inc.* | 91 | 896 | ||||||
| Lincoln Educational Services Corp. | 226 | 852 | ||||||
| Marine Products Corp. | 100 | 752 | ||||||
| Diversified Restaurant Holdings, Inc.* | 112 | 560 | ||||||
| Gordmans Stores, Inc. | 82 | 448 | ||||||
| Trans World Entertainment Corp. | 116 | 421 | ||||||
| EveryWare Global, Inc.* | 89 | 406 | ||||||
| Beasley Broadcasting Group, Inc. — Class A | 43 | 391 | ||||||
| American Apparel, Inc.* | 533 | 267 | ||||||
| Body Central Corp.* | 163 | 174 | ||||||
| Total Consumer Discretionary | 2,068,797 | |||||||
| ENERGY - 4.1% | ||||||||
| Kodiak Oil & Gas Corp.* | 2,500 | 30,349 | ||||||
| Targa Resources Corp. | 304 | 30,176 | ||||||
| Rosetta Resources, Inc.* | 574 | 26,736 | ||||||
| SemGroup Corp. — Class A | 399 | 26,206 | ||||||
| CARBO Ceramics, Inc. | 188 | 25,941 | ||||||
| Bristow Group, Inc. | 334 | 25,224 | ||||||
| Exterran Holdings, Inc. | 533 | 23,388 | ||||||
| Helix Energy Solutions Group, Inc.* | 985 | 22,635 | ||||||
| Carrizo Oil & Gas, Inc.* | 418 | 22,345 | ||||||
| Energy XXI Bermuda Ltd. | 893 | 21,047 | ||||||
| PDC Energy, Inc.* | 333 | 20,733 | ||||||
| Western Refining, Inc. | 510 | 19,687 | ||||||
| Stone Energy Corp.* | 465 | 19,516 | ||||||
| Scorpio Tankers, Inc. | 1,728 | 17,228 | ||||||
| SEACOR Holdings, Inc.* | 191 | 16,506 | ||||||
| Hornbeck Offshore Services, Inc.* | 335 | 14,006 | ||||||
| Matador Resources Co.* | 555 | 13,592 | ||||||
| Magnum Hunter Resources Corp.* | 1,599 | 13,592 | ||||||
| Key Energy Services, Inc.* | 1,424 | 13,158 | ||||||
| C&J Energy Services, Inc.* | 421 | 12,276 | ||||||
| Diamondback Energy, Inc.* | 182 | 12,250 | ||||||
| Bonanza Creek Energy, Inc.* | 274 | 12,166 | ||||||
| Cloud Peak Energy, Inc.* | 575 | 12,156 | ||||||
| Gulfmark Offshore, Inc. — Class A | 262 | 11,774 | ||||||
| Bill Barrett Corp.* | 458 | 11,725 | ||||||
| Forum Energy Technologies, Inc.* | 361 | 11,184 | ||||||
| EPL Oil & Gas, Inc.* | 280 | 10,808 | ||||||
| Sanchez Energy Corp.* | 355 | 10,519 | ||||||
| 88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 | |
| RUSSELL 2000® 1.5x STRATEGY FUND | ||
| Shares | Value | |||||||
| Delek US Holdings, Inc. | 354 | $ | 10,280 | |||||
| Comstock Resources, Inc. | 449 | 10,260 | ||||||
| Arch Coal, Inc. | 1,998 | 9,630 | ||||||
| TETRA Technologies, Inc.* | 735 | 9,408 | ||||||
| Halcon Resources Corp.*,1 | 2,168 | 9,387 | ||||||
| Ship Finance International Ltd. | 516 | 9,273 | ||||||
| Newpark Resources, Inc.* | 801 | 9,171 | ||||||
| Penn Virginia Corp.* | 520 | 9,095 | ||||||
| Northern Oil and Gas, Inc.* | 605 | 8,845 | ||||||
| Alpha Natural Resources, Inc.* | 2,076 | 8,823 | ||||||
| EXCO Resources, Inc.1 | 1,551 | 8,686 | ||||||
| Matrix Service Co.* | 246 | 8,310 | ||||||
| Rex Energy Corp.* | 432 | 8,083 | ||||||
| Parker Drilling Co.* | 1,114 | 7,899 | ||||||
| Basic Energy Services, Inc.* | 285 | 7,812 | ||||||
| Geospace Technologies Corp.* | 117 | 7,742 | ||||||
| Pioneer Energy Services Corp.* | 581 | 7,524 | ||||||
| Green Plains Renewable Energy, Inc. | 240 | 7,190 | ||||||
| Approach Resources, Inc.* | 331 | 6,921 | ||||||
| Hercules Offshore, Inc.* | 1,490 | 6,839 | ||||||
| Nordic American Tankers Ltd. | 686 | 6,750 | ||||||
| Contango Oil & Gas Co.* | 140 | 6,684 | ||||||
| RigNet, Inc.* | 123 | 6,621 | ||||||
| GasLog Ltd. | 274 | 6,381 | ||||||
| Clayton Williams Energy, Inc.* | 56 | 6,329 | ||||||
| Era Group, Inc.* | 205 | 6,009 | ||||||
| Athlon Energy, Inc.* | 166 | 5,885 | ||||||
| Clean Energy Fuels Corp.* | 636 | 5,686 | ||||||
| W&T Offshore, Inc. | 327 | 5,660 | ||||||
| PHI, Inc.* | 120 | 5,309 | ||||||
| Triangle Petroleum Corp.* | 637 | 5,249 | ||||||
| Tesco Corp.* | 281 | 5,199 | ||||||
| ION Geophysical Corp.* | 1,228 | 5,170 | ||||||
| Synergy Resources Corp.* | 478 | 5,139 | ||||||
| Solazyme, Inc.* | 442 | 5,132 | ||||||
| Willbros Group, Inc.* | 376 | 4,745 | ||||||
| Goodrich Petroleum Corp.* | 294 | 4,651 | ||||||
| VAALCO Energy, Inc.* | 533 | 4,557 | ||||||
| Resolute Energy Corp.* | 627 | 4,514 | ||||||
| Swift Energy Co.* | 395 | 4,250 | ||||||
| Natural Gas Services Group, Inc.* | 135 | 4,069 | ||||||
| Rentech, Inc.* | 2,120 | 4,028 | ||||||
| Knightsbridge Tankers Ltd. | 291 | 3,943 | ||||||
| Emerald Oil, Inc.* | 537 | 3,609 | ||||||
| BPZ Resources, Inc.* | 1,103 | 3,508 | ||||||
| Westmoreland Coal Co.* | 116 | 3,454 | ||||||
| Panhandle Oil and Gas, Inc. — Class A | 79 | 3,445 | ||||||
| Warren Resources, Inc.* | 691 | 3,317 | ||||||
| Alon USA Energy, Inc. | 220 | 3,287 | ||||||
| Vantage Drilling Co.* | 1,875 | 3,206 | ||||||
| PetroQuest Energy, Inc.* | 541 | 3,084 | ||||||
| Callon Petroleum Co.* | 368 | 3,080 | ||||||
| Quicksilver Resources, Inc.*,1 | 1,170 | 3,077 | ||||||
| Abraxas Petroleum Corp.* | 770 | 3,049 | ||||||
| Gulf Island Fabrication, Inc. | 138 | 2,982 | ||||||
| Gastar Exploration, Inc.* | 525 | 2,872 | ||||||
| REX American Resources Corp.* | 48 | 2,738 | ||||||
| Nuverra Environmental Solutions, Inc.* | 134 | 2,719 | ||||||
| Renewable Energy Group, Inc.* | 198 | 2,372 | ||||||
| Dawson Geophysical Co. | 81 | 2,269 | ||||||
| Forest Oil Corp.* | 1,126 | 2,151 | ||||||
| Teekay Tankers Ltd. — Class A | 593 | 2,099 | ||||||
| Evolution Petroleum Corp. | 156 | 1,986 | ||||||
| Frontline Ltd.* | 481 | 1,890 | ||||||
| Mitcham Industries, Inc.* | 135 | 1,882 | ||||||
| Ur-Energy, Inc.* | 1,153 | 1,787 | ||||||
| Jones Energy, Inc. — Class A* | 114 | 1,726 | ||||||
| Midstates Petroleum Company, Inc.* | 321 | 1,721 | ||||||
| Bolt Technology Corp. | 87 | 1,720 | ||||||
| FX Energy, Inc.* | 506 | 1,690 | ||||||
| Miller Energy Resources, Inc.* | 279 | 1,641 | ||||||
| Cal Dive International, Inc.* | 927 | 1,576 | ||||||
| Equal Energy Ltd. | 342 | 1,566 | ||||||
| Endeavour International Corp.* | 452 | 1,469 | ||||||
| Isramco, Inc.* | 11 | 1,458 | ||||||
| Apco Oil and Gas International, Inc.* | 85 | 1,228 | ||||||
| Adams Resources & Energy, Inc. | 21 | 1,216 | ||||||
| Uranium Energy Corp.* | 791 | 1,044 | ||||||
| Amyris, Inc.* | 248 | 925 | ||||||
| TGC Industries, Inc.* | 144 | 857 | ||||||
| L&L Energy, Inc.*,†† | 480 | 806 | ||||||
| Hallador Energy Co. | 90 | 770 | ||||||
| ZaZa Energy Corp.* | 346 | 260 | ||||||
| KiOR, Inc. — Class A* | 421 | 241 | ||||||
| Total Energy | 885,838 | |||||||
| MATERIALS - 3.6% | ||||||||
| PolyOne Corp. | 915 | 33,544 | ||||||
| Axiall Corp. | 650 | 29,197 | ||||||
| Sensient Technologies Corp. | 476 | 26,851 | ||||||
| Chemtura Corp.* | 931 | 23,545 | ||||||
| KapStone Paper and Packaging Corp.* | 777 | 22,408 | ||||||
| HB Fuller Co. | 463 | 22,354 | ||||||
| Louisiana-Pacific Corp.* | 1,296 | 21,864 | ||||||
| Minerals Technologies, Inc. | 331 | 21,369 | ||||||
| Olin Corp. | 764 | 21,094 | ||||||
| Commercial Metals Co. | 1,091 | 20,598 | ||||||
| Texas Industries, Inc.* | 223 | 19,985 | ||||||
| Graphic Packaging Holding Co.* | 1,867 | 18,968 | ||||||
| Worthington Industries, Inc. | 494 | 18,896 | ||||||
| Stillwater Mining Co.* | 1,107 | 16,395 | ||||||
| SunCoke Energy, Inc.* | 652 | 14,891 | ||||||
| Balchem Corp. | 272 | 14,177 | ||||||
| Resolute Forest Products, Inc.* | 644 | 12,938 | ||||||
| Globe Specialty Metals, Inc. | 613 | 12,763 | ||||||
| Kaiser Aluminum Corp. | 178 | 12,713 | ||||||
| Innophos Holdings, Inc. | 221 | 12,531 | ||||||
| Clearwater Paper Corp.* | 195 | 12,221 | ||||||
| Flotek Industries, Inc.* | 438 | 12,198 | ||||||
| Schweitzer-Mauduit International, Inc. | 286 | 12,181 | ||||||
| AMCOL International Corp. | 264 | 12,086 | ||||||
| Berry Plastics Group, Inc.* | 505 | 11,691 | ||||||
| Stepan Co. | 177 | 11,427 | ||||||
| PH Glatfelter Co. | 413 | 11,242 | ||||||
| Calgon Carbon Corp.* | 504 | 11,002 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 89 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 | |
| RUSSELL 2000® 1.5x STRATEGY FUND | ||
| Shares | Value | |||||||
| Innospec, Inc. | 228 | $ | 10,312 | |||||
| OM Group, Inc. | 310 | 10,298 | ||||||
| A. Schulman, Inc. | 280 | 10,153 | ||||||
| Hecla Mining Co. | 3,110 | 9,548 | ||||||
| Quaker Chemical Corp. | 119 | 9,381 | ||||||
| Ferro Corp.* | 678 | 9,261 | ||||||
| Headwaters, Inc.* | 696 | 9,194 | ||||||
| AK Steel Holding Corp.* | 1,265 | 9,133 | ||||||
| Coeur Mining, Inc.* | 949 | 8,816 | ||||||
| Kraton Performance Polymers, Inc.* | 315 | 8,234 | ||||||
| RTI International Metals, Inc.* | 296 | 8,223 | ||||||
| Koppers Holdings, Inc. | 195 | 8,040 | ||||||
| Intrepid Potash, Inc.* | 520 | 8,038 | ||||||
| US Silica Holdings, Inc. | 202 | 7,710 | ||||||
| Horsehead Holding Corp.* | 457 | 7,687 | ||||||
| Neenah Paper, Inc. | 148 | 7,655 | ||||||
| Haynes International, Inc. | 134 | 7,236 | ||||||
| Schnitzer Steel Industries, Inc. — Class A | 244 | 7,039 | ||||||
| Materion Corp. | 197 | 6,684 | ||||||
| LSB Industries, Inc.* | 178 | 6,661 | ||||||
| Deltic Timber Corp. | 101 | 6,588 | ||||||
| Molycorp, Inc.*,1 | 1,397 | 6,552 | ||||||
| Century Aluminum Co.* | 469 | 6,195 | ||||||
| Wausau Paper Corp. | 458 | 5,830 | ||||||
| American Vanguard Corp. | 267 | 5,781 | ||||||
| Tredegar Corp. | 228 | 5,246 | ||||||
| Myers Industries, Inc. | 254 | 5,060 | ||||||
| Advanced Emissions Solutions, Inc.* | 188 | 4,614 | ||||||
| OMNOVA Solutions, Inc.* | 437 | 4,536 | ||||||
| Walter Energy, Inc. | 579 | 4,377 | ||||||
| FutureFuel Corp. | 212 | 4,304 | ||||||
| Allied Nevada Gold Corp.* | 977 | 4,211 | ||||||
| Zep, Inc. | 218 | 3,859 | ||||||
| Hawkins, Inc. | 98 | 3,601 | ||||||
| Boise Cascade Co.* | 121 | 3,465 | ||||||
| Taminco Corp.* | 158 | 3,320 | ||||||
| US Concrete, Inc.* | 129 | 3,032 | ||||||
| Landec Corp.* | 247 | 2,757 | ||||||
| Universal Stainless & Alloy Products, Inc.* | 76 | 2,567 | ||||||
| AM Castle & Co.* | 167 | 2,453 | ||||||
| Olympic Steel, Inc. | 84 | 2,411 | ||||||
| Arabian American Development Co.* | 190 | 2,062 | ||||||
| Chase Corp. | 59 | 1,860 | ||||||
| Paramount Gold and Silver Corp.* | 1,300 | 1,599 | ||||||
| AEP Industries, Inc.* | 42 | 1,558 | ||||||
| Gold Resource Corp. | 317 | 1,515 | ||||||
| UFP Technologies, Inc.* | 60 | 1,462 | ||||||
| Penford Corp.* | 98 | 1,407 | ||||||
| United States Lime & Minerals, Inc. | 23 | 1,295 | ||||||
| Noranda Aluminum Holding Corp. | 314 | 1,291 | ||||||
| KMG Chemicals, Inc. | 80 | 1,254 | ||||||
| Midway Gold Corp.* | 1,053 | 1,106 | ||||||
| Handy & Harman Ltd.* | 46 | 1,012 | ||||||
| Marrone Bio Innovations, Inc.* | 46 | 643 | ||||||
| General Moly, Inc.* | 549 | 544 | ||||||
| GSE Holding, Inc.* | 73 | 21 | ||||||
| Total Materials | 769,820 | |||||||
| CONSUMER STAPLES - 2.7% | ||||||||
| Rite Aid Corp.* | 6,843 | 42,906 | ||||||
| Hain Celestial Group, Inc.* | 364 | 33,294 | ||||||
| United Natural Foods, Inc.* | 463 | 32,836 | ||||||
| Darling International, Inc.* | 1,450 | 29,029 | ||||||
| Casey’s General Stores, Inc. | 356 | 24,062 | ||||||
| TreeHouse Foods, Inc.* | 328 | 23,613 | ||||||
| Lancaster Colony Corp. | 189 | 18,790 | ||||||
| Boston Beer Company, Inc. — Class A* | 74 | 18,110 | ||||||
| PriceSmart, Inc. | 176 | 17,764 | ||||||
| Sanderson Farms, Inc. | 223 | 17,503 | ||||||
| Post Holdings, Inc.* | 310 | 17,087 | ||||||
| Spectrum Brands Holdings, Inc. | 202 | 16,099 | ||||||
| Andersons, Inc. | 256 | 15,165 | ||||||
| B&G Foods, Inc. — Class A | 494 | 14,874 | ||||||
| J&J Snack Foods Corp. | 148 | 14,204 | ||||||
| SUPERVALU, Inc.* | 1,924 | 13,160 | ||||||
| Snyder’s-Lance, Inc. | 462 | 13,024 | ||||||
| Universal Corp. | 226 | 12,631 | ||||||
| Vector Group Ltd. | 578 | 12,450 | ||||||
| Pilgrim’s Pride Corp.* | 580 | 12,134 | ||||||
| WD-40 Co. | 156 | 12,101 | ||||||
| Susser Holdings Corp.* | 172 | 10,745 | ||||||
| Seaboard Corp.* | 4 | 10,486 | ||||||
| Boulder Brands, Inc.* | 578 | 10,184 | ||||||
| Fresh Del Monte Produce, Inc. | 344 | 9,484 | ||||||
| Cal-Maine Foods, Inc. | 137 | 8,601 | ||||||
| Spartan Stores, Inc. | 342 | 7,938 | ||||||
| Diamond Foods, Inc.* | 210 | 7,335 | ||||||
| Elizabeth Arden, Inc.* | 244 | 7,200 | ||||||
| Inter Parfums, Inc. | 156 | 5,649 | ||||||
| Tootsie Roll Industries, Inc. | 188 | 5,643 | ||||||
| Chiquita Brands International, Inc.* | 446 | 5,553 | ||||||
| Weis Markets, Inc. | 109 | 5,368 | ||||||
| Annie’s, Inc.* | 125 | 5,024 | ||||||
| Calavo Growers, Inc. | 132 | 4,697 | ||||||
| USANA Health Sciences, Inc.* | 58 | 4,370 | ||||||
| Natural Grocers by Vitamin Cottage, Inc.* | 88 | 3,842 | ||||||
| Medifast, Inc.* | 131 | 3,811 | ||||||
| Harbinger Group, Inc.* | 307 | 3,755 | ||||||
| Coca-Cola Bottling | ||||||||
| Company Consolidated | 44 | 3,739 | ||||||
| Chefs’ Warehouse, Inc.* | 157 | 3,360 | ||||||
| Pantry, Inc.* | 217 | 3,329 | ||||||
| Central Garden and Pet Co. ��� Class A* | 395 | 3,267 | ||||||
| Ingles Markets, Inc. — Class A | 114 | 2,715 | ||||||
| Revlon, Inc. — Class A* | 104 | 2,657 | ||||||
| Seneca Foods Corp. — Class A* | 79 | 2,487 | ||||||
| Alliance One International, Inc.* | 825 | 2,409 | ||||||
| Omega Protein Corp.* | 196 | 2,366 | ||||||
| Nutraceutical International Corp.* | 87 | 2,261 | ||||||
| Limoneira Co. | 95 | 2,155 | ||||||
| National Beverage Corp.* | 106 | 2,068 | ||||||
| John B Sanfilippo & Son, Inc. | 80 | 1,842 | ||||||
| Inventure Foods, Inc.* | 129 | 1,803 | ||||||
| Orchids Paper Products Co. | 58 | 1,775 | ||||||
| Village Super Market, Inc. — Class A | 63 | 1,663 | ||||||
| 90 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 | |
| RUSSELL 2000® 1.5x STRATEGY FUND | ||
| Shares | Value | |||||||
| Roundy’s, Inc. | 234 | $ | 1,610 | |||||
| Female Health Co. | 207 | 1,606 | ||||||
| Oil-Dri Corporation of America | 46 | 1,589 | ||||||
| Craft Brew Alliance, Inc.* | 94 | 1,435 | ||||||
| Nature’s Sunshine Products, Inc. | 99 | 1,364 | ||||||
| Lifevantage Corp.* | 996 | 1,305 | ||||||
| Star Scientific, Inc.* | 1,555 | 1,220 | ||||||
| Fairway Group Holdings Corp.* | 154 | 1,177 | ||||||
| Farmer Bros Co.* | 57 | 1,123 | ||||||
| Synutra International, Inc.* | 162 | 1,084 | ||||||
| Griffin Land & Nurseries, Inc. | 30 | 907 | ||||||
| Alico, Inc. | 21 | 792 | ||||||
| Lifeway Foods, Inc. | 44 | 647 | ||||||
| Total Consumer Staples | 586,276 | |||||||
| UTILITIES - 2.3% | ||||||||
| Cleco Corp. | 569 | 28,780 | ||||||
| IDACORP, Inc. | 462 | 25,627 | ||||||
| Piedmont Natural Gas Company, Inc. | 696 | 24,632 | ||||||
| Black Hills Corp. | 423 | 24,386 | ||||||
| UNS Energy Corp. | 399 | 23,952 | ||||||
| Dynegy, Inc.* | 956 | 23,842 | ||||||
| Southwest Gas Corp. | 441 | 23,571 | ||||||
| Portland General Electric Co. | 710 | 22,961 | ||||||
| PNM Resources, Inc. | 750 | 20,273 | ||||||
| New Jersey Resources Corp. | 389 | 19,372 | ||||||
| UIL Holdings Corp. | 526 | 19,362 | ||||||
| ALLETE, Inc. | 365 | 19,133 | ||||||
| WGL Holdings, Inc. | 475 | 19,029 | ||||||
| NorthWestern Corp. | 374 | 17,739 | ||||||
| Avista Corp. | 549 | 16,827 | ||||||
| South Jersey Industries, Inc. | 294 | 16,490 | ||||||
| Laclede Group, Inc. | 316 | 14,899 | ||||||
| El Paso Electric Co. | 381 | 13,613 | ||||||
| MGE Energy, Inc. | 326 | 12,769 | ||||||
| American States Water Co. | 361 | 11,657 | ||||||
| Northwest Natural Gas Co. | 250 | 11,003 | ||||||
| Otter Tail Corp. | 349 | 10,746 | ||||||
| California Water Service Group | 440 | 10,534 | ||||||
| Empire District Electric Co. | 391 | 9,509 | ||||||
| NRG Yield, Inc. — Class A | 219 | 8,657 | ||||||
| Chesapeake Utilities Corp. | 87 | 5,495 | ||||||
| Ormat Technologies, Inc. | 164 | 4,922 | ||||||
| Pattern Energy Group, Inc. | 166 | 4,504 | ||||||
| SJW Corp. | 145 | 4,286 | ||||||
| Unitil Corp. | 126 | 4,138 | ||||||
| Connecticut Water Service, Inc. | 109 | 3,725 | ||||||
| Middlesex Water Co. | 155 | 3,382 | ||||||
| Atlantic Power Corp. | 1,131 | 3,280 | ||||||
| York Water Co. | 131 | 2,672 | ||||||
| Consolidated Water Company Ltd. | 140 | 1,845 | ||||||
| Delta Natural Gas Company, Inc. | 75 | 1,554 | ||||||
| Artesian Resources Corp. — Class A | 67 | 1,505 | ||||||
| Genie Energy Ltd. — Class B* | 122 | 1,216 | ||||||
| Pure Cycle Corp.* | 162 | 980 | ||||||
| Total Utilities | 492,867 | |||||||
| TELECOMMUNICATION SERVICES - 0.5% | ||||||||
| Cogent Communications Group, Inc. | 436 | 15,490 | ||||||
| 8x8, Inc.* | 798 | 8,626 | ||||||
| Consolidated Communications | ||||||||
| Holdings, Inc. | 377 | 7,543 | ||||||
| Shenandoah Telecommunications Co. | 221 | 7,136 | ||||||
| Cincinnati Bell, Inc.* | 1,949 | 6,744 | ||||||
| Vonage Holdings Corp.* | 1,447 | 6,179 | ||||||
| Atlantic Tele-Network, Inc. | 85 | 5,603 | ||||||
| Premiere Global Services, Inc.* | 444 | 5,355 | ||||||
| inContact, Inc.* | 502 | 4,819 | ||||||
| Iridium Communications, Inc.* | 620 | 4,656 | ||||||
| Inteliquent, Inc. | 316 | 4,591 | ||||||
| magicJack VocalTec Ltd.* | 181 | 3,843 | ||||||
| USA Mobility, Inc. | 204 | 3,707 | ||||||
| General Communication, | ||||||||
| Inc. — Class A* | 295 | 3,366 | ||||||
| Hawaiian Telcom Holdco, Inc.* | 96 | 2,735 | ||||||
| FairPoint Communications, Inc.* | 193 | 2,625 | ||||||
| ORBCOMM, Inc.* | 383 | 2,624 | ||||||
| IDT Corp. — Class B | 155 | 2,582 | ||||||
| NTELOS Holdings Corp. | 153 | 2,066 | ||||||
| Lumos Networks Corp. | 153 | 2,046 | ||||||
| NII Holdings, Inc.* | 1,612 | 1,918 | ||||||
| Cbeyond, Inc.* | 254 | 1,842 | ||||||
| HickoryTech Corp. | 122 | 1,560 | ||||||
| Towerstream Corp.* | 623 | 1,464 | ||||||
| RingCentral, Inc. — Class A* | 79 | 1,430 | ||||||
| Boingo Wireless, Inc.* | 183 | 1,241 | ||||||
| Straight Path Communications, | ||||||||
| Inc. — Class B* | 66 | 486 | ||||||
| Total Telecommunication Services | 112,277 | |||||||
| Total Common Stocks | ||||||||
| (Cost $9,375,772) | 15,716,747 | |||||||
| WARRANTS†† - 0.0% | ||||||||
| Tejon Ranch Co. | ||||||||
| $10.50, 08/31/16*,† | 54 | 197 | ||||||
| Magnum Hunter Resources Corp. | ||||||||
| $8.50, 04/15/16*,1 | 282 | — | ||||||
| Total Warrants | ||||||||
| (Cost $344) | 197 | |||||||
| RIGHTS† - 0.0% | ||||||||
| Leap Wireless International | ||||||||
| Expires 03/17/15*,†† | 513 | 1,293 | ||||||
| Cubist Pharmaceuticals, Inc. | ||||||||
| Expires 12/31/16*,† | 729 | 474 | ||||||
| Omthera Pharmaceuticals, Inc. | ||||||||
| Expires 12/31/20*,†† | 57 | 34 | ||||||
| Central European Media | ||||||||
| Enterprises Ltd. | ||||||||
| Expires 04/25/14*,†† | 11 | — | ||||||
| Total Rights | ||||||||
| (Cost $1,670) | 1,801 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 91 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 | |
| RUSSELL 2000® 1.5x STRATEGY FUND | ||
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,2 - 16.6% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 1,939,572 | $ | 1,939,572 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 818,432 | 818,432 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 553,452 | 553,452 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 257,862 | 257,862 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $3,569,318) | 3,569,318 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 29,626 | 29,626 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 26,434 | 26,434 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% – 0.08% | ||||||||
| due 04/01/14 | 4,983 | 4,983 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $61,043) | 61,043 | |||||||
| Total Investments - 89.9% | ||||||||
| (Cost $13,008,147) | $ | 19,349,106 | ||||||
| Other Assets & Liabilities, net - 10.1% | 2,184,582 | |||||||
| Total Net Assets - 100.0% | $ | 21,533,688 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (Loss) | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Russell 2000 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $9,337,600) | 80 | $ | (102,613 | ) | ||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $4,924,542) | 4,198 | $ | 66,438 | |||||
| Goldman Sachs International | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $2,121,477) | 1,809 | 22,926 | ||||||
| Barclays Bank plc | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $216,109) | 184 | 3,912 | ||||||
| (Total Notional Value | ||||||||
| $7,262,128) | $ | 93,276 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
| †† | Value determined based on Level 2 inputs, unless otherwise noted — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Total Return based on Russell 2000 Index +/- financing at a variable rate. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| 92 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $58,592 of | ||||
| securities loaned | ||||
| (cost $9,377,786) | $ | 15,718,745 | ||
| Repurchase agreements, at value | ||||
| (cost $3,630,361) | 3,630,361 | |||
| Total investments | ||||
| (cost $13,008,147) | 19,349,106 | |||
| Foreign currency, at value | ||||
| (cost $34) | 34 | |||
| Segregated cash with broker | 1,713,668 | |||
| Unrealized appreciation on swap agreements | 93,276 | |||
| Receivables: | ||||
| Fund shares sold | 694,291 | |||
| Variation margin | 161,600 | |||
| Dividends | 15,766 | |||
| Securities lending income | 433 | |||
| Interest | 2 | |||
| Total assets | 22,028,176 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 349,313 | |||
| Upon return of securities loaned | 61,043 | |||
| Swap settlement | 32,096 | |||
| Management fees | 16,533 | |||
| Distribution and service fees | 5,709 | |||
| Transfer agent and administrative fees | 4,592 | |||
| Portfolio accounting fees | 1,837 | |||
| Miscellaneous | 23,365 | |||
| Total liabilities | 494,488 | |||
| Net assets | $ | 21,533,688 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 16,109,947 | ||
| Accumulated net investment loss | (66,937 | ) | ||
| Accumulated net realized loss on investments | (840,944 | ) | ||
| Net unrealized appreciation on investments | 6,331,622 | |||
| Net assets | $ | 21,533,688 | ||
| A-Class: | ||||
| Net assets | $ | 613,914 | ||
| Capital shares outstanding | 11,534 | |||
| Net asset value per share | $ | 53.23 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 55.88 | ||
| C-Class: | ||||
| Net assets | $ | 1,863,872 | ||
| Capital shares outstanding | 38,766 | |||
| Net asset value per share | $ | 48.08 | ||
| H-Class: | ||||
| Net assets | $ | 19,055,902 | ||
| Capital shares outstanding | 358,669 | |||
| Net asset value per share | $ | 53.13 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $275) | $ | 323,397 | ||
| Income from securities lending, net | 10,707 | |||
| Interest | 1,802 | |||
| Total investment income | 335,906 | |||
| Expenses: | ||||
| Management fees | 331,091 | |||
| Transfer agent and administrative fees | 91,970 | |||
| Distribution and service fees: | ||||
| A-Class | 1,882 | |||
| C-Class | 17,786 | |||
| H-Class | 85,641 | |||
| Portfolio accounting fees | 36,788 | |||
| Custodian fees | 4,066 | |||
| Trustees’ fees* | 3,581 | |||
| Line of credit interest expense | 552 | |||
| Miscellaneous | 72,767 | |||
| Total expenses | 646,124 | |||
| Net investment loss | (310,218 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 2,331,065 | |||
| Swap agreements | 2,382,696 | |||
| Futures contracts | 2,406,473 | |||
| Net realized gain | 7,120,234 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 2,179,269 | |||
| Swap agreements | 39,426 | |||
| Futures contracts | (108,018 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | 2,110,677 | |||
| Net realized and unrealized gain | 9,230,911 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 8,920,693 |
* 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 | 93 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (310,218 | ) | $ | (89,798 | ) | ||
| Net realized gain on investments | 7,120,234 | 4,305,014 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 2,110,677 | 2,376,583 | ||||||
| Net increase in net assets resulting from operations | 8,920,693 | 6,591,799 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 1,668,443 | 228,253 | ||||||
| C-Class | 452,183 | 228,943 | ||||||
| H-Class | 344,982,687 | 250,947,697 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (1,740,054 | ) | (1,182,104 | ) | ||||
| C-Class | (787,292 | ) | (670,266 | ) | ||||
| H-Class | (378,994,862 | ) | (227,207,565 | ) | ||||
| Net increase (decrease) from capital share transactions | (34,418,895 | ) | 22,344,958 | |||||
| Net increase (decrease) in net assets | (25,498,202 | ) | 28,936,757 | |||||
| Net assets: | ||||||||
| Beginning of year | 47,031,890 | 18,095,133 | ||||||
| End of year | $ | 21,533,688 | $ | 47,031,890 | ||||
| Accumulated net investment loss at end of year | $ | (66,937 | ) | $ | (104,531 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 37,199 | 6,710 | ||||||
| C-Class | 10,755 | 7,508 | ||||||
| H-Class | 7,350,452 | 7,767,546 | ||||||
| Shares redeemed | ||||||||
| A-Class | (35,645 | ) | (38,805 | ) | ||||
| C-Class | (19,078 | ) | (22,694 | ) | ||||
| H-Class | (8,137,425 | ) | (7,085,665 | ) | ||||
| Net increase (decrease) in shares | (793,742 | ) | 634,600 | |||||
| 94 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 39.32 | $ | 32.20 | $ | 34.37 | $ | 25.24 | $ | 12.49 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.37 | ) | (.16 | ) | (.39 | ) | (.35 | ) | (.11 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 14.28 | 7.28 | (1.78 | ) | 9.48 | 12.86 | ||||||||||||||
| Total from investment operations | 13.91 | 7.12 | (2.17 | ) | 9.13 | 12.75 | ||||||||||||||
| Net asset value, end of period | $ | 53.23 | $ | 39.32 | $ | 32.20 | $ | 34.37 | $ | 25.24 | ||||||||||
| Total Returnb | 35.38 | % | 22.11 | % | (6.31 | %) | 36.17 | % | 102.08 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 614 | $ | 392 | $ | 1,355 | $ | 2,312 | $ | 585 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.78 | %) | (0.51 | %) | (1.24 | %) | (1.25 | %) | (0.59 | %) | ||||||||||
| Total expenses | 1.72 | % | 1.71 | % | 1.73 | % | 1.72 | % | 1.71 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 527 | % | 177 | % | 211 | % | 109 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 35.78 | $ | 29.52 | $ | 31.75 | $ | 23.50 | $ | 11.71 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.65 | ) | (.34 | ) | (.54 | ) | (.47 | ) | (.24 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 12.95 | 6.60 | (1.69 | ) | 8.72 | 12.03 | ||||||||||||||
| Total from investment operations | 12.30 | 6.26 | (2.23 | ) | 8.25 | 11.79 | ||||||||||||||
| Net asset value, end of period | $ | 48.08 | $ | 35.78 | $ | 29.52 | $ | 31.75 | $ | 23.50 | ||||||||||
| Total Returnb | 34.38 | % | 21.21 | % | (7.02 | %) | 35.11 | % | 100.68 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,864 | $ | 1,685 | $ | 1,839 | $ | 2,786 | $ | 2,782 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.55 | %) | (1.15 | %) | (1.99 | %) | (1.90 | %) | (1.36 | %) | ||||||||||
| Total expenses | 2.47 | % | 2.46 | % | 2.49 | % | 2.47 | % | 2.46 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 527 | % | 177 | % | 211 | % | 109 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 95 |
| RUSSELL 2000® 1.5x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 39.24 | $ | 32.13 | $ | 34.29 | $ | 25.21 | $ | 12.47 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.37 | ) | (.08 | ) | (.37 | ) | (.35 | ) | (.19 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 14.26 | 7.19 | (1.79 | ) | 9.43 | 12.93 | ||||||||||||||
| Total from investment operations | 13.89 | 7.11 | (2.16 | ) | 9.08 | 12.74 | ||||||||||||||
| Net asset value, end of period | $ | 53.13 | $ | 39.24 | $ | 32.13 | $ | 34.29 | $ | 25.21 | ||||||||||
| Total Returnb | 35.40 | % | 22.13 | % | (6.30 | %) | 36.02 | % | 102.17 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 19,056 | $ | 44,955 | $ | 14,902 | $ | 37,780 | $ | 23,320 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.81 | %) | (0.25 | %) | (1.24 | %) | (1.25 | %) | (0.94 | %) | ||||||||||
| Total expenses | 1.72 | % | 1.71 | % | 1.73 | % | 1.72 | % | 1.71 | % | ||||||||||
| Portfolio turnover rate | 472 | % | 527 | % | 177 | % | 211 | % | 109 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 96 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 97 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
RUSSELL 2000® 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 Russell 2000® Index (the “underlying index”).
Russell 2000® Fund H-Class turned in a 22.69% performance for the one-year period ended March 31, 2014. Its benchmark, the Russell 2000 Index, returned 24.90% for the period. Russell 2000® Fund maintained a daily correlation of over 99% to its benchmark of the daily price movement of the Russell 2000 Index.
Among sectors, the biggest performance contributors to the underlying index during the period were Information Technology and Health Care. No sector detracted. Telecommunication Services contributed least to performance of the underlying index for the period, followed by the Utilities sector.
SunEdison, Inc., Isis Pharmaceuticals, Inc. and Rite Aid Corp. were the largest contributors to performance of the underlying index for the year. Axiall Corp., Infinity Pharmaceuticals, Inc. and Coeur Mining, Inc. were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| A-Class | May 31, 2006 |
| C-Class | May 31, 2006 |
| H-Class | May 31, 2006 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| athenahealth, Inc. | 0.3 | % | ||
| Acuity Brands, Inc. | 0.3 | % | ||
| CoStar Group, Inc. | 0.2 | % | ||
| SunEdison, Inc. | 0.2 | % | ||
| Middleby Corp. | 0.2 | % | ||
| Isis Pharmaceuticals, Inc. | 0.2 | % | ||
| Rite Aid Corp. | 0.2 | % | ||
| NorthStar Realty Finance Corp. | 0.2 | % | ||
| Kate Spade & Co. | 0.2 | % | ||
| FEI Co. | 0.2 | % | ||
| Top Ten Total | 2.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 98 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||
| Since | ||||||
| Inception | ||||||
| 1 Year | 5 Year | (05/31/06) | ||||
| A-Class Shares | 22.87% | 22.60% | 6.23% | |||
| A-Class Shares with sales charge† | 17.03% | 21.42% | 5.57% | |||
| C-Class Shares | 21.78% | 21.58% | 5.37% | |||
| C-Class Shares with CDSC‡ | 20.78% | 21.58% | 5.37% | |||
| H-Class Shares | 22.69% | 22.56% | 6.21% | |||
| Russell 2000 Index | 24.90% | 24.31% | 7.88% |
| * | 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
THE RYDEX FUNDS ANNUAL REPORT | 99
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 73.5% | ||||||||
| FINANCIALS - 16.9% | ||||||||
| NorthStar Realty Finance Corp. | 6,218 | $ | 100,358 | |||||
| CNO Financial Group, Inc. | 5,008 | 90,645 | ||||||
| Prosperity Bancshares, Inc. | 1,359 | 89,897 | ||||||
| FirstMerit Corp. | 3,731 | 77,716 | ||||||
| Highwoods Properties, Inc. | 2,022 | 77,665 | ||||||
| RLJ Lodging Trust | 2,788 | 74,552 | ||||||
| LaSalle Hotel Properties | 2,340 | 73,265 | ||||||
| Stifel Financial Corp.* | 1,435 | 71,407 | ||||||
| Hancock Holding Co. | 1,908 | 69,927 | ||||||
| Prospect Capital Corp. | 6,273 | 67,747 | ||||||
| Portfolio Recovery Associates, Inc.* | 1,141 | 66,017 | ||||||
| First American Financial Corp. | 2,433 | 64,595 | ||||||
| Webster Financial Corp. | 2,032 | 63,113 | ||||||
| MGIC Investment Corp.* | 7,309 | 62,272 | ||||||
| EPR Properties | 1,164 | 62,146 | ||||||
| Primerica, Inc. | 1,283 | 60,442 | ||||||
| Texas Capital Bancshares, Inc.* | 919 | 59,679 | ||||||
| Radian Group, Inc. | 3,895 | 58,541 | ||||||
| Financial Engines, Inc. | 1,102 | 55,959 | ||||||
| Sunstone Hotel Investors, Inc. | 3,959 | 54,357 | ||||||
| BancorpSouth, Inc. | 2,140 | 53,413 | ||||||
| Healthcare Realty Trust, Inc. | 2,164 | 52,261 | ||||||
| UMB Financial Corp. | 803 | 51,953 | ||||||
| Geo Group, Inc. | 1,609 | 51,874 | ||||||
| DiamondRock Hospitality Co. | 4,407 | 51,782 | ||||||
| Sovran Self Storage, Inc. | 703 | 51,635 | ||||||
| DCT Industrial Trust, Inc. | 6,548 | 51,598 | ||||||
| CubeSmart | 3,002 | 51,514 | ||||||
| Invesco Mortgage Capital, Inc. | 3,047 | 50,184 | ||||||
| MarketAxess Holdings, Inc. | 840 | 49,745 | ||||||
| American Realty Capital Properties, Inc. | 3,466 | 48,592 | ||||||
| Susquehanna Bancshares, Inc. | 4,204 | 47,884 | ||||||
| Bank of the Ozarks, Inc. | 696 | 47,370 | ||||||
| Glacier Bancorp, Inc. | 1,626 | 47,268 | ||||||
| Umpqua Holdings Corp. | 2,526 | 47,085 | ||||||
| IBERIABANK Corp. | 670 | 47,001 | ||||||
| First Industrial Realty Trust, Inc. | 2,417 | 46,696 | ||||||
| Pebblebrook Hotel Trust | 1,382 | 46,670 | ||||||
| Medical Properties Trust, Inc. | 3,636 | 46,504 | ||||||
| FNB Corp. | 3,384 | 45,346 | ||||||
| Cathay General Bancorp | 1,776 | 44,737 | ||||||
| United Bankshares, Inc. | 1,460 | 44,705 | ||||||
| PrivateBancorp, Inc. — Class A | 1,465 | 44,697 | ||||||
| Lexington Realty Trust | 4,050 | 44,186 | ||||||
| First Financial Bankshares, Inc. | 707 | 43,686 | ||||||
| Cousins Properties, Inc. | 3,783 | 43,391 | ||||||
| EastGroup Properties, Inc. | 686 | 43,156 | ||||||
| Ryman Hospitality Properties, Inc. | 996 | 42,350 | ||||||
| RLI Corp. | 954 | 42,204 | ||||||
| Apollo Investment Corp. | 5,066 | 42,098 | ||||||
| Capitol Federal Financial, Inc. | 3,352 | 42,068 | ||||||
| Strategic Hotels & Resorts, Inc.* | 4,088 | 41,657 | ||||||
| Chambers Street Properties | 5,332 | 41,430 | ||||||
| Alexander & Baldwin, Inc. | 973 | 41,411 | ||||||
| Western Alliance Bancorporation* | 1,670 | 41,082 | ||||||
| Wintrust Financial Corp. | 832 | 40,485 | ||||||
| Platinum Underwriters Holdings Ltd. | 660 | 39,666 | ||||||
| Evercore Partners, Inc. — Class A | 709 | 39,173 | ||||||
| Trustmark Corp. | 1,510 | 38,279 | ||||||
| National Health Investors, Inc. | 632 | 38,211 | ||||||
| MB Financial, Inc. | 1,231 | 38,112 | ||||||
| PennyMac Mortgage Investment Trust | 1,582 | 37,810 | ||||||
| Redwood Trust, Inc. | 1,847 | 37,457 | ||||||
| New Residential Investment Corp. | 5,696 | 36,853 | ||||||
| Janus Capital Group, Inc. | 3,364 | 36,567 | ||||||
| Sun Communities, Inc. | 810 | 36,523 | ||||||
| PacWest Bancorp1 | 849 | 36,515 | ||||||
| Symetra Financial Corp. | 1,837 | 36,409 | ||||||
| Colony Financial, Inc. | 1,641 | 36,020 | ||||||
| PS Business Parks, Inc. | 430 | 35,957 | ||||||
| Washington Real Estate Investment Trust | 1,502 | 35,868 | ||||||
| EverBank Financial Corp. | 1,809 | 35,692 | ||||||
| Community Bank System, Inc. | 903 | 35,235 | ||||||
| Potlatch Corp. | 910 | 35,208 | ||||||
| Home BancShares, Inc. | 1,017 | 35,005 | ||||||
| ARMOUR Residential REIT, Inc. | 8,424 | 34,707 | ||||||
| Home Loan Servicing Solutions Ltd. | 1,596 | 34,474 | ||||||
| Old National Bancorp | 2,282 | 34,025 | ||||||
| American Equity Investment | ||||||||
| Life Holding Co. | 1,437 | 33,942 | ||||||
| First Financial Holdings, Inc. | 542 | 33,940 | ||||||
| DuPont Fabros Technology, Inc. | 1,410 | 33,939 | ||||||
| First Cash Financial Services, Inc.* | 661 | 33,354 | ||||||
| Hilltop Holdings, Inc.* | 1,397 | 33,235 | ||||||
| PHH Corp.* | 1,283 | 33,153 | ||||||
| Greenhill & Company, Inc. | 632 | 32,851 | ||||||
| CVB Financial Corp. | 2,065 | 32,834 | ||||||
| Westamerica Bancorporation | 606 | 32,772 | ||||||
| Columbia Banking System, Inc. | 1,146 | 32,684 | ||||||
| Glimcher Realty Trust | 3,256 | 32,657 | ||||||
| Acadia Realty Trust | 1,236 | 32,605 | ||||||
| CYS Investments, Inc. | 3,932 | 32,478 | ||||||
| Ambac Financial Group, Inc.* | 1,017 | 31,558 | ||||||
| Investors Bancorp, Inc. | 1,141 | 31,537 | ||||||
| Altisource Residential Corp. | 983 | 31,023 | ||||||
| Government Properties Income Trust | 1,229 | 30,971 | ||||||
| Kennedy-Wilson Holdings, Inc. | 1,371 | 30,862 | ||||||
| Northwest Bancshares, Inc. | 2,109 | 30,791 | ||||||
| BBCN Bancorp, Inc. | 1,776 | 30,441 | ||||||
| Equity One, Inc. | 1,352 | 30,203 | ||||||
| International Bancshares Corp. | 1,198 | 30,046 | ||||||
| WisdomTree Investments, Inc.* | 2,266 | 29,730 | ||||||
| Enstar Group Ltd.* | 218 | 29,716 | ||||||
| Pinnacle Financial Partners, Inc. | 792 | 29,692 | ||||||
| LTC Properties, Inc. | 783 | 29,464 | ||||||
| Montpelier Re Holdings Ltd. | 987 | 29,373 | ||||||
| Selective Insurance Group, Inc. | 1,250 | 29,150 | ||||||
| Fifth Street Finance Corp. | 3,081 | 29,146 | ||||||
| Main Street Capital Corp. | 882 | 28,983 | ||||||
| First Midwest Bancorp, Inc. | 1,694 | 28,934 | ||||||
| iStar Financial, Inc.* | 1,916 | 28,280 | ||||||
| 100 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Chesapeake Lodging Trust | 1,091 | $ | 28,071 | |||||
| Argo Group International Holdings Ltd. | 611 | 28,045 | ||||||
| Pennsylvania Real Estate | ||||||||
| Investment Trust | 1,530 | 27,617 | ||||||
| National Penn Bancshares, Inc. | 2,639 | 27,578 | ||||||
| Astoria Financial Corp. | 1,990 | 27,502 | ||||||
| Capstead Mortgage Corp. | 2,151 | 27,232 | ||||||
| Hersha Hospitality Trust — Class A | 4,560 | 26,585 | ||||||
| AmTrust Financial Services, Inc.1 | 700 | 26,327 | ||||||
| Virtus Investment Partners, Inc.* | 150 | 25,976 | ||||||
| Encore Capital Group, Inc.* | 567 | 25,912 | ||||||
| ViewPoint Financial Group, Inc. | 895 | 25,821 | ||||||
| Horace Mann Educators Corp. | 889 | 25,781 | ||||||
| Sterling Financial Corp. | 768 | 25,597 | ||||||
| American Assets Trust, Inc. | 758 | 25,575 | ||||||
| Franklin Street Properties Corp. | 2,023 | 25,490 | ||||||
| Education Realty Trust, Inc. | 2,572 | 25,386 | ||||||
| FelCor Lodging Trust, Inc. | 2,795 | 25,267 | ||||||
| HFF, Inc. — Class A | 746 | 25,073 | ||||||
| Walter Investment Management Corp.* | 832 | 24,819 | ||||||
| Cash America International, Inc. | 640 | 24,781 | ||||||
| Provident Financial Services, Inc. | 1,346 | 24,726 | ||||||
| Union First Market Bankshares Corp. | 958 | 24,352 | ||||||
| Boston Private Financial Holdings, Inc. | 1,792 | 24,246 | ||||||
| Retail Opportunity Investments Corp. | 1,618 | 24,173 | ||||||
| Hudson Pacific Properties, Inc. | 1,047 | 24,154 | ||||||
| Parkway Properties, Inc. | 1,320 | 24,090 | ||||||
| NBT Bancorp, Inc. | 982 | 24,020 | ||||||
| Sterling Bancorp | 1,878 | 23,775 | ||||||
| Ramco-Gershenson Properties Trust | 1,445 | 23,554 | ||||||
| Sabra Health Care REIT, Inc. | 843 | 23,511 | ||||||
| BofI Holding, Inc.* | 273 | 23,410 | ||||||
| First Financial Bancorp | 1,301 | 23,392 | ||||||
| STAG Industrial, Inc. | 939 | 22,630 | ||||||
| American Capital Mortgage | ||||||||
| Investment Corp. | 1,196 | 22,449 | ||||||
| Credit Acceptance Corp.* | 157 | 22,318 | ||||||
| Solar Capital Ltd. | 1,012 | 22,041 | ||||||
| Associated Estates Realty Corp. | 1,295 | 21,937 | ||||||
| Chemical Financial Corp. | 665 | 21,579 | ||||||
| Nelnet, Inc. — Class A | 518 | 21,186 | ||||||
| Independent Bank Corp. | 534 | 21,024 | ||||||
| eHealth, Inc.* | 412 | 20,929 | ||||||
| Greenlight Capital Re Ltd. — Class A* | 635 | 20,828 | ||||||
| National Bank Holdings Corp. — Class A | 1,027 | 20,612 | ||||||
| Investors Real Estate Trust | 2,271 | 20,394 | ||||||
| Inland Real Estate Corp. | 1,922 | 20,277 | ||||||
| First Commonwealth Financial Corp. | 2,204 | 19,924 | ||||||
| Renasant Corp. | 683 | 19,841 | ||||||
| Park National Corp. | 256 | 19,684 | ||||||
| Hercules Technology Growth Capital, Inc. | 1,391 | 19,571 | ||||||
| KCG Holdings, Inc. — Class A* | 1,602 | 19,112 | ||||||
| United Community Banks, Inc.* | 972 | 18,867 | ||||||
| BGC Partners, Inc. — Class A | 2,858 | 18,691 | ||||||
| WesBanco, Inc. | 585 | 18,621 | ||||||
| AMERISAFE, Inc. | 418 | 18,354 | ||||||
| Eagle Bancorp, Inc.* | 498 | 17,978 | ||||||
| Banner Corp. | 436 | 17,968 | ||||||
| OFG Bancorp | 1,030 | 17,706 | ||||||
| ICG Group, Inc.* | 859 | 17,541 | ||||||
| Banco Latinoamericano de Comercio | ||||||||
| Exterior S.A. — Class E | 655 | 17,299 | ||||||
| Infinity Property & Casualty Corp. | 255 | 17,246 | ||||||
| First Potomac Realty Trust | 1,323 | 17,093 | ||||||
| First Merchants Corp. | 785 | 16,987 | ||||||
| Investment Technology Group, Inc.* | 840 | 16,968 | ||||||
| Northfield Bancorp, Inc. | 1,314 | 16,898 | ||||||
| Cohen & Steers, Inc. | 422 | 16,817 | ||||||
| Stewart Information Services Corp. | 477 | 16,757 | ||||||
| Summit Hotel Properties, Inc. | 1,800 | 16,704 | ||||||
| Piper Jaffray Cos.* | 363 | 16,625 | ||||||
| Hanmi Financial Corp. | 712 | 16,590 | ||||||
| PennantPark Investment Corp. | 1,498 | 16,553 | ||||||
| Wilshire Bancorp, Inc. | 1,487 | 16,506 | ||||||
| Oritani Financial Corp. | 1,025 | 16,205 | ||||||
| Anworth Mortgage Asset Corp. | 3,264 | 16,189 | ||||||
| Kite Realty Group Trust | 2,694 | 16,164 | ||||||
| Triangle Capital Corp. | 624 | 16,155 | ||||||
| Tompkins Financial Corp. | 328 | 16,059 | ||||||
| S&T Bancorp, Inc. | 674 | 15,974 | ||||||
| Resource Capital Corp. | 2,865 | 15,958 | ||||||
| City Holding Co. | 350 | 15,701 | ||||||
| Ashford Hospitality Trust, Inc. | 1,381 | 15,564 | ||||||
| Alexander’s, Inc. | 43 | 15,523 | ||||||
| Safety Insurance Group, Inc. | 288 | 15,509 | ||||||
| BlackRock Kelso Capital Corp. | 1,671 | 15,323 | ||||||
| Golub Capital BDC, Inc. | 839 | 14,968 | ||||||
| TrustCo Bank Corp. NY | 2,121 | 14,932 | ||||||
| Brookline Bancorp, Inc. | 1,577 | 14,855 | ||||||
| Select Income REIT | 490 | 14,832 | ||||||
| Lakeland Financial Corp. | 367 | 14,761 | ||||||
| World Acceptance Corp.*,1 | 195 | 14,641 | ||||||
| Flushing Financial Corp. | 690 | 14,538 | ||||||
| New Mountain Finance Corp. | 998 | 14,521 | ||||||
| Berkshire Hills Bancorp, Inc. | 560 | 14,493 | ||||||
| CoreSite Realty Corp. | 467 | 14,477 | ||||||
| RAIT Financial Trust | 1,702 | 14,450 | ||||||
| Employers Holdings, Inc. | 696 | 14,080 | ||||||
| Navigators Group, Inc.* | 229 | 14,058 | ||||||
| United Fire Group, Inc. | 463 | 14,052 | ||||||
| Sandy Spring Bancorp, Inc. | 560 | 13,989 | ||||||
| Maiden Holdings Ltd. | 1,118 | 13,953 | ||||||
| Forestar Group, Inc.* | 782 | 13,920 | ||||||
| Bancorp, Inc.* | 738 | 13,882 | ||||||
| Simmons First National Corp. — Class A | 372 | 13,864 | ||||||
| Apollo Commercial Real | ||||||||
| Estate Finance, Inc. | 832 | 13,836 | ||||||
| Excel Trust, Inc. | 1,074 | 13,618 | ||||||
| PICO Holdings, Inc.* | 511 | 13,281 | ||||||
| Capital Bank Financial Corp. — Class A* | 524 | 13,158 | ||||||
| Community Trust Bancorp, Inc. | 316 | 13,108 | ||||||
| Ameris Bancorp* | 561 | 13,071 | ||||||
| WSFS Financial Corp. | 179 | 12,786 | ||||||
| State Bank Financial Corp. | 721 | 12,754 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 101 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Cardinal Financial Corp. | 715 | $ | 12,748 | |||||
| Campus Crest Communities, Inc. | 1,455 | 12,629 | ||||||
| TCP Capital Corp. | 763 | 12,628 | ||||||
| Southside Bancshares, Inc. | 399 | 12,521 | ||||||
| EZCORP, Inc. — Class A* | 1,153 | 12,441 | ||||||
| Medley Capital Corp. | 904 | 12,303 | ||||||
| FXCM, Inc. — Class A | 825 | 12,185 | ||||||
| Washington Trust Bancorp, Inc. | 325 | 12,178 | ||||||
| Dime Community Bancshares, Inc. | 713 | 12,107 | ||||||
| New York Mortgage Trust, Inc. | 1,553 | 12,082 | ||||||
| Chatham Lodging Trust | 592 | 11,970 | ||||||
| Apollo Residential Mortgage, Inc. | 718 | 11,653 | ||||||
| Urstadt Biddle Properties, Inc. — Class A | 563 | 11,632 | ||||||
| TICC Capital Corp. | 1,179 | 11,531 | ||||||
| Green Dot Corp. — Class A* | 580 | 11,327 | ||||||
| Universal Health Realty Income Trust | 266 | 11,236 | ||||||
| First Interstate Bancsystem, Inc. — Class A | 398 | 11,232 | ||||||
| Dynex Capital, Inc. | 1,237 | 11,071 | ||||||
| National Western Life Insurance | ||||||||
| Co. — Class A | 45 | 11,003 | ||||||
| AG Mortgage Investment Trust, Inc. | 626 | 10,961 | ||||||
| Getty Realty Corp. | 576 | 10,881 | ||||||
| 1st Source Corp. | 339 | 10,879 | ||||||
| Tejon Ranch Co.* | 314 | 10,623 | ||||||
| Terreno Realty Corp. | 561 | 10,609 | ||||||
| Safeguard Scientifics, Inc.* | 477 | 10,580 | ||||||
| GAMCO Investors, Inc. — Class A | 136 | 10,560 | ||||||
| Capital Southwest Corp. | 304 | 10,555 | ||||||
| THL Credit, Inc. | 760 | 10,488 | ||||||
| Agree Realty Corp. | 331 | 10,066 | ||||||
| Central Pacific Financial Corp. | 495 | 9,999 | ||||||
| Flagstar Bancorp, Inc.* | 450 | 9,999 | ||||||
| Cedar Realty Trust, Inc. | 1,633 | 9,978 | ||||||
| Cowen Group, Inc. — Class A* | 2,203 | 9,715 | ||||||
| SY Bancorp, Inc. | 307 | 9,713 | ||||||
| Westwood Holdings Group, Inc. | 154 | 9,654 | ||||||
| Monmouth Real Estate | ||||||||
| Investment Corp. — Class A | 1,008 | 9,616 | ||||||
| Beneficial Mutual Bancorp, Inc.* | 723 | 9,536 | ||||||
| First Busey Corp. | 1,635 | 9,483 | ||||||
| Arlington Asset Investment | ||||||||
| Corp. — Class A | 356 | 9,427 | ||||||
| Customers Bancorp, Inc.* | 445 | 9,287 | ||||||
| Rouse Properties, Inc. | 538 | 9,275 | ||||||
| TowneBank | 597 | 9,259 | ||||||
| Trico Bancshares | 357 | 9,257 | ||||||
| Taylor Capital Group, Inc.* | 384 | 9,185 | ||||||
| BancFirst Corp. | 162 | 9,174 | ||||||
| CoBiz Financial, Inc. | 794 | 9,147 | ||||||
| CyrusOne, Inc. | 436 | 9,082 | ||||||
| Heartland Financial USA, Inc. | 336 | 9,069 | ||||||
| Lakeland Bancorp, Inc. | 800 | 9,000 | ||||||
| Third Point Reinsurance Ltd.* | 566 | 8,971 | ||||||
| First BanCorp* | 1,620 | 8,813 | ||||||
| Bryn Mawr Bank Corp. | 304 | 8,734 | ||||||
| Diamond Hill Investment Group, Inc. | 66 | 8,675 | ||||||
| Enterprise Financial Services Corp. | 430 | 8,630 | ||||||
| FBL Financial Group, Inc. — Class A | 197 | 8,534 | ||||||
| Western Asset Mortgage Capital Corp. | 545 | 8,524 | ||||||
| First Financial Corp. | 253 | 8,521 | ||||||
| First Bancorp | 447 | 8,493 | ||||||
| Winthrop Realty Trust | 719 | 8,333 | ||||||
| United Financial Bancorp, Inc. | 447 | 8,220 | ||||||
| German American Bancorp, Inc. | 284 | 8,205 | ||||||
| Saul Centers, Inc. | 173 | 8,193 | ||||||
| NewStar Financial, Inc.* | 589 | 8,164 | ||||||
| HCI Group, Inc. | 223 | 8,117 | ||||||
| DFC Global Corp.* | 911 | 8,044 | ||||||
| Rockville Financial, Inc. | 578 | 7,855 | ||||||
| MainSource Financial Group, Inc. | 458 | 7,832 | ||||||
| OneBeacon Insurance Group | ||||||||
| Class A | 506 | 7,823 | ||||||
| Southwest Bancorp, Inc. | 440 | 7,770 | ||||||
| Univest Corporation of Pennsylvania | 376 | 7,716 | ||||||
| Federal Agricultural Mortgage | ||||||||
| Corp. — Class C | 228 | 7,581 | ||||||
| Universal Insurance Holdings, Inc. | 588 | 7,468 | ||||||
| HomeTrust Bancshares, Inc.* | 469 | 7,401 | ||||||
| Centerstate Banks, Inc. | 675 | 7,371 | ||||||
| Citizens, Inc.* | 982 | 7,267 | ||||||
| Financial Institutions, Inc. | 315 | 7,251 | ||||||
| AmREIT, Inc. — Class B | 437 | 7,241 | ||||||
| First of Long Island Corp. | 177 | 7,188 | ||||||
| State Auto Financial Corp. | 335 | 7,139 | ||||||
| BNC Bancorp | 410 | 7,105 | ||||||
| Camden National Corp. | 170 | 7,004 | ||||||
| Whitestone REIT — Class B | 485 | 7,003 | ||||||
| Ladenburg Thalmann Financial | ||||||||
| Services, Inc.* | 2,318 | 7,000 | ||||||
| Hudson Valley Holding Corp. | 367 | 6,991 | ||||||
| Gramercy Property Trust, Inc. | 1,340 | 6,914 | ||||||
| Yadkin Financial Corp.* | 322 | 6,894 | ||||||
| MVC Capital, Inc. | 505 | 6,843 | ||||||
| Great Southern Bancorp, Inc. | 226 | 6,787 | ||||||
| Phoenix Companies, Inc.* | 131 | 6,779 | ||||||
| Metro Bancorp, Inc.* | 320 | 6,765 | ||||||
| Preferred Bank/Los Angeles CA* | 260 | 6,750 | ||||||
| Park Sterling Corp. | 1,011 | 6,723 | ||||||
| Bank Mutual Corp. | 1,048 | 6,644 | ||||||
| Bridge Bancorp, Inc. | 247 | 6,597 | ||||||
| Meadowbrook Insurance Group, Inc. | 1,122 | 6,541 | ||||||
| Crawford & Co. — Class B | 592 | 6,459 | ||||||
| Ares Commercial Real Estate Corp. | 480 | 6,437 | ||||||
| Arrow Financial Corp. | 240 | 6,346 | ||||||
| First Community Bancshares, Inc. | 381 | 6,233 | ||||||
| Aviv REIT, Inc. | 254 | 6,210 | ||||||
| Washington Banking Co. | 348 | 6,187 | ||||||
| Oppenheimer Holdings, Inc. — Class A | 220 | 6,171 | ||||||
| MCG Capital Corp. | 1,608 | 6,094 | ||||||
| Walker & Dunlop, Inc.* | 371 | 6,066 | ||||||
| First Connecticut Bancorp, Inc. | 387 | 6,060 | ||||||
| Peoples Bancorp, Inc. | 245 | 6,059 | ||||||
| Bank of Marin Bancorp | 134 | 6,033 | ||||||
| Meta Financial Group, Inc. | 134 | 6,010 | ||||||
| 102 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| International. FCStone, Inc.* | 319 | $ | 6,000 | |||||
| Medallion Financial Corp. | 453 | 5,984 | ||||||
| Pacific Premier Bancorp, Inc.* | 370 | 5,972 | ||||||
| Gladstone Commercial Corp. | 343 | 5,948 | ||||||
| Fidus Investment Corp. | 304 | 5,870 | ||||||
| Heritage Financial Corp. | 345 | 5,837 | ||||||
| First Defiance Financial Corp. | 214 | 5,804 | ||||||
| OmniAmerican Bancorp, Inc. | 254 | 5,789 | ||||||
| Calamos Asset Management, | ||||||||
| Inc. — Class A | 445 | 5,754 | ||||||
| Suffolk Bancorp* | 257 | 5,731 | ||||||
| HomeStreet, Inc. | 290 | 5,670 | ||||||
| CNB Financial Corp. | 320 | 5,658 | ||||||
| National Bankshares, Inc. | 154 | 5,623 | ||||||
| Physicians Realty Trust | 403 | 5,610 | ||||||
| One Liberty Properties, Inc. | 261 | 5,565 | ||||||
| Pacific Continental Corp. | 404 | 5,559 | ||||||
| GFI Group, Inc. | 1,563 | 5,549 | ||||||
| Charter Financial Corp. | 511 | 5,524 | ||||||
| OceanFirst Financial Corp. | 312 | 5,519 | ||||||
| Penns Woods Bancorp, Inc. | 113 | 5,512 | ||||||
| American Residential Properties, Inc.* | 305 | 5,484 | ||||||
| KCAP Financial, Inc. | 632 | 5,473 | ||||||
| Baldwin & Lyons, Inc. — Class B | 207 | 5,442 | ||||||
| Citizens & Northern Corp. | 274 | 5,401 | ||||||
| Rexford Industrial Realty, Inc. | 376 | 5,332 | ||||||
| Consolidated-Tomoka Land Co. | 132 | 5,317 | ||||||
| Silver Bay Realty Trust Corp. | 340 | 5,277 | ||||||
| Bridge Capital Holdings* | 219 | 5,203 | ||||||
| 1st United Bancorp, Inc. | 673 | 5,155 | ||||||
| Manning & Napier, Inc. — Class A | 307 | 5,148 | ||||||
| Bank of Kentucky Financial Corp. | 137 | 5,143 | ||||||
| Territorial Bancorp, Inc. | 236 | 5,098 | ||||||
| FBR & Co.* | 197 | 5,089 | ||||||
| Center Bancorp, Inc. | 265 | 5,035 | ||||||
| Home Federal Bancorp, Inc. | 321 | 4,995 | ||||||
| Global Indemnity plc — Class A* | 187 | 4,926 | ||||||
| Gladstone Investment Corp. | 592 | 4,896 | ||||||
| SWS Group, Inc.* | 652 | 4,877 | ||||||
| West Bancorporation, Inc. | 320 | 4,861 | ||||||
| Republic Bancorp, Inc. — Class A | 214 | 4,836 | ||||||
| Independent Bank Group, Inc. | 82 | 4,818 | ||||||
| Meridian Interstate Bancorp, Inc.* | 188 | 4,807 | ||||||
| Gladstone Capital Corp. | 476 | 4,798 | ||||||
| Hannon Armstrong Sustainable | ||||||||
| Infrastructure Capital, Inc. | 334 | 4,793 | ||||||
| PennyMac Financial Services, | ||||||||
| Inc. — Class A* | 288 | 4,792 | ||||||
| Kearny Financial Corp.* | 322 | 4,759 | ||||||
| Ames National Corp. | 213 | 4,695 | ||||||
| BankFinancial Corp. | 470 | 4,691 | ||||||
| Guaranty Bancorp | 328 | 4,674 | ||||||
| Fox Chase Bancorp, Inc. | 273 | 4,600 | ||||||
| Franklin Financial Corp.* | 234 | 4,577 | ||||||
| Fidelity Southern Corp. | 327 | 4,568 | ||||||
| Tree.com, Inc.* | 147 | 4,563 | ||||||
| PennantPark Floating Rate Capital Ltd. | 330 | 4,561 | ||||||
| Banc of California, Inc. | 367 | 4,503 | ||||||
| Kansas City Life Insurance Co. | 92 | 4,434 | ||||||
| Horizon Bancorp | 199 | 4,434 | ||||||
| GSV Capital Corp.* | 435 | 4,411 | ||||||
| United Community Financial Corp.* | 1,114 | 4,367 | ||||||
| Peapack Gladstone Financial Corp. | 198 | 4,356 | ||||||
| Solar Senior Capital Ltd. | 254 | 4,346 | ||||||
| Firsthand Technology Value Fund, Inc. | 203 | 4,334 | ||||||
| Armada Hoffler Properties, Inc. | 425 | 4,267 | ||||||
| Sierra Bancorp | 268 | 4,267 | ||||||
| Seacoast Banking Corporation of Florida* | 385 | 4,235 | ||||||
| Merchants Bancshares, Inc. | 129 | 4,207 | ||||||
| Empire State Realty Trust, Inc. — Class A | 272 | 4,110 | ||||||
| Mercantile Bank Corp. | 199 | 4,103 | ||||||
| National Interstate Corp. | 151 | 4,048 | ||||||
| Ashford Hospitality Prime, Inc. | 265 | 4,007 | ||||||
| NewBridge Bancorp* | 559 | 3,991 | ||||||
| American National Bankshares, Inc. | 169 | 3,975 | ||||||
| Stellus Capital Investment Corp. | 275 | 3,955 | ||||||
| CU Bancorp* | 211 | 3,882 | ||||||
| AV Homes, Inc.* | 214 | 3,871 | ||||||
| Marlin Business Services Corp. | 186 | 3,871 | ||||||
| Farmers Capital Bank Corp.* | 170 | 3,818 | ||||||
| Northrim BanCorp, Inc. | 148 | 3,802 | ||||||
| ESB Financial Corp. | 288 | 3,764 | ||||||
| MidWestOne Financial Group, Inc. | 149 | 3,761 | ||||||
| Capital City Bank Group, Inc. | 283 | 3,758 | ||||||
| Heritage Commerce Corp. | 464 | 3,740 | ||||||
| Heritage Oaks Bancorp* | 457 | 3,693 | ||||||
| JAVELIN Mortgage Investment Corp. | 270 | 3,621 | ||||||
| Nicholas Financial, Inc. | 224 | 3,524 | ||||||
| Tower Group International Ltd. | 1,298 | 3,505 | ||||||
| UMH Properties, Inc. | 356 | 3,482 | ||||||
| First Financial Northwest, Inc. | 341 | 3,461 | ||||||
| EMC Insurance Group, Inc. | 97 | 3,446 | ||||||
| First Bancorp, Inc. | 210 | 3,423 | ||||||
| Bar Harbor Bankshares | 89 | 3,413 | ||||||
| Enterprise Bancorp, Inc. | 161 | 3,275 | ||||||
| Provident Financial Holdings, Inc. | 209 | 3,223 | ||||||
| BBX Capital Corp. — Class A* | 164 | 3,190 | ||||||
| NGP Capital Resources Co. | 471 | 3,184 | ||||||
| MidSouth Bancorp, Inc. | 187 | 3,147 | ||||||
| First NBC Bank Holding Co.* | 90 | 3,137 | ||||||
| Home Bancorp, Inc.* | 148 | 3,107 | ||||||
| First Security Group, Inc.* | 1,481 | 3,080 | ||||||
| Sun Bancorp, Inc.* | 915 | 3,074 | ||||||
| Westfield Financial, Inc. | 411 | 3,062 | ||||||
| Regional Management Corp.* | 122 | 3,009 | ||||||
| Pzena Investment Management, | ||||||||
| Inc. — Class A | 253 | 2,978 | ||||||
| Intervest Bancshares Corp. — Class A* | 398 | 2,965 | ||||||
| Consumer Portfolio Services, Inc.* | 410 | 2,804 | ||||||
| Macatawa Bank Corp. | 533 | 2,686 | ||||||
| LCNB Corp. | 154 | 2,664 | ||||||
| CommunityOne Bancorp* | 237 | 2,659 | ||||||
| Hallmark Financial Services, Inc.* | 319 | 2,651 | ||||||
| Gain Capital Holdings, Inc. | 240 | 2,594 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 103 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Access National Corp. | 160 | $ | 2,594 | |||||
| Century Bancorp, Inc. — Class A | 76 | 2,592 | ||||||
| Hingham Institution for Savings | 32 | 2,512 | ||||||
| Investors Title Co. | 33 | 2,505 | ||||||
| JMP Group, Inc. | 352 | 2,503 | ||||||
| NASB Financial, Inc. | 97 | 2,444 | ||||||
| Donegal Group, Inc. — Class A | 167 | 2,435 | ||||||
| C&F Financial Corp. | 72 | 2,386 | ||||||
| Ellington Residential Mortgage REIT | 140 | 2,369 | ||||||
| Resource America, Inc. — Class A | 275 | 2,357 | ||||||
| Independence Holding Co. | 172 | 2,308 | ||||||
| Clifton Bancorp, Inc. | 194 | 2,274 | ||||||
| Horizon Technology Finance Corp. | 180 | 2,252 | ||||||
| WhiteHorse Finance, Inc. | 160 | 2,251 | ||||||
| Silvercrest Asset Management | ||||||||
| Group, Inc. — Class A | 122 | 2,231 | ||||||
| Imperial Holdings, Inc.* | 383 | 2,202 | ||||||
| Chemung Financial Corp. | 80 | 2,170 | ||||||
| ESSA Bancorp, Inc. | 198 | 2,152 | ||||||
| Tristate Capital Holdings, Inc.* | 150 | 2,132 | ||||||
| Middleburg Financial Corp. | 118 | 2,078 | ||||||
| ZAIS Financial Corp. | 124 | 2,066 | ||||||
| Springleaf Holdings, Inc.* | 78 | 1,962 | ||||||
| ConnectOne Bancorp, Inc.* | 40 | 1,958 | ||||||
| Waterstone Financial, Inc.* | 185 | 1,922 | ||||||
| Garrison Capital, Inc. | 135 | 1,908 | ||||||
| VantageSouth Bancshares, Inc.* | 270 | 1,898 | ||||||
| Essent Group Ltd.* | 78 | 1,752 | ||||||
| RCS Capital Corp. — Class A | 45 | 1,751 | ||||||
| Palmetto Bancshares, Inc.* | 95 | 1,339 | ||||||
| First Marblehead Corp.* | 210 | 1,268 | ||||||
| CIFC Corp. | 154 | 1,254 | ||||||
| Doral Financial Corp.* | 143 | 1,241 | ||||||
| Hampton Roads Bankshares, Inc.* | 752 | 1,196 | ||||||
| QTS Realty Trust, Inc. — Class A | 47 | 1,179 | ||||||
| RE/MAX Holdings, Inc. — Class A* | 39 | 1,124 | ||||||
| Health Insurance Innovations, | ||||||||
| Inc. — Class A* | 105 | 1,086 | ||||||
| Fortegra Financial Corp.* | 148 | 1,040 | ||||||
| California First National Bancorp | 54 | 829 | ||||||
| Cascade Bancorp* | 138 | 773 | ||||||
| First Federal Bancshares of Arkansas, Inc.* | 69 | 633 | ||||||
| JGWPT Holdings, Inc. — Class A* | 32 | 584 | ||||||
| Stonegate Mortgage Corp.* | 32 | 476 | ||||||
| Marcus & Millichap, Inc.* | 23 | 410 | ||||||
| Blue Capital Reinsurance Holdings Ltd.* | 16 | 278 | ||||||
| Capitala Finance Corp. | 8 | 154 | ||||||
| Total Financials | 8,510,250 | |||||||
| INFORMATION TECHNOLOGY - 13.2% | ||||||||
| CoStar Group, Inc.* | 644 | 120,261 | ||||||
| SunEdison, Inc.* | 6,003 | 113,096 | ||||||
| FEI Co. | 940 | 96,838 | ||||||
| PTC, Inc.* | 2,691 | 95,341 | ||||||
| Aspen Technology, Inc.* | 2,108 | 89,294 | ||||||
| Ultimate Software Group, Inc.* | 624 | 85,488 | ||||||
| WEX, Inc.* | 871 | 82,789 | ||||||
| ARRIS Group, Inc.* | 2,625 | 73,974 | ||||||
| MAXIMUS, Inc. | 1,541 | 69,130 | ||||||
| Belden, Inc. | 993 | 69,113 | ||||||
| CommVault Systems, Inc.* | 1,043 | 67,742 | ||||||
| Cognex Corp.* | 1,958 | 66,297 | ||||||
| Anixter International, Inc. | 609 | 61,825 | ||||||
| Manhattan Associates, Inc.* | 1,758 | 61,583 | ||||||
| ViaSat, Inc.* | 886 | 61,169 | ||||||
| Tyler Technologies, Inc.* | 711 | 59,496 | ||||||
| Acxiom Corp.* | 1,668 | 57,372 | ||||||
| Verint Systems, Inc.* | 1,191 | 55,894 | ||||||
| Finisar Corp.* | 2,108 | 55,883 | ||||||
| Yelp, Inc. — Class A* | 713 | 54,851 | ||||||
| Guidewire Software, Inc.* | 1,094 | 53,661 | ||||||
| ACI Worldwide, Inc.* | 894 | 52,916 | ||||||
| SS&C Technologies Holdings, Inc.* | 1,307 | 52,306 | ||||||
| Microsemi Corp.* | 2,089 | 52,288 | ||||||
| Qlik Technologies, Inc.* | 1,960 | 52,116 | ||||||
| Ciena Corp.* | 2,286 | 51,984 | ||||||
| j2 Global, Inc. | 1,037 | 51,902 | ||||||
| Convergys Corp. | 2,363 | 51,773 | ||||||
| Cavium, Inc.* | 1,154 | 50,464 | ||||||
| RF Micro Devices, Inc.* | 6,336 | 49,928 | ||||||
| GT Advanced Technologies, Inc.* | 2,916 | 49,718 | ||||||
| TriQuint Semiconductor, Inc.* | 3,682 | 49,302 | ||||||
| Dealertrack Technologies, Inc.* | 984 | 48,403 | ||||||
| Aruba Networks, Inc.* | 2,565 | 48,094 | ||||||
| Mentor Graphics Corp. | 2,148 | 47,299 | ||||||
| Euronet Worldwide, Inc.* | 1,119 | 46,539 | ||||||
| Littelfuse, Inc. | 494 | 46,257 | ||||||
| Zillow, Inc. — Class A*,1 | 525 | 46,253 | ||||||
| Electronics for Imaging, Inc.* | 1,050 | 45,475 | ||||||
| Fair Isaac Corp. | 812 | 44,920 | ||||||
| Hittite Microwave Corp. | 707 | 44,569 | ||||||
| Synaptics, Inc.* | 729 | 43,754 | ||||||
| Cornerstone OnDemand, Inc.* | 909 | 43,514 | ||||||
| Plantronics, Inc. | 972 | 43,205 | ||||||
| International Rectifier Corp.* | 1,567 | 42,936 | ||||||
| Power Integrations, Inc. | 650 | 42,757 | ||||||
| Sapient Corp.* | 2,489 | 42,462 | ||||||
| Conversant, Inc.* | 1,502 | 42,281 | ||||||
| Take-Two Interactive Software, Inc.* | 1,827 | 40,066 | ||||||
| Cardtronics, Inc.* | 1,009 | 39,200 | ||||||
| OpenTable, Inc.* | 508 | 39,080 | ||||||
| Semtech Corp.* | 1,514 | 38,365 | ||||||
| CACI International, Inc. — Class A* | 517 | 38,155 | ||||||
| Entegris, Inc.* | 3,142 | 38,050 | ||||||
| TiVo, Inc.* | 2,850 | 37,706 | ||||||
| Intersil Corp. — Class A | 2,868 | 37,055 | ||||||
| Veeco Instruments, Inc.* | 878 | 36,815 | ||||||
| Integrated Device Technology, Inc.* | 2,973 | 36,360 | ||||||
| Vistaprint N.V.* | 735 | 36,177 | ||||||
| SYNNEX Corp.* | 595 | 36,063 | ||||||
| Coherent, Inc.* | 549 | 35,877 | ||||||
| MKS Instruments, Inc. | 1,190 | 35,569 | ||||||
| PMC-Sierra, Inc.* | 4,595 | 34,968 | ||||||
| Heartland Payment Systems, Inc. | 822 | 34,072 | ||||||
| 104 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Cypress Semiconductor Corp. | 3,312 | $ | 34,014 | |||||
| Cray, Inc.* | 890 | 33,214 | ||||||
| Sanmina Corp.* | 1,869 | 32,613 | ||||||
| ADTRAN, Inc. | 1,335 | 32,587 | ||||||
| Web.com Group, Inc.* | 946 | 32,192 | ||||||
| Monolithic Power Systems, Inc.* | 830 | 32,179 | ||||||
| Blackbaud, Inc. | 1,025 | 32,083 | ||||||
| Itron, Inc.* | 894 | 31,773 | ||||||
| Syntel, Inc.* | 343 | 30,836 | ||||||
| Plexus Corp.* | 767 | 30,733 | ||||||
| InterDigital, Inc. | 924 | 30,594 | ||||||
| NetScout Systems, Inc.* | 811 | 30,477 | ||||||
| InvenSense, Inc. — Class A* | 1,275 | 30,179 | ||||||
| Unisys Corp.* | 989 | 30,125 | ||||||
| Bottomline Technologies de, Inc.* | 851 | 29,913 | ||||||
| SunPower Corp. — Class A* | 927 | 29,905 | ||||||
| NETGEAR, Inc.* | 870 | 29,345 | ||||||
| Universal Display Corp.* | 905 | 28,879 | ||||||
| Cirrus Logic, Inc.* | 1,429 | 28,394 | ||||||
| NIC, Inc. | 1,456 | 28,115 | ||||||
| Tessera Technologies, Inc. | 1,184 | 27,978 | ||||||
| Benchmark Electronics, Inc.* | 1,229 | 27,837 | ||||||
| Rambus, Inc.* | 2,515 | 27,036 | ||||||
| OSI Systems, Inc.* | 445 | 26,638 | ||||||
| WebMD Health Corp. — Class A* | 640 | 26,496 | ||||||
| comScore, Inc.* | 802 | 26,298 | ||||||
| Monotype Imaging Holdings, Inc. | 859 | 25,890 | ||||||
| Methode Electronics, Inc. | 836 | 25,632 | ||||||
| QLogic Corp.* | 2,010 | 25,627 | ||||||
| Progress Software Corp.* | 1,171 | 25,528 | ||||||
| Interactive Intelligence Group, Inc.* | 351 | 25,448 | ||||||
| ScanSource, Inc.* | 624 | 25,440 | ||||||
| Imperva, Inc.* | 456 | 25,399 | ||||||
| Demandware, Inc.* | 396 | 25,368 | ||||||
| iGATE Corp.* | 782 | 24,664 | ||||||
| Insight Enterprises, Inc.* | 980 | 24,608 | ||||||
| MTS Systems Corp. | 359 | 24,588 | ||||||
| ATMI, Inc.* | 722 | 24,555 | ||||||
| LogMeIn, Inc.* | 544 | 24,420 | ||||||
| Rogers Corp.* | 387 | 24,157 | ||||||
| MicroStrategy, Inc. — Class A* | 208 | 24,001 | ||||||
| Infinera Corp.* | 2,611 | 23,708 | ||||||
| Infoblox, Inc.* | 1,181 | 23,691 | ||||||
| Measurement Specialties, Inc.* | 348 | 23,612 | ||||||
| Cabot Microelectronics Corp.* | 528 | 23,232 | ||||||
| ExlService Holdings, Inc.* | 737 | 22,781 | ||||||
| Synchronoss Technologies, Inc.* | 660 | 22,631 | ||||||
| CalAmp Corp.* | 790 | 22,017 | ||||||
| SPS Commerce, Inc.* | 358 | 21,999 | ||||||
| Advanced Energy Industries, Inc.* | 887 | 21,732 | ||||||
| Advent Software, Inc. | 736 | 21,609 | ||||||
| OmniVision Technologies, Inc.* | 1,215 | 21,506 | ||||||
| Diodes, Inc.* | 801 | 20,922 | ||||||
| Trulia, Inc.* | 625 | 20,750 | ||||||
| FARO Technologies, Inc.* | 388 | 20,564 | ||||||
| Envestnet, Inc.* | 509 | 20,452 | ||||||
| Lattice Semiconductor Corp.* | 2,602 | 20,400 | ||||||
| CSG Systems International, Inc. | 759 | 19,764 | ||||||
| RealPage, Inc.*,1 | 1,050 | 19,068 | ||||||
| Fusion-io, Inc.* | 1,810 | 19,041 | ||||||
| Proofpoint, Inc.* | 513 | 19,022 | ||||||
| Spansion, Inc. — Class A* | 1,065 | 18,552 | ||||||
| Ultratech, Inc.* | 628 | 18,331 | ||||||
| Newport Corp.* | 879 | 18,178 | ||||||
| Blucora, Inc.* | 920 | 18,115 | ||||||
| II-VI, Inc.* | 1,154 | 17,806 | ||||||
| Badger Meter, Inc. | 323 | 17,797 | ||||||
| Monster Worldwide, Inc.* | 2,365 | 17,690 | ||||||
| Bankrate, Inc.* | 1,037 | 17,567 | ||||||
| Sykes Enterprises, Inc.* | 884 | 17,565 | ||||||
| Comverse, Inc.* | 500 | 17,290 | ||||||
| Ellie Mae, Inc.* | 595 | 17,160 | ||||||
| BroadSoft, Inc.* | 634 | 16,947 | ||||||
| Constant Contact, Inc.* | 687 | 16,804 | ||||||
| Virtusa Corp.* | 499 | 16,721 | ||||||
| Sonus Networks, Inc.* | 4,864 | 16,392 | ||||||
| Brooks Automation, Inc. | 1,494 | 16,329 | ||||||
| Applied Micro Circuits Corp.* | 1,649 | 16,325 | ||||||
| EVERTEC, Inc. | 660 | 16,302 | ||||||
| Harmonic, Inc.* | 2,278 | 16,265 | ||||||
| EPAM Systems, Inc.* | 490 | 16,121 | ||||||
| PROS Holdings, Inc.* | 505 | 15,913 | ||||||
| ManTech International Corp. — Class A | 540 | 15,881 | ||||||
| Ixia* | 1,269 | 15,863 | ||||||
| Accelrys, Inc.* | 1,261 | 15,712 | ||||||
| CTS Corp. | 752 | 15,702 | ||||||
| Rofin-Sinar Technologies, Inc.* | 634 | 15,191 | ||||||
| LivePerson, Inc.* | 1,239 | 14,955 | ||||||
| Liquidity Services, Inc.* | 555 | 14,458 | ||||||
| Park Electrochemical Corp. | �� | 468 | 13,979 | |||||
| Pegasystems, Inc. | 395 | 13,951 | ||||||
| SciQuest, Inc.* | 509 | 13,751 | ||||||
| Perficient, Inc.* | 752 | 13,626 | ||||||
| VirnetX Holding Corp.*,1 | 950 | 13,471 | ||||||
| Emulex Corp.* | 1,816 | 13,420 | ||||||
| Fabrinet* | 639 | 13,272 | ||||||
| Digital River, Inc.* | 751 | 13,090 | ||||||
| Ubiquiti Networks, Inc.* | 286 | 13,004 | ||||||
| Tangoe, Inc.* | 695 | 12,920 | ||||||
| FleetMatics Group plc* | 386 | 12,912 | ||||||
| Checkpoint Systems, Inc.* | 926 | 12,427 | ||||||
| Super Micro Computer, Inc.* | 715 | 12,420 | ||||||
| Shutterstock, Inc.* | 170 | 12,344 | ||||||
| Ruckus Wireless, Inc.* | 1,015 | 12,342 | ||||||
| Extreme Networks, Inc.* | 2,099 | 12,174 | ||||||
| Silicon Image, Inc.* | 1,743 | 12,027 | ||||||
| Comtech Telecommunications Corp. | 374 | 11,916 | ||||||
| Daktronics, Inc. | 827 | 11,901 | ||||||
| Ebix, Inc. | 695 | 11,864 | ||||||
| Cass Information Systems, Inc. | 227 | 11,704 | ||||||
| Photronics, Inc.* | 1,372 | 11,703 | ||||||
| Micrel, Inc. | 1,049 | 11,623 | ||||||
| Angie’s List, Inc.* | 954 | 11,620 | ||||||
| ServiceSource International, Inc.* | 1,371 | 11,571 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 105 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| ShoreTel, Inc.* | 1,329 | $ | 11,429 | |||||
| Callidus Software, Inc.* | 897 | 11,230 | ||||||
| AVG Technologies N.V.* | 535 | 11,214 | ||||||
| Ambarella, Inc.* | 412 | 11,005 | ||||||
| TeleTech Holdings, Inc.* | 448 | 10,980 | ||||||
| Amkor Technology, Inc.* | 1,584 | 10,866 | ||||||
| Move, Inc.* | 902 | 10,427 | ||||||
| Exar Corp.* | 858 | 10,253 | ||||||
| PDF Solutions, Inc.* | 562 | 10,212 | ||||||
| Global Cash Access Holdings, Inc.* | 1,488 | 10,208 | ||||||
| RealD, Inc.* | 911 | 10,176 | ||||||
| TTM Technologies, Inc.* | 1,195 | 10,098 | ||||||
| Forrester Research, Inc. | 278 | 9,966 | ||||||
| Integrated Silicon Solution, Inc.* | 635 | 9,874 | ||||||
| Stamps.com, Inc.* | 290 | 9,732 | ||||||
| Epiq Systems, Inc. | 706 | 9,623 | ||||||
| Mercury Systems, Inc.* | 724 | 9,564 | ||||||
| Parkervision, Inc.* | 1,990 | 9,552 | ||||||
| LTX-Credence Corp.* | 1,072 | 9,552 | ||||||
| Inphi Corp.* | 588 | 9,461 | ||||||
| Nanometrics, Inc.* | 524 | 9,416 | ||||||
| Silicon Graphics International Corp.* | 759 | 9,321 | ||||||
| GSI Group, Inc.* | 687 | 8,972 | ||||||
| Intralinks Holdings, Inc.* | 862 | 8,818 | ||||||
| Lionbridge Technologies, Inc.* | 1,307 | 8,770 | ||||||
| Ceva, Inc.* | 499 | 8,762 | ||||||
| Black Box Corp. | 358 | 8,714 | ||||||
| Qualys, Inc.* | 337 | 8,570 | ||||||
| Internap Network Services Corp.* | 1,207 | 8,546 | ||||||
| E2open, Inc.* | 362 | 8,532 | ||||||
| MoneyGram International, Inc.* | 483 | 8,525 | ||||||
| Maxwell Technologies, Inc.* | 653 | 8,437 | ||||||
| Rudolph Technologies, Inc.* | 738 | 8,421 | ||||||
| EarthLink Holdings Corp. | 2,318 | 8,368 | ||||||
| Global Eagle Entertainment, Inc.* | 525 | 8,285 | ||||||
| Entropic Communications, Inc.* | 2,015 | 8,241 | ||||||
| DTS, Inc.* | 406 | 8,023 | ||||||
| Bazaarvoice, Inc.* | 1,083 | 7,906 | ||||||
| FormFactor, Inc.* | 1,212 | 7,745 | ||||||
| CIBER, Inc.* | 1,684 | 7,713 | ||||||
| Oplink Communications, Inc.* | 429 | 7,705 | ||||||
| Seachange International, Inc.* | 734 | 7,663 | ||||||
| Calix, Inc.* | 901 | 7,595 | ||||||
| Electro Rent Corp. | 419 | 7,370 | ||||||
| Supertex, Inc.* | 219 | 7,223 | ||||||
| Jive Software, Inc.* | 892 | 7,145 | ||||||
| Ultra Clean Holdings, Inc.* | 538 | 7,075 | ||||||
| Glu Mobile, Inc.* | 1,446 | 6,854 | ||||||
| Immersion Corp.* | 630 | 6,647 | ||||||
| NVE Corp.* | 113 | 6,446 | ||||||
| Actuate Corp.* | 1,066 | 6,417 | ||||||
| Dice Holdings, Inc.* | 858 | 6,401 | ||||||
| Brightcove, Inc.* | 633 | 6,222 | ||||||
| PLX Technology, Inc.* | 1,026 | 6,207 | ||||||
| Blackhawk Network Holdings, Inc.* | 254 | 6,195 | ||||||
| IXYS Corp. | 545 | 6,186 | ||||||
| XO Group, Inc.* | 604 | 6,125 | ||||||
| Cohu, Inc. | 561 | 6,025 | ||||||
| Datalink Corp.* | 429 | 5,976 | ||||||
| Digi International, Inc.* | 582 | 5,907 | ||||||
| KEMET Corp.* | 1,010 | 5,868 | ||||||
| Computer Task Group, Inc. | 344 | 5,845 | ||||||
| Quantum Corp.* | 4,781 | 5,833 | ||||||
| Zix Corp.* | 1,389 | 5,750 | ||||||
| Vocus, Inc.* | 425 | 5,665 | ||||||
| Kopin Corp.* | 1,494 | 5,647 | ||||||
| Zygo Corp.* | 371 | 5,635 | ||||||
| Millennial Media, Inc.* | 795 | 5,501 | ||||||
| ChannelAdvisor Corp.* | 145 | 5,472 | ||||||
| American Software, Inc. — Class A | 537 | 5,461 | ||||||
| Marchex, Inc. — Class B | 512 | 5,381 | ||||||
| Electro Scientific Industries, Inc. | 538 | 5,299 | ||||||
| Vringo, Inc.* | 1,514 | 5,254 | ||||||
| Axcelis Technologies, Inc.* | 2,435 | 5,235 | ||||||
| Mesa Laboratories, Inc. | 58 | 5,235 | ||||||
| Marketo, Inc.* | 160 | 5,227 | ||||||
| Gigamon, Inc.* | 170 | 5,166 | ||||||
| MaxLinear, Inc. — Class A* | 536 | 5,081 | ||||||
| Higher One Holdings, Inc.* | 702 | 5,075 | ||||||
| Gogo, Inc.* | 245 | 5,032 | ||||||
| Cvent, Inc.* | 139 | 5,025 | ||||||
| Rubicon Technology, Inc.* | 438 | 4,945 | ||||||
| M/A-COM Technology Solutions | ||||||||
| Holdings, Inc.* | 238 | 4,891 | ||||||
| VASCO Data Security International, Inc.* | 648 | 4,886 | ||||||
| Vishay Precision Group, Inc.* | 279 | 4,849 | ||||||
| Unwired Planet, Inc.* | 2,231 | 4,841 | ||||||
| MoSys, Inc.* | 1,057 | 4,799 | ||||||
| Bel Fuse, Inc. — Class B | 219 | 4,796 | ||||||
| Procera Networks, Inc.* | 461 | 4,790 | ||||||
| ePlus, Inc.* | 85 | 4,740 | ||||||
| QuinStreet, Inc.* | 705 | 4,681 | ||||||
| KVH Industries, Inc.* | 349 | 4,593 | ||||||
| PRGX Global, Inc.* | 646 | 4,477 | ||||||
| Imation Corp.* | 767 | 4,426 | ||||||
| Tessco Technologies, Inc. | 118 | 4,408 | ||||||
| Agilysys, Inc.* | 319 | 4,275 | ||||||
| PC Connection, Inc. | 208 | 4,227 | ||||||
| Guidance Software, Inc.* | 377 | 4,170 | ||||||
| Travelzoo, Inc.* | 182 | 4,168 | ||||||
| Pericom Semiconductor Corp.* | 520 | 4,072 | ||||||
| Digimarc Corp. | 128 | 4,019 | ||||||
| Demand Media, Inc.* | 815 | 3,953 | ||||||
| DSP Group, Inc.* | 445 | 3,845 | ||||||
| RealNetworks, Inc.* | 503 | 3,813 | ||||||
| Alliance Fiber Optic Products, Inc. | 260 | 3,762 | ||||||
| Luxoft Holding, Inc.* | 106 | 3,717 | ||||||
| Westell Technologies, Inc. — Class A* | 997 | 3,679 | ||||||
| Speed Commerce, Inc.* | 1,010 | 3,676 | ||||||
| PC-Telephone, Inc. | 420 | 3,667 | ||||||
| Peregrine Semiconductor Corp.* | 600 | 3,630 | ||||||
| Aeroflex Holding Corp.* | 433 | 3,598 | ||||||
| NeoPhotonics Corp.* | 451 | 3,576 | ||||||
| ModusLink Global Solutions, Inc.* | 832 | 3,519 | ||||||
| 106 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 | |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Xoom Corp.* | 180 | $ | 3,514 | |||||
| Sapiens International | ||||||||
| Corporation N.V.* | 433 | 3,512 | ||||||
| United Online, Inc. | 302 | 3,491 | ||||||
| Hackett Group, Inc. | 582 | 3,480 | ||||||
| Neonode, Inc.* | 610 | 3,471 | ||||||
| Numerex Corp. — Class A* | 311 | 3,399 | ||||||
| Reis, Inc.* | 187 | 3,375 | ||||||
| Sigma Designs, Inc.* | 694 | 3,303 | ||||||
| GSI Technology, Inc.* | 458 | 3,165 | ||||||
| ANADIGICS, Inc.* | 1,849 | 3,143 | ||||||
| Textura Corp.* | 122 | 3,076 | ||||||
| support.com, Inc.* | 1,186 | 3,024 | ||||||
| Rosetta Stone, Inc.* | 257 | 2,884 | ||||||
| Alpha & Omega Semiconductor Ltd.* | 386 | 2,841 | ||||||
| Carbonite, Inc.* | 275 | 2,802 | ||||||
| Richardson Electronics Ltd. | 259 | 2,787 | ||||||
| Limelight Networks, Inc.* | 1,205 | 2,627 | ||||||
| Audience, Inc.* | 210 | 2,625 | ||||||
| Planet Payment, Inc.* | 957 | 2,622 | ||||||
| QAD, Inc. — Class A | 127 | 2,595 | ||||||
| Multi-Fineline Electronix, Inc.* | 201 | 2,573 | ||||||
| TeleCommunication Systems, | ||||||||
| Inc. — Class A* | 1,070 | 2,461 | ||||||
| Telenav, Inc.* | 401 | 2,390 | ||||||
| Silver Spring Networks, Inc.* | 130 | 2,259 | ||||||
| Control4 Corp.* | 106 | 2,248 | ||||||
| Marin Software, Inc.* | 211 | 2,230 | ||||||
| Aviat Networks, Inc.* | 1,382 | 2,197 | ||||||
| Mitek Systems, Inc.* | 565 | 2,187 | ||||||
| Spark Networks, Inc.* | 398 | 2,082 | ||||||
| eGain Corp.* | 290 | 2,047 | ||||||
| Rally Software Development Corp.* | 150 | 2,007 | ||||||
| TechTarget, Inc.* | 267 | 1,925 | ||||||
| Radisys Corp.* | 523 | 1,878 | ||||||
| Model N, Inc.* | 183 | 1,850 | ||||||
| Uni-Pixel, Inc.* | 230 | 1,762 | ||||||
| Hutchinson Technology, Inc.* | 525 | 1,486 | ||||||
| Benefitfocus, Inc.* | 24 | 1,127 | ||||||
| Intermolecular, Inc.* | 385 | 1,078 | ||||||
| Viasystems Group, Inc.* | 82 | 1,027 | ||||||
| Endurance International | ||||||||
| Group Holdings, Inc.* | 78 | 1,015 | ||||||
| YuMe, Inc.* | 116 | 848 | ||||||
| Cyan, Inc.* | 180 | 769 | ||||||
| Wix.com Ltd.* | 32 | 735 | ||||||
| Rocket Fuel, Inc.* | 16 | 686 | ||||||
| Tremor Video, Inc.* | 166 | 684 | ||||||
| Barracuda Networks, Inc.* | 15 | 509 | ||||||
| Chegg, Inc.* | 47 | 329 | ||||||
| Mavenir Systems, Inc.* | 16 | 286 | ||||||
| Violin Memory, Inc.* | 63 | 252 | ||||||
| Applied Optoelectronics, Inc.* | 8 | 197 | ||||||
| Net Element, Inc.* | 51 | 177 | ||||||
| Covisint Corp.* | 24 | 176 | ||||||
| Total Information Technology | 6,658,592 | |||||||
| INDUSTRIALS - 10.8% | ||||||||
| Acuity Brands, Inc. | 961 | 127,401 | ||||||
| Middleby Corp.* | 418 | 110,440 | ||||||
| HEICO Corp. | 1,495 | 89,938 | ||||||
| Teledyne Technologies, Inc.* | 844 | 82,146 | ||||||
| Spirit Airlines, Inc.* | 1,359 | 80,724 | ||||||
| Esterline Technologies Corp.* | 708 | 75,430 | ||||||
| EnerSys, Inc. | 1,085 | 75,181 | ||||||
| EMCOR Group, Inc. | 1,509 | 70,607 | ||||||
| Generac Holdings, Inc. | 1,163 | 68,582 | ||||||
| Curtiss-Wright Corp. | 1,050 | 66,717 | ||||||
| Moog, Inc. — Class A* | 1,016 | 66,558 | ||||||
| Woodward, Inc. | 1,553 | 64,496 | ||||||
| CLARCOR, Inc. | 1,121 | 64,289 | ||||||
| Deluxe Corp. | 1,147 | 60,184 | ||||||
| MasTec, Inc.* | 1,337 | 58,079 | ||||||
| Watsco, Inc. | 574 | 57,349 | ||||||
| USG Corp.* | 1,729 | 56,572 | ||||||
| Actuant Corp. — Class A | 1,644 | 56,143 | ||||||
| Corporate Executive Board Co. | 753 | 55,895 | ||||||
| Chart Industries, Inc.* | 683 | 54,333 | ||||||
| Advisory Board Co.* | 795 | 51,079 | ||||||
| DigitalGlobe, Inc.* | 1,679 | 48,708 | ||||||
| Swift Transportation Co. — Class A* | 1,889 | 46,753 | ||||||
| Barnes Group, Inc. | 1,211 | 46,587 | ||||||
| Applied Industrial Technologies, Inc. | 948 | 45,733 | ||||||
| JetBlue Airways Corp.* | 5,235 | 45,492 | ||||||
| Franklin Electric Company, Inc. | 1,068 | 45,411 | ||||||
| Healthcare Services Group, Inc. | 1,540 | 44,753 | ||||||
| Tetra Tech, Inc.* | 1,458 | 43,143 | ||||||
| Herman Miller, Inc. | 1,324 | 42,540 | ||||||
| Beacon Roofing Supply, Inc.* | 1,093 | 42,255 | ||||||
| On Assignment, Inc.* | 1,032 | 39,825 | ||||||
| Mueller Industries, Inc. | 1,258 | 37,727 | ||||||
| Watts Water Technologies, Inc. — Class A | 642 | 37,679 | ||||||
| Orbital Sciences Corp.* | 1,349 | 37,637 | ||||||
| HNI Corp. | 1,028 | 37,584 | ||||||
| Mobile Mini, Inc. | 865 | 37,507 | ||||||
| Allegiant Travel Co. — Class A | 335 | 37,497 | ||||||
| United Stationers, Inc. | 909 | 37,333 | ||||||
| MSA Safety, Inc. | 637 | 36,309 | ||||||
| UniFirst Corp. | 330 | 36,280 | ||||||
| Polypore International, Inc.* | 1,049 | 35,886 | ||||||
| ABM Industries, Inc. | 1,226 | 35,235 | ||||||
| Granite Construction, Inc. | 874 | 34,899 | ||||||
| EnPro Industries, Inc.* | 473 | 34,373 | ||||||
| Mueller Water Products, Inc. — Class A | 3,561 | 33,830 | ||||||
| TriMas Corp.* | 1,012 | 33,598 | ||||||
| Hub Group, Inc. — Class A* | 836 | 33,431 | ||||||
| RBC Bearings, Inc.* | 522 | 33,251 | ||||||
| Huron Consulting Group, Inc.* | 520 | 32,958 | ||||||
| TAL International Group, Inc. | 766 | 32,838 | ||||||
| Korn/Ferry International* | 1,098 | 32,687 | ||||||
| Simpson Manufacturing Company, Inc. | 909 | 32,114 | ||||||
| WageWorks, Inc.* | 565 | 31,702 | ||||||
| Steelcase, Inc. — Class A | 1,904 | 31,625 | ||||||
| Forward Air Corp. | 679 | 31,309 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 107 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Brink’s Co. | 1,083 | $ | 30,920 | |||||
| Knight Transportation, Inc. | 1,326 | 30,670 | ||||||
| FTI Consulting, Inc.* | 904 | 30,139 | ||||||
| Aircastle Ltd. | 1,538 | 29,806 | ||||||
| CIRCOR International, Inc. | 397 | 29,112 | ||||||
| GrafTech International Ltd.* | 2,634 | 28,763 | ||||||
| General Cable Corp. | 1,116 | 28,581 | ||||||
| Trex Company, Inc.* | 390 | 28,532 | ||||||
| Brady Corp. — Class A | 1,041 | 28,263 | ||||||
| Interface, Inc. — Class A | 1,336 | 27,455 | ||||||
| G&K Services, Inc. — Class A | 441 | 26,976 | ||||||
| TrueBlue, Inc.* | 920 | 26,919 | ||||||
| Tennant Co. | 410 | 26,904 | ||||||
| H&E Equipment Services, Inc.* | 665 | 26,899 | ||||||
| Meritor, Inc.* | 2,192 | 26,852 | ||||||
| Raven Industries, Inc. | 818 | 26,790 | ||||||
| Werner Enterprises, Inc. | 1,027 | 26,199 | ||||||
| Proto Labs, Inc.* | 381 | 25,782 | ||||||
| Lindsay Corp.1 | 291 | 25,660 | ||||||
| AZZ, Inc. | 571 | 25,513 | ||||||
| Rush Enterprises, Inc. — Class A* | 783 | 25,432 | ||||||
| Greenbrier Companies, Inc.* | 554 | 25,262 | ||||||
| Kaman Corp. | 613 | 24,937 | ||||||
| GenCorp, Inc.* | 1,359 | 24,829 | ||||||
| Universal Forest Products, Inc. | 443 | 24,516 | ||||||
| Briggs & Stratton Corp. | 1,087 | 24,186 | ||||||
| Tutor Perini Corp.* | 837 | 23,997 | ||||||
| Primoris Services Corp. | 798 | 23,924 | ||||||
| Matson, Inc. | 959 | 23,677 | ||||||
| Dycom Industries, Inc.* | 741 | 23,423 | ||||||
| Heartland Express, Inc. | 1,032 | 23,416 | ||||||
| AAR Corp. | 899 | 23,329 | ||||||
| Hyster-Yale Materials Handling, Inc. | 236 | 23,010 | ||||||
| Titan International, Inc. | 1,208 | 22,940 | ||||||
| Cubic Corp. | 446 | 22,777 | ||||||
| Encore Wire Corp. | 464 | 22,509 | ||||||
| Aegion Corp. — Class A* | 885 | 22,399 | ||||||
| Albany International Corp. — Class A | 626 | 22,248 | ||||||
| Exponent, Inc. | 296 | 22,218 | ||||||
| Astronics Corp.* | 344 | 21,813 | ||||||
| Altra Industrial Motion Corp. | 607 | 21,670 | ||||||
| UTI Worldwide, Inc. | 2,042 | 21,625 | ||||||
| Arkansas Best Corp. | 583 | 21,542 | ||||||
| Apogee Enterprises, Inc. | 646 | 21,467 | ||||||
| Wabash National Corp.* | 1,542 | 21,218 | ||||||
| Taser International, Inc.* | 1,158 | 21,180 | ||||||
| Navigant Consulting, Inc.* | 1,133 | 21,142 | ||||||
| ESCO Technologies, Inc. | 598 | 21,044 | ||||||
| Federal Signal Corp.* | 1,405 | 20,935 | ||||||
| Sun Hydraulics Corp. | 480 | 20,789 | ||||||
| Saia, Inc.* | 542 | 20,710 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 582 | 20,527 | ||||||
| Wesco Aircraft Holdings, Inc.* | 930 | 20,469 | ||||||
| John Bean Technologies Corp. | 650 | 20,085 | ||||||
| Astec Industries, Inc. | 457 | 20,067 | ||||||
| DXP Enterprises, Inc.* | 211 | 20,030 | ||||||
| McGrath RentCorp | 571 | 19,962 | ||||||
| Rexnord Corp.* | 684 | 19,822 | ||||||
| Team, Inc.* | 462 | 19,801 | ||||||
| Knoll, Inc. | 1,085 | 19,736 | ||||||
| XPO Logistics, Inc.* | 656 | 19,293 | ||||||
| Textainer Group Holdings Ltd. | 482 | 18,446 | ||||||
| ICF International, Inc.* | 447 | 17,795 | ||||||
| Engility Holdings, Inc.* | 390 | 17,570 | ||||||
| AAON, Inc. | 628 | 17,502 | ||||||
| Quanex Building Products Corp. | 833 | 17,226 | ||||||
| US Ecology, Inc. | 462 | 17,149 | ||||||
| Acacia Research Corp. | 1,111 | 16,976 | ||||||
| Aerovironment, Inc.* | 414 | 16,664 | ||||||
| Nortek, Inc.* | 199 | 16,360 | ||||||
| Hawaiian Holdings, Inc.* | 1,170 | 16,333 | ||||||
| Insperity, Inc. | 509 | 15,769 | ||||||
| ACCO Brands Corp.* | 2,553 | 15,726 | ||||||
| Standex International Corp. | 285 | 15,270 | ||||||
| SkyWest, Inc. | 1,168 | 14,904 | ||||||
| Capstone Turbine Corp.* | 6,865 | 14,622 | ||||||
| American Railcar Industries, Inc. | 208 | 14,566 | ||||||
| Kelly Services, Inc. — Class A | 607 | 14,404 | ||||||
| Thermon Group Holdings, Inc.* | 608 | 14,093 | ||||||
| Gorman-Rupp Co. | 422 | 13,415 | ||||||
| KEYW Holding Corp.* | 714 | 13,359 | ||||||
| Kimball International, Inc. — Class B | 729 | 13,202 | ||||||
| EnerNOC, Inc.* | 591 | 13,167 | ||||||
| Quad/Graphics, Inc. | 561 | 13,155 | ||||||
| Powell Industries, Inc. | 203 | 13,154 | ||||||
| Blount International, Inc.* | 1,104 | 13,138 | ||||||
| Gibraltar Industries, Inc.* | 694 | 13,096 | ||||||
| Resources Connection, Inc. | 923 | 13,005 | ||||||
| Kforce, Inc. | 608 | 12,963 | ||||||
| Comfort Systems USA, Inc. | 839 | 12,786 | ||||||
| Aceto Corp. | 613 | 12,315 | ||||||
| American Science & Engineering, Inc. | 183 | 12,292 | ||||||
| Great Lakes Dredge & Dock Corp.* | 1,337 | 12,207 | ||||||
| Griffon Corp. | 1,000 | 11,940 | ||||||
| MYR Group, Inc.* | 470 | 11,900 | ||||||
| RPX Corp.* | 726 | 11,819 | ||||||
| Columbus McKinnon Corp.* | 437 | 11,707 | ||||||
| West Corp. | 483 | 11,558 | ||||||
| PowerSecure International, Inc.* | 487 | 11,415 | ||||||
| Marten Transport Ltd. | 522 | 11,233 | ||||||
| Viad Corp. | 462 | 11,106 | ||||||
| Park-Ohio Holdings Corp.* | 197 | 11,062 | ||||||
| Celadon Group, Inc. | 453 | 10,890 | ||||||
| Roadrunner Transportation Systems, Inc.* | 418 | 10,550 | ||||||
| LB Foster Co. — Class A | 225 | 10,541 | ||||||
| Republic Airways Holdings, Inc.* | 1,107 | 10,118 | ||||||
| Ennis, Inc. | 584 | 9,677 | ||||||
| CAI International, Inc.* | 388 | 9,572 | ||||||
| FuelCell Energy, Inc.* | 3,844 | 9,533 | ||||||
| Multi-Color Corp. | 271 | 9,485 | ||||||
| Argan, Inc. | 315 | 9,365 | ||||||
| Barrett Business Services, Inc. | 156 | 9,293 | ||||||
| Kadant, Inc. | 253 | 9,227 | ||||||
| Air Transport Services Group, Inc.* | 1,172 | 9,200 | ||||||
| 108 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| SP Plus Corp.* | 349 | $ | 9,168 | |||||
| Builders FirstSource, Inc.* | 1,005 | 9,156 | ||||||
| GP Strategies Corp.* | 327 | 8,904 | ||||||
| Lydall, Inc.* | 387 | 8,851 | ||||||
| Douglas Dynamics, Inc. | 498 | 8,675 | ||||||
| PGT, Inc.* | 750 | 8,633 | ||||||
| Alamo Group, Inc. | 158 | 8,584 | ||||||
| National Presto Industries, Inc. | 109 | 8,506 | ||||||
| Furmanite Corp.* | 846 | 8,308 | ||||||
| Mistras Group, Inc.* | 360 | 8,197 | ||||||
| Heidrick & Struggles International, Inc. | 403 | 8,088 | ||||||
| Layne Christensen Co.* | 444 | 8,076 | ||||||
| NCI Building Systems, Inc.* | 462 | 8,067 | ||||||
| Insteel Industries, Inc. | 403 | 7,927 | ||||||
| Orion Marine Group, Inc.* | 613 | 7,705 | ||||||
| NN, Inc. | 389 | 7,663 | ||||||
| InnerWorkings, Inc.* | 995 | 7,622 | ||||||
| Global Power Equipment Group, Inc. | 383 | 7,618 | ||||||
| Northwest Pipe Co.* | 207 | 7,485 | ||||||
| American Woodmark Corp.* | 222 | 7,473 | ||||||
| Kratos Defense & Security Solutions, Inc.* | 990 | 7,465 | ||||||
| CBIZ, Inc.* | 808 | 7,401 | ||||||
| Echo Global Logistics, Inc.* | 397 | 7,273 | ||||||
| Pacer International, Inc.* | 793 | 7,105 | ||||||
| Graham Corp. | 220 | 7,007 | ||||||
| Sparton Corp.* | 234 | 6,852 | ||||||
| Patrick Industries, Inc.* | 152 | 6,738 | ||||||
| Pendrell Corp.* | 3,648 | 6,676 | ||||||
| CECO Environmental Corp. | 396 | 6,570 | ||||||
| Pike Corp.* | 585 | 6,295 | ||||||
| ARC Document Solutions, Inc.* | 845 | 6,287 | ||||||
| FreightCar America, Inc. | 270 | 6,275 | ||||||
| Quality Distribution, Inc.* | 478 | 6,209 | ||||||
| Schawk, Inc. — Class A | 306 | 6,117 | ||||||
| Ducommun, Inc.* | 240 | 6,014 | ||||||
| Titan Machinery, Inc.* | 383 | 6,002 | ||||||
| Dynamic Materials Corp. | 304 | 5,788 | ||||||
| YRC Worldwide, Inc.* | 244 | 5,490 | ||||||
| CDI Corp. | 318 | 5,454 | ||||||
| Patriot Transportation Holding, Inc.* | 150 | 5,408 | ||||||
| ExOne Co.* | 150 | 5,375 | ||||||
| Energy Recovery, Inc.* | 995 | 5,293 | ||||||
| Houston Wire & Cable Co. | 401 | 5,265 | ||||||
| Manitex International, Inc.* | 314 | 5,118 | ||||||
| VSE Corp. | 97 | 5,112 | ||||||
| CRA International, Inc.* | 232 | 5,097 | ||||||
| Miller Industries, Inc. | 254 | 4,961 | ||||||
| Twin Disc, Inc. | 187 | 4,926 | ||||||
| Commercial Vehicle Group, Inc.* | 536 | 4,888 | ||||||
| Performant Financial Corp.* | 499 | 4,516 | ||||||
| Ply Gem Holdings, Inc.* | 355 | 4,484 | ||||||
| Casella Waste Systems, Inc. — Class A* | 873 | 4,461 | ||||||
| Odyssey Marine Exploration, Inc.* | 1,859 | 4,257 | ||||||
| Vicor Corp.* | 396 | 4,039 | ||||||
| Courier Corp. | 261 | 4,019 | ||||||
| LSI Industries, Inc. | 490 | 4,013 | ||||||
| Xerium Technologies, Inc.* | 250 | 4,013 | ||||||
| Accuride Corp.* | 898 | 3,978 | ||||||
| Franklin Covey Co.* | 201 | 3,974 | ||||||
| Hurco Companies, Inc. | 146 | 3,895 | ||||||
| Hardinge, Inc. | 265 | 3,816 | ||||||
| Preformed Line Products Co. | 55 | 3,770 | ||||||
| Cenveo, Inc.* | 1,211 | 3,681 | ||||||
| International Shipholding Corp. | 123 | 3,621 | ||||||
| Stock Building Supply Holdings, Inc.* | 178 | 3,617 | ||||||
| Heritage-Crystal Clean, Inc.* | 199 | 3,608 | ||||||
| Ampco-Pittsburgh Corp. | 186 | 3,510 | ||||||
| Universal Truckload Services, Inc. | 120 | 3,468 | ||||||
| Power Solutions International, Inc.* | 46 | 3,458 | ||||||
| Ameresco, Inc. — Class A* | 444 | 3,357 | ||||||
| Sterling Construction Company, Inc.* | 375 | 3,251 | ||||||
| LMI Aerospace, Inc.* | 229 | 3,229 | ||||||
| Global Brass & Copper Holdings, Inc. | 184 | 2,902 | ||||||
| Tecumseh Products Co. — Class A* | 412 | 2,843 | ||||||
| PMFG, Inc.* | 469 | 2,800 | ||||||
| Enphase Energy, Inc.* | 359 | 2,642 | ||||||
| TRC Companies, Inc.* | 365 | 2,427 | ||||||
| API Technologies Corp.* | 728 | 2,133 | ||||||
| Revolution Lighting Technologies, Inc.* | 672 | 2,117 | ||||||
| Innovative Solutions & Support, Inc.* | 279 | 2,101 | ||||||
| American Superconductor Corp.* | 1,097 | 1,766 | ||||||
| NL Industries, Inc. | 156 | 1,691 | ||||||
| Acorn Energy, Inc. | 494 | 1,675 | ||||||
| Erickson Air-Crane, Inc.* | 80 | 1,545 | ||||||
| Ultrapetrol Bahamas Ltd.* | 485 | 1,504 | ||||||
| Omega Flex, Inc. | 63 | 1,351 | ||||||
| Intersections, Inc. | 210 | 1,239 | ||||||
| Swisher Hygiene, Inc.* | 2,559 | 1,152 | ||||||
| BlueLinx Holdings, Inc.* | 761 | 989 | ||||||
| Norcraft Companies, Inc.* | 24 | 406 | ||||||
| Compx International, Inc. | 24 | 246 | ||||||
| RR Donnelley & Sons Co. | 9 | 161 | ||||||
| Total Industrials | 5,434,035 | |||||||
| HEALTH CARE - 9.8% | ||||||||
| athenahealth, Inc.* | 826 | 132,357 | ||||||
| Isis Pharmaceuticals, Inc.* | 2,529 | 109,277 | ||||||
| Alnylam Pharmaceuticals, Inc.* | 1,310 | 87,952 | ||||||
| Align Technology, Inc.* | 1,648 | 85,349 | ||||||
| Cepheid, Inc.* | 1,515 | 78,143 | ||||||
| Centene Corp.* | 1,227 | 76,381 | ||||||
| Questcor Pharmaceuticals, Inc. | 1,167 | 75,773 | ||||||
| HealthSouth Corp. | 1,962 | 70,494 | ||||||
| PAREXEL International Corp.* | 1,284 | 69,451 | ||||||
| Team Health Holdings, Inc.* | 1,549 | 69,317 | ||||||
| West Pharmaceutical Services, Inc. | 1,562 | 68,806 | ||||||
| NPS Pharmaceuticals, Inc.* | 2,256 | 67,522 | ||||||
| DexCom, Inc.* | 1,593 | 65,886 | ||||||
| InterMune, Inc.* | 1,955 | 65,434 | ||||||
| Medidata Solutions, Inc.* | 1,194 | 64,882 | ||||||
| STERIS Corp. | 1,327 | 63,364 | ||||||
| WellCare Health Plans, Inc.* | 979 | 62,186 | ||||||
| Insulet Corp.* | 1,205 | 57,141 | ||||||
| Puma Biotechnology, Inc.* | 502 | 52,278 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 109 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Intercept Pharmaceuticals, Inc.* | 156 | $ | 51,447 | |||||
| Owens & Minor, Inc. | 1,428 | 50,023 | ||||||
| Air Methods Corp.* | 872 | 46,590 | ||||||
| Thoratec Corp.* | 1,295 | 46,374 | ||||||
| MWI Veterinary Supply, Inc.* | 287 | 44,663 | ||||||
| Pacira Pharmaceuticals, Inc.* | 616 | 43,114 | ||||||
| Impax Laboratories, Inc.* | 1,546 | 40,845 | ||||||
| Cyberonics, Inc.* | 623 | 40,651 | ||||||
| Medicines Co.* | 1,423 | 40,442 | ||||||
| OPKO Health, Inc.*,1 | 4,249 | 39,601 | ||||||
| ACADIA Pharmaceuticals, Inc.* | 1,582 | 38,490 | ||||||
| NuVasive, Inc.* | 994 | 38,180 | ||||||
| HMS Holdings Corp.* | 1,980 | 37,718 | ||||||
| Haemonetics Corp.* | 1,148 | 37,413 | ||||||
| Neogen Corp.* | 811 | 36,454 | ||||||
| Magellan Health Services, Inc.* | 608 | 36,085 | ||||||
| Synageva BioPharma Corp.* | 433 | 35,926 | ||||||
| Acadia Healthcare Company, Inc.* | 794 | 35,824 | ||||||
| Chemed Corp. | 392 | 35,064 | ||||||
| Acorda Therapeutics, Inc.* | 913 | 34,612 | ||||||
| Celldex Therapeutics, Inc.* | 1,958 | 34,598 | ||||||
| HeartWare International, Inc.* | 367 | 34,417 | ||||||
| MedAssets, Inc.* | 1,376 | 34,001 | ||||||
| Amsurg Corp. — Class A* | 719 | 33,851 | ||||||
| Keryx Biopharmaceuticals, Inc.* | 1,969 | 33,552 | ||||||
| Nektar Therapeutics* | 2,753 | 33,366 | ||||||
| Globus Medical, Inc. — Class A* | 1,232 | 32,759 | ||||||
| Prestige Brands Holdings, Inc.* | 1,156 | 31,501 | ||||||
| Arena Pharmaceuticals, Inc.*,1 | 4,908 | 30,920 | ||||||
| ArthroCare Corp.* | 633 | 30,504 | ||||||
| Auxilium Pharmaceuticals, Inc.* | 1,106 | 30,061 | ||||||
| Masimo Corp.* | 1,099 | 30,014 | ||||||
| Aegerion Pharmaceuticals, Inc.* | 646 | 29,794 | ||||||
| Akorn, Inc.* | 1,311 | 28,842 | ||||||
| Emeritus Corp.* | 905 | 28,453 | ||||||
| ImmunoGen, Inc.* | 1,903 | 28,412 | ||||||
| Kindred Healthcare, Inc. | 1,213 | 28,408 | ||||||
| Wright Medical Group, Inc.* | 909 | 28,243 | ||||||
| Spectranetics Corp.* | 906 | 27,461 | ||||||
| CONMED Corp. | 620 | 26,939 | ||||||
| Ligand Pharmaceuticals, Inc. — Class B* | 400 | 26,904 | ||||||
| Hanger, Inc.* | 784 | 26,405 | ||||||
| Clovis Oncology, Inc.* | 380 | 26,323 | ||||||
| PDL BioPharma, Inc.1 | 3,155 | 26,218 | ||||||
| Ironwood Pharmaceuticals, | ||||||||
| Inc. — Class A* | 2,096 | 25,823 | ||||||
| Halozyme Therapeutics, Inc.* | 2,000 | 25,400 | ||||||
| Fluidigm Corp.* | 568 | 25,031 | ||||||
| Sangamo BioSciences, Inc.* | 1,377 | 24,896 | ||||||
| Cantel Medical Corp. | 736 | 24,818 | ||||||
| Greatbatch, Inc.* | 537 | 24,659 | ||||||
| Dyax Corp.* | 2,728 | 24,497 | ||||||
| Volcano Corp.* | 1,233 | 24,302 | ||||||
| Neurocrine Biosciences, Inc.* | 1,506 | 24,247 | ||||||
| Molina Healthcare, Inc.* | 636 | 23,888 | ||||||
| ExamWorks Group, Inc.* | 677 | 23,702 | ||||||
| Analogic Corp. | 280 | 22,991 | ||||||
| ABIOMED, Inc.* | 877 | 22,837 | ||||||
| Integra LifeSciences Holdings Corp.* | 493 | 22,673 | ||||||
| Exact Sciences Corp.* | 1,581 | 22,403 | ||||||
| Omnicell, Inc.* | 775 | 22,181 | ||||||
| Meridian Bioscience, Inc. | 929 | 20,243 | ||||||
| Sarepta Therapeutics, Inc.* | 815 | 19,584 | ||||||
| Abaxis, Inc.* | 502 | 19,518 | ||||||
| Ensign Group, Inc. | 441 | 19,245 | ||||||
| Novavax, Inc.* | 4,186 | 18,963 | ||||||
| PharMerica Corp.* | 670 | 18,747 | ||||||
| Depomed, Inc.* | 1,269 | 18,401 | ||||||
| IPC The Hospitalist Company, Inc.* | 374 | 18,356 | ||||||
| Endologix, Inc.* | 1,410 | 18,147 | ||||||
| Natus Medical, Inc.* | 682 | 17,596 | ||||||
| Horizon Pharma, Inc.* | 1,162 | 17,569 | ||||||
| ICU Medical, Inc.* | 290 | 17,365 | ||||||
| Quidel Corp.*,1 | 635 | 17,336 | ||||||
| NxStage Medical, Inc.* | 1,348 | 17,174 | ||||||
| Capital Senior Living Corp.* | 649 | 16,868 | ||||||
| Cardiovascular Systems, Inc.* | 524 | 16,658 | ||||||
| Computer Programs & Systems, Inc. | 254 | 16,408 | ||||||
| Endocyte, Inc.* | 689 | 16,405 | ||||||
| Accuray, Inc.* | 1,672 | 16,051 | ||||||
| Staar Surgical Co.* | 827 | 15,548 | ||||||
| Emergent Biosolutions, Inc.* | 613 | 15,491 | ||||||
| Exelixis, Inc.*,1 | 4,318 | 15,286 | ||||||
| Luminex Corp.* | 844 | 15,285 | ||||||
| Quality Systems, Inc. | 903 | 15,243 | ||||||
| Bio-Reference Labs, Inc.* | 544 | 15,058 | ||||||
| Lannett Company, Inc.* | 416 | 14,860 | ||||||
| Insmed, Inc.* | 775 | 14,756 | ||||||
| Orexigen Therapeutics, Inc.* | 2,244 | 14,586 | ||||||
| AMN Healthcare Services, Inc.* | 1,032 | 14,180 | ||||||
| Invacare Corp. | 717 | 13,673 | ||||||
| Select Medical Holdings Corp. | 1,098 | 13,670 | ||||||
| Merit Medical Systems, Inc.* | 955 | 13,657 | ||||||
| Idenix Pharmaceuticals, Inc.* | 2,250 | 13,568 | ||||||
| Raptor Pharmaceutical Corp.* | 1,347 | 13,470 | ||||||
| MannKind Corp.*,1 | 3,350 | 13,467 | ||||||
| Vivus, Inc.* | 2,265 | 13,454 | ||||||
| National Healthcare Corp. | 241 | 13,441 | ||||||
| Orthofix International N.V.* | 441 | 13,296 | ||||||
| Furiex Pharmaceuticals, Inc.* | 152 | 13,224 | ||||||
| Healthways, Inc.* | 768 | 13,164 | ||||||
| Array BioPharma, Inc.* | 2,753 | 12,939 | ||||||
| Infinity Pharmaceuticals, Inc.* | 1,081 | 12,853 | ||||||
| Cambrex Corp.* | 674 | 12,718 | ||||||
| Cynosure, Inc. — Class A* | 431 | 12,628 | ||||||
| Corvel Corp.* | 252 | 12,540 | ||||||
| Prothena Corporation plc* | 324 | 12,412 | ||||||
| Momenta Pharmaceuticals, Inc.* | 1,064 | 12,396 | ||||||
| Tornier N.V.* | 584 | 12,392 | ||||||
| MiMedx Group, Inc.* | 1,998 | 12,248 | ||||||
| TherapeuticsMD, Inc.* | 1,940 | 12,241 | ||||||
| Vanda Pharmaceuticals, Inc.* | 747 | 12,139 | ||||||
| HealthStream, Inc.* | 451 | 12,042 | ||||||
| AVANIR Pharmaceuticals, Inc. — Class A* | 3,271 | 12,005 | ||||||
| 110 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Atrion Corp. | 38 | $ | 11,633 | |||||
| Affymetrix, Inc.* | 1,598 | 11,394 | ||||||
| Anacor Pharmaceuticals, Inc.* | 568 | 11,366 | ||||||
| Rockwell Medical, Inc.* | 884 | 11,191 | ||||||
| Spectrum Pharmaceuticals, Inc.* | 1,426 | 11,180 | ||||||
| Anika Therapeutics, Inc.* | 272 | 11,179 | ||||||
| Merrimack Pharmaceuticals, Inc.*,1 | 2,174 | 10,957 | ||||||
| Hi-Tech Pharmacal Company, Inc.* | 249 | 10,789 | ||||||
| NewLink Genetics Corp.* | 379 | 10,764 | ||||||
| Amedisys, Inc.* | 713 | 10,617 | ||||||
| Dendreon Corp.*,1 | 3,548 | 10,609 | ||||||
| KYTHERA Biopharmaceuticals, Inc.* | 264 | 10,497 | ||||||
| OraSure Technologies, Inc.* | 1,248 | 9,947 | ||||||
| Sagent Pharmaceuticals, Inc.* | 425 | 9,932 | ||||||
| Genomic Health, Inc.* | 374 | 9,851 | ||||||
| Vascular Solutions, Inc.* | 373 | 9,769 | ||||||
| Dynavax Technologies Corp.* | 5,418 | 9,752 | ||||||
| Albany Molecular Research, Inc.* | 520 | 9,667 | ||||||
| Synergy Pharmaceuticals, Inc.* | 1,819 | 9,659 | ||||||
| Landauer, Inc. | 210 | 9,519 | ||||||
| Cell Therapeutics, Inc.* | 2,785 | 9,469 | ||||||
| US Physical Therapy, Inc. | 273 | 9,438 | ||||||
| AMAG Pharmaceuticals, Inc.* | 486 | 9,404 | ||||||
| Chelsea Therapeutics International Ltd.* | 1,685 | 9,301 | ||||||
| Repros Therapeutics, Inc.* | 520 | 9,225 | ||||||
| BioScrip, Inc.* | 1,316 | 9,186 | ||||||
| Repligen Corp.* | 712 | 9,156 | ||||||
| TESARO, Inc.* | 303 | 8,932 | ||||||
| Unilife Corp.* | 2,184 | 8,889 | ||||||
| Antares Pharma, Inc.* | 2,536 | 8,876 | ||||||
| Lexicon Pharmaceuticals, Inc.* | 5,123 | 8,863 | ||||||
| AtriCure, Inc.* | 469 | 8,822 | ||||||
| XOMA Corp.* | 1,675 | 8,727 | ||||||
| AngioDynamics, Inc.* | 551 | 8,678 | ||||||
| Triple-S Management Corp. — Class B* | 535 | 8,635 | ||||||
| Symmetry Medical, Inc.* | 840 | 8,450 | ||||||
| Omeros Corp.* | 673 | 8,123 | ||||||
| GenMark Diagnostics, Inc.* | 805 | 8,002 | ||||||
| ZIOPHARM Oncology, Inc.*,1 | 1,724 | 7,896 | ||||||
| Vocera Communications, Inc.* | 479 | 7,822 | ||||||
| Zeltiq Aesthetics, Inc.* | 393 | 7,707 | ||||||
| Rigel Pharmaceuticals, Inc.* | 1,960 | 7,605 | ||||||
| Cerus Corp.* | 1,569 | 7,531 | ||||||
| Insys Therapeutics, Inc.* | 177 | 7,333 | ||||||
| Achillion Pharmaceuticals, Inc.* | 2,177 | 7,162 | ||||||
| Immunomedics, Inc.* | 1,653 | 6,959 | ||||||
| SurModics, Inc.* | 306 | 6,916 | ||||||
| Peregrine Pharmaceuticals, Inc.* | 3,565 | 6,774 | ||||||
| Providence Service Corp.* | 238 | 6,731 | ||||||
| Intrexon Corp.* | 255 | 6,704 | ||||||
| Gentiva Health Services, Inc.* | 709 | 6,466 | ||||||
| AcelRx Pharmaceuticals, Inc.* | 530 | 6,365 | ||||||
| Sequenom, Inc.*,1 | 2,590 | 6,346 | ||||||
| Portola Pharmaceuticals, Inc.* | 241 | 6,242 | ||||||
| CryoLife, Inc. | 619 | 6,165 | ||||||
| Agios Pharmaceuticals, Inc.* | 156 | 6,107 | ||||||
| Geron Corp.* | 2,935 | 6,105 | ||||||
| Universal American Corp. | 861 | 6,087 | ||||||
| Receptos, Inc.* | 145 | 6,081 | ||||||
| LHC Group, Inc.* | 270 | 5,956 | ||||||
| Zogenix, Inc.* | 2,052 | 5,838 | ||||||
| Pacific Biosciences of California, Inc.* | 1,081 | 5,783 | ||||||
| Galena Biopharma, Inc.* | 2,303 | 5,758 | ||||||
| BioDelivery Sciences International, Inc.* | 670 | 5,655 | ||||||
| Cytokinetics, Inc.* | 595 | 5,653 | ||||||
| SciClone Pharmaceuticals, Inc.* | 1,219 | 5,546 | ||||||
| PTC Therapeutics, Inc.* | 212 | 5,542 | ||||||
| Progenics Pharmaceuticals, Inc.* | 1,342 | 5,489 | ||||||
| Curis, Inc.* | 1,909 | 5,383 | ||||||
| Chindex International, Inc.* | 279 | 5,323 | ||||||
| Accelerate Diagnostics, Inc.* | 244 | 5,322 | ||||||
| XenoPort, Inc.* | 1,028 | 5,315 | ||||||
| Corcept Therapeutics, Inc.* | 1,201 | 5,236 | ||||||
| RTI Surgical, Inc.* | 1,271 | 5,186 | ||||||
| Cempra, Inc.* | 440 | 5,082 | ||||||
| Threshold Pharmaceuticals, Inc.* | 1,061 | 5,050 | ||||||
| Navidea Biopharmaceuticals, Inc.*,1 | 2,698 | 4,991 | ||||||
| Hyperion Therapeutics, Inc.* | 191 | 4,928 | ||||||
| Osiris Therapeutics, Inc.* | 375 | 4,924 | ||||||
| Cross Country Healthcare, Inc.* | 610 | 4,923 | ||||||
| Pozen, Inc. | 608 | 4,864 | ||||||
| Sunesis Pharmaceuticals, Inc.* | 725 | 4,792 | ||||||
| Exactech, Inc.* | 211 | 4,760 | ||||||
| PhotoMedex, Inc.* | 300 | 4,749 | ||||||
| Five Star Quality Care, Inc.* | 967 | 4,700 | ||||||
| Synta Pharmaceuticals Corp.*,1 | 1,078 | 4,646 | ||||||
| Utah Medical Products, Inc. | 77 | 4,453 | ||||||
| Ampio Pharmaceuticals, Inc.* | 697 | 4,426 | ||||||
| TearLab Corp.* | 650 | 4,394 | ||||||
| Stemline Therapeutics, Inc.* | 215 | 4,377 | ||||||
| Almost Family, Inc.* | 187 | 4,320 | ||||||
| Verastem, Inc.* | 386 | 4,165 | ||||||
| Chimerix, Inc.* | 180 | 4,111 | ||||||
| Durata Therapeutics, Inc.*,†† | 295 | 3,972 | ||||||
| Cytori Therapeutics, Inc.* | 1,427 | 3,853 | ||||||
| OncoGenex Pharmaceutical, Inc.* | 327 | 3,846 | ||||||
| Derma Sciences, Inc.* | 303 | 3,842 | ||||||
| National Research Corp. — Class A* | 225 | 3,733 | ||||||
| Alliance HealthCare Services, Inc.* | 110 | 3,688 | ||||||
| Cutera, Inc.* | 327 | 3,659 | ||||||
| ChemoCentryx, Inc.* | 550 | 3,647 | ||||||
| Merge Healthcare, Inc.* | 1,472 | 3,592 | ||||||
| OncoMed Pharmaceuticals, Inc.* | 106 | 3,567 | ||||||
| Bluebird Bio, Inc.* | 156 | 3,547 | ||||||
| Tetraphase Pharmaceuticals, Inc.* | 303 | 3,300 | ||||||
| Supernus Pharmaceuticals, Inc.* | 360 | 3,218 | ||||||
| Enanta Pharmaceuticals, Inc.* | 80 | 3,199 | ||||||
| Alimera Sciences, Inc.* | 382 | 3,014 | ||||||
| Targacept, Inc.* | 624 | 2,964 | ||||||
| Epizyme, Inc.* | 130 | 2,960 | ||||||
| MEI Pharma, Inc.* | 257 | 2,860 | ||||||
| BioTime, Inc.* | 832 | 2,737 | ||||||
| Arqule, Inc.* | 1,333 | 2,733 | ||||||
| Harvard Bioscience, Inc.* | 571 | 2,707 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 111 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Aratana Therapeutics, Inc.* | 143 | $ | 2,654 | |||||
| Fibrocell Science, Inc.* | 507 | 2,652 | ||||||
| Nanosphere, Inc.* | 1,225 | 2,634 | ||||||
| Addus HomeCare Corp.* | 114 | 2,628 | ||||||
| NeoGenomics, Inc.* | 740 | 2,568 | ||||||
| SIGA Technologies, Inc.* | 828 | 2,567 | ||||||
| TG Therapeutics, Inc.* | 349 | 2,408 | ||||||
| Skilled Healthcare Group, Inc. — Class A* | 450 | 2,372 | ||||||
| Medical Action Industries, Inc.* | 329 | 2,293 | ||||||
| Sucampo Pharmaceuticals, Inc. — Class A* | 311 | 2,224 | ||||||
| Vical, Inc.* | 1,714 | 2,211 | ||||||
| Pernix Therapeutics Holdings* | 393 | 2,103 | ||||||
| Alphatec Holdings, Inc.* | 1,398 | 2,097 | ||||||
| Regulus Therapeutics, Inc.* | 232 | 2,093 | ||||||
| Biolase, Inc.* | 773 | 1,863 | ||||||
| OvaScience, Inc.* | 200 | 1,788 | ||||||
| AVEO Pharmaceuticals, Inc.* | 1,169 | 1,748 | ||||||
| Esperion Therapeutics, Inc.* | 106 | 1,603 | ||||||
| Amicus Therapeutics, Inc.* | 683 | 1,414 | ||||||
| Harvard Apparatus Regenerative | ||||||||
| Technology, Inc.* | 146 | 1,324 | ||||||
| Cellular Dynamics International, Inc.* | 86 | 1,284 | ||||||
| Surgical Care Affiliates, Inc.* | 40 | 1,230 | ||||||
| Coronado Biosciences, Inc.* | 599 | 1,186 | ||||||
| Ophthotech Corp.* | 31 | 1,108 | ||||||
| Conatus Pharmaceuticals, Inc.* | 131 | 1,066 | ||||||
| GTx, Inc.* | 595 | 910 | ||||||
| Onconova Therapeutics, Inc.* | 138 | 875 | ||||||
| Enzon Pharmaceuticals, Inc. | 848 | 873 | ||||||
| Acceleron Pharma, Inc.* | 23 | 794 | ||||||
| Foundation Medicine, Inc.* | 24 | 777 | ||||||
| Karyopharm Therapeutics, Inc.* | 24 | 741 | ||||||
| KaloBios Pharmaceuticals, Inc.* | 268 | 726 | ||||||
| Relypsa, Inc.* | 24 | 715 | ||||||
| Tandem Diabetes Care, Inc.* | 32 | 707 | ||||||
| Aerie Pharmaceuticals, Inc.* | 31 | 657 | ||||||
| LDR Holding Corp.* | 16 | 549 | ||||||
| Oxford Immunotec Global plc* | 24 | 482 | ||||||
| MacroGenics, Inc.* | 16 | 445 | ||||||
| Veracyte, Inc.* | 24 | 411 | ||||||
| ContraVir Pharmaceuticals, Inc.* | 173 | 389 | ||||||
| Five Prime Therapeutics, Inc.* | 16 | 315 | ||||||
| USMD Holdings, Inc.* | 20 | 255 | ||||||
| BIND Therapeutics, Inc.* | 16 | 191 | ||||||
| Total Health Care | 4,954,127 | |||||||
| CONSUMER DISCRETIONARY - 9.6% | ||||||||
| Kate Spade & Co.* | 2,701 | 100,180 | ||||||
| Brunswick Corp. | 2,042 | 92,483 | ||||||
| Tenneco, Inc.* | 1,365 | 79,267 | ||||||
| Dana Holding Corp. | 3,309 | 77,001 | ||||||
| Live Nation Entertainment, Inc.* | 3,168 | 68,903 | ||||||
| Sotheby’s | 1,539 | 67,022 | ||||||
| Pool Corp. | 1,052 | 64,509 | ||||||
| Wolverine World Wide, Inc. | 2,256 | 64,408 | ||||||
| Buffalo Wild Wings, Inc.* | 423 | 62,984 | ||||||
| Jack in the Box, Inc.* | 1,000 | 58,940 | ||||||
| Lumber Liquidators Holdings, Inc.* | 621 | 58,249 | ||||||
| Cheesecake Factory, Inc. | 1,202 | 57,251 | ||||||
| Vail Resorts, Inc. | 811 | 56,526 | ||||||
| Men’s Wearhouse, Inc. | 1,070 | 52,409 | ||||||
| New York Times Co. — Class A | 2,910 | 49,820 | ||||||
| Helen of Troy Ltd.* | 717 | 49,638 | ||||||
| Steven Madden Ltd.* | 1,353 | 48,681 | ||||||
| Grand Canyon Education, Inc.* | 1,026 | 47,915 | ||||||
| Life Time Fitness, Inc.* | 969 | 46,609 | ||||||
| Outerwall, Inc.* | 631 | 45,748 | ||||||
| HSN, Inc. | 765 | 45,693 | ||||||
| Iconix Brand Group, Inc.* | 1,158 | 45,475 | ||||||
| Office Depot, Inc.* | 10,812 | 44,653 | ||||||
| ANN, Inc.* | 1,062 | 44,052 | ||||||
| Cracker Barrel Old Country Store, Inc. | 442 | 42,980 | ||||||
| Sinclair Broadcast Group, Inc. — Class A | 1,544 | 41,826 | ||||||
| Ryland Group, Inc. | 1,043 | 41,646 | ||||||
| Jos. A. Bank Clothiers, Inc.* | 634 | 40,766 | ||||||
| Penske Automotive Group, Inc. | 951 | 40,664 | ||||||
| Pier 1 Imports, Inc. | 2,135 | 40,309 | ||||||
| Hillenbrand, Inc. | 1,241 | 40,122 | ||||||
| Genesco, Inc.* | 537 | 40,044 | ||||||
| Monro Muffler Brake, Inc.1 | 704 | 40,043 | ||||||
| Asbury Automotive Group, Inc.* | 702 | 38,828 | ||||||
| Papa John’s International, Inc. | 720 | 37,519 | ||||||
| Meredith Corp. | 802 | 37,237 | ||||||
| Marriott Vacations Worldwide Corp.* | 658 | 36,788 | ||||||
| Texas Roadhouse, Inc. — Class A | 1,407 | 36,695 | ||||||
| Shutterfly, Inc.* | 850 | 36,278 | ||||||
| Meritage Homes Corp.* | 860 | 36,017 | ||||||
| Cooper Tire & Rubber Co. | 1,429 | 34,725 | ||||||
| Dorman Products, Inc.* | 564 | 33,311 | ||||||
| Lithia Motors, Inc. — Class A | 495 | 32,898 | ||||||
| Vitamin Shoppe, Inc.* | 682 | 32,409 | ||||||
| Group 1 Automotive, Inc. | 489 | 32,108 | ||||||
| KB Home | 1,886 | 32,043 | ||||||
| Rent-A-Center, Inc. — Class A | 1,204 | 32,025 | ||||||
| La-Z-Boy, Inc. | 1,175 | 31,842 | ||||||
| Skechers U.S.A., Inc. — Class A* | 870 | 31,790 | ||||||
| Five Below, Inc.* | 742 | 31,520 | ||||||
| Pinnacle Entertainment, Inc.* | 1,313 | 31,119 | ||||||
| Orient-Express Hotels Ltd. — Class A* | 2,156 | 31,068 | ||||||
| Hibbett Sports, Inc.* | 587 | 31,041 | ||||||
| Crocs, Inc.* | 1,981 | 30,904 | ||||||
| Express, Inc.* | 1,925 | 30,569 | ||||||
| Finish Line, Inc. — Class A | 1,110 | 30,070 | ||||||
| Bloomin’ Brands, Inc.* | 1,247 | 30,053 | ||||||
| Bob Evans Farms, Inc. | 594 | 29,718 | ||||||
| Restoration Hardware Holdings, Inc.* | 399 | 29,362 | ||||||
| DineEquity, Inc. | 375 | 29,276 | ||||||
| Sonic Corp.* | 1,269 | 28,921 | ||||||
| Buckle, Inc. | 625 | 28,625 | ||||||
| Drew Industries, Inc. | 517 | 28,021 | ||||||
| American Axle & Manufacturing | ||||||||
| Holdings, Inc.* | 1,512 | 28,002 | ||||||
| Churchill Downs, Inc. | 306 | 27,938 | ||||||
| Standard Pacific Corp.* | 3,338 | 27,739 | ||||||
| 112 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Jones Group, Inc. | 1,804 | $ | 27,006 | |||||
| G-III Apparel Group Ltd.* | 374 | 26,771 | ||||||
| Krispy Kreme Doughnuts, Inc.* | 1,478 | 26,205 | ||||||
| iRobot Corp.* | 636 | 26,108 | ||||||
| Children’s Place Retail Stores, Inc. | 524 | 26,100 | ||||||
| Gentherm, Inc.* | 749 | 26,005 | ||||||
| Brown Shoe Company, Inc. | 976 | 25,903 | ||||||
| Sturm Ruger & Company, Inc. | 431 | 25,774 | ||||||
| Matthews International Corp. — Class A | 623 | 25,425 | ||||||
| MDC Holdings, Inc. | 875 | 24,745 | ||||||
| Nexstar Broadcasting Group, | ||||||||
| Inc. — Class A | 659 | 24,726 | ||||||
| Tumi Holdings, Inc.* | 1,077 | 24,373 | ||||||
| Columbia Sportswear Co. | 293 | 24,216 | ||||||
| Ascent Capital Group, Inc. — Class A* | 314 | 23,723 | ||||||
| Oxford Industries, Inc. | 300 | 23,460 | ||||||
| LifeLock, Inc.* | 1,370 | 23,441 | ||||||
| Red Robin Gourmet Burgers, Inc.* | 323 | 23,153 | ||||||
| Interval Leisure Group, Inc. | 882 | 23,055 | ||||||
| Select Comfort Corp.* | 1,255 | 22,690 | ||||||
| Quiksilver, Inc.* | 2,983 | 22,402 | ||||||
| Fiesta Restaurant Group, Inc.* | 489 | 22,294 | ||||||
| Popeyes Louisiana Kitchen, Inc.* | 538 | 21,864 | ||||||
| International Speedway Corp. — Class A | 622 | 21,142 | ||||||
| Scholastic Corp. | 600 | 20,688 | ||||||
| Boyd Gaming Corp.* | 1,566 | 20,671 | ||||||
| Loral Space & Communications, Inc.* | 290 | 20,512 | ||||||
| National CineMedia, Inc. | 1,344 | 20,161 | ||||||
| Conn’s, Inc.* | 510 | 19,814 | ||||||
| Sonic Automotive, Inc. — Class A | 874 | 19,648 | ||||||
| MDC Partners, Inc. — Class A | 855 | 19,511 | ||||||
| Barnes & Noble, Inc.* | 907 | 18,956 | ||||||
| Core-Mark Holding Company, Inc. | 259 | 18,804 | ||||||
| Multimedia Games Holding | ||||||||
| Company, Inc.* | 645 | 18,731 | ||||||
| World Wrestling Entertainment, | ||||||||
| Inc. — Class A | 645 | 18,628 | ||||||
| Smith & Wesson Holding Corp.*,1 | 1,252 | 18,304 | ||||||
| BJ’s Restaurants, Inc.* | 555 | 18,154 | ||||||
| Movado Group, Inc. | 398 | 18,129 | ||||||
| Stage Stores, Inc. | 740 | 18,093 | ||||||
| Francesca’s Holdings Corp.* | 994 | 18,031 | ||||||
| Caesars Entertainment Corp.* | 911 | 17,318 | ||||||
| Winnebago Industries, Inc.* | 629 | 17,228 | ||||||
| Cato Corp. — Class A | 616 | 16,657 | ||||||
| Callaway Golf Co. | 1,602 | 16,372 | ||||||
| Chuy’s Holdings, Inc.* | 370 | 15,962 | ||||||
| Standard Motor Products, Inc. | 444 | 15,882 | ||||||
| Capella Education Co. | 249 | 15,724 | ||||||
| Modine Manufacturing Co.* | 1,063 | 15,573 | ||||||
| Carmike Cinemas, Inc.* | 515 | 15,378 | ||||||
| Zale Corp.* | 735 | 15,369 | ||||||
| Pep Boys-Manny Moe & Jack* | 1,196 | 15,213 | ||||||
| Steiner Leisure Ltd.* | 327 | 15,124 | ||||||
| ITT Educational Services, Inc.* | 525 | 15,057 | ||||||
| Fred’s, Inc. — Class A | 825 | 14,858 | ||||||
| Scientific Games Corp. — Class A* | 1,076 | 14,773 | ||||||
| Regis Corp. | 1,071 | 14,673 | ||||||
| Mattress Firm Holding Corp.* | 306 | 14,636 | ||||||
| Arctic Cat, Inc. | 298 | 14,241 | ||||||
| Ethan Allen Interiors, Inc. | 557 | 14,176 | ||||||
| Rentrak Corp.* | 233 | 14,045 | ||||||
| American Public Education, Inc.* | 399 | 13,997 | ||||||
| K12, Inc.* | 611 | 13,839 | ||||||
| Tuesday Morning Corp.* | 967 | 13,683 | ||||||
| Cumulus Media, Inc. — Class A* | 1,952 | 13,488 | ||||||
| FTD Companies, Inc.* | 421 | 13,392 | ||||||
| Denny’s Corp.* | 2,069 | 13,304 | ||||||
| Vera Bradley, Inc.* | 492 | 13,279 | ||||||
| Haverty Furniture Companies, Inc. | 445 | 13,217 | ||||||
| Universal Electronics, Inc.* | 335 | 12,861 | ||||||
| EW Scripps Co. — Class A* | 708 | 12,546 | ||||||
| Libbey, Inc.* | 476 | 12,375 | ||||||
| M/I Homes, Inc.* | 545 | 12,219 | ||||||
| Cavco Industries, Inc.* | 155 | 12,160 | ||||||
| Hovnanian Enterprises, Inc. — Class A* | 2,553 | 12,076 | ||||||
| Biglari Holdings, Inc.* | 24 | 11,700 | ||||||
| Gray Television, Inc.* | 1,128 | 11,697 | ||||||
| Strayer Education, Inc.* | 247 | 11,468 | ||||||
| Zumiez, Inc.* | 471 | 11,417 | ||||||
| Beazer Homes USA, Inc.* | 565 | 11,345 | ||||||
| LeapFrog Enterprises, Inc. — Class A* | 1,436 | 10,770 | ||||||
| Superior Industries International, Inc. | 523 | 10,716 | ||||||
| Bright Horizons Family Solutions, Inc.* | 265 | 10,364 | ||||||
| NutriSystem, Inc. | 647 | 9,750 | ||||||
| Blue Nile, Inc.* | 280 | 9,744 | ||||||
| Ruth’s Hospitality Group, Inc. | 804 | 9,720 | ||||||
| Career Education Corp.* | 1,245 | 9,288 | ||||||
| Aeropostale, Inc.* | 1,763 | 8,850 | ||||||
| Journal Communications, Inc. — Class A* | 998 | 8,842 | ||||||
| McClatchy Co. — Class A* | 1,373 | 8,815 | ||||||
| Stein Mart, Inc. | 619 | 8,672 | ||||||
| Harte-Hanks, Inc. | 972 | 8,592 | ||||||
| William Lyon Homes — Class A* | 306 | 8,449 | ||||||
| MarineMax, Inc.* | 549 | 8,339 | ||||||
| Destination Maternity Corp. | 304 | 8,330 | ||||||
| Entravision Communications | ||||||||
| Corp. — Class A | 1,238 | 8,295 | ||||||
| Federal-Mogul Corp.* | 441 | 8,251 | ||||||
| Media General, Inc. — Class A*,1 | 440 | 8,083 | ||||||
| Shoe Carnival, Inc. | 336 | 7,741 | ||||||
| Ruby Tuesday, Inc.* | 1,374 | 7,708 | ||||||
| Unifi, Inc.* | 333 | 7,683 | ||||||
| Remy International, Inc. | 320 | 7,558 | ||||||
| Stoneridge, Inc.* | 644 | 7,232 | ||||||
| Marcus Corp. | 415 | 6,931 | ||||||
| Diamond Resorts International, Inc.* | 404 | 6,848 | ||||||
| Del Frisco’s Restaurant Group, Inc.* | 242 | 6,752 | ||||||
| Nautilus, Inc.* | 696 | 6,702 | ||||||
| America’s Car-Mart, Inc.* | 182 | 6,683 | ||||||
| RetailMeNot, Inc.* | 207 | 6,624 | ||||||
| Tile Shop Holdings, Inc.* | 420 | 6,489 | ||||||
| Universal Technical Institute, Inc. | 500 | 6,475 | ||||||
| Carriage Services, Inc. — Class A | 352 | 6,420 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 113 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Black Diamond, Inc.* | 514 | $ | 6,286 | |||||
| Bravo Brio Restaurant Group, Inc.* | 438 | 6,180 | ||||||
| Big 5 Sporting Goods Corp. | 376 | 6,035 | ||||||
| PetMed Express, Inc. | 449 | 6,021 | ||||||
| NACCO Industries, Inc. — Class A | 110 | 5,963 | ||||||
| Sizmek, Inc.* | 545 | 5,793 | ||||||
| VOXX International Corp. — Class A* | 421 | 5,759 | ||||||
| Kirkland’s, Inc.* | 309 | 5,713 | ||||||
| Citi Trends, Inc.* | 346 | 5,636 | ||||||
| Christopher & Banks Corp.* | 820 | 5,420 | ||||||
| Saga Communications, Inc. — Class A | 109 | 5,416 | ||||||
| Entercom Communications | ||||||||
| Corp. — Class A* | 534 | 5,377 | ||||||
| TRI Pointe Homes, Inc.* | 330 | 5,356 | ||||||
| Destination XL Group, Inc.* | 945 | 5,330 | ||||||
| Noodles & Co.* | 134 | 5,289 | ||||||
| Central European Media Enterprises | ||||||||
| Ltd. — Class A* | 1,723 | 5,066 | ||||||
| Bridgepoint Education, Inc.* | 337 | 5,018 | ||||||
| CSS Industries, Inc. | 184 | 4,968 | ||||||
| Overstock.com, Inc.* | 252 | 4,964 | ||||||
| AH Belo Corp. — Class A | 428 | 4,956 | ||||||
| Speedway Motorsports, Inc. | 264 | 4,945 | ||||||
| bebe stores, Inc. | 783 | 4,792 | ||||||
| Morgans Hotel Group Co.* | 596 | 4,792 | ||||||
| RadioShack Corp.*,1 | 2,250 | 4,770 | ||||||
| Town Sports International Holdings, Inc. | 537 | 4,559 | ||||||
| Jamba, Inc.* | 377 | 4,522 | ||||||
| Sears Hometown and Outlet Stores, Inc.* | 190 | 4,494 | ||||||
| West Marine, Inc.* | 380 | 4,321 | ||||||
| ValueVision Media, Inc. — Class A* | 882 | 4,287 | ||||||
| Orbitz Worldwide, Inc.* | 543 | 4,257 | ||||||
| RG Barry Corp. | 218 | 4,116 | ||||||
| Lifetime Brands, Inc. | 230 | 4,108 | ||||||
| Fox Factory Holding Corp.* | 217 | 4,101 | ||||||
| Flexsteel Industries, Inc. | 109 | 4,101 | ||||||
| Weyco Group, Inc. | 150 | 4,053 | ||||||
| Winmark Corp. | 53 | 4,010 | ||||||
| Spartan Motors, Inc. | 772 | 3,968 | ||||||
| Global Sources Ltd.* | 425 | 3,808 | ||||||
| Carrols Restaurant Group, Inc.* | 531 | 3,807 | ||||||
| Hooker Furniture Corp. | 243 | 3,805 | ||||||
| Perry Ellis International, Inc.* | 274 | 3,765 | ||||||
| Systemax, Inc.* | 249 | 3,713 | ||||||
| Skullcandy, Inc.* | 402 | 3,690 | ||||||
| Isle of Capri Casinos, Inc.* | 481 | 3,689 | ||||||
| Bassett Furniture Industries, Inc. | 248 | 3,683 | ||||||
| Monarch Casino & Resort, Inc.* | 197 | 3,650 | ||||||
| Tower International, Inc.* | 134 | 3,647 | ||||||
| Culp, Inc. | 183 | 3,612 | ||||||
| Dex Media, Inc.* | 390 | 3,588 | ||||||
| Vitacost.com, Inc.* | 495 | 3,510 | ||||||
| Fuel Systems Solutions, Inc.* | 315 | 3,389 | ||||||
| Bon-Ton Stores, Inc. | 299 | 3,283 | ||||||
| 1-800-Flowers.com, Inc. — Class A* | 576 | 3,243 | ||||||
| ZAGG, Inc.* | 690 | 3,188 | ||||||
| JAKKS Pacific, Inc. | 436 | 3,148 | ||||||
| Daily Journal Corp.* | 18 | 3,113 | ||||||
| Pacific Sunwear of California, Inc.* | 1,040 | 3,089 | ||||||
| WCI Communities, Inc.* | 156 | 3,083 | ||||||
| Crown Media Holdings, Inc. — Class A* | 783 | 3,007 | ||||||
| Nathan’s Famous, Inc.* | 61 | 2,988 | ||||||
| Reading International, Inc. — Class A* | 394 | 2,888 | ||||||
| New York & Company, Inc.* | 645 | 2,832 | ||||||
| Johnson Outdoors, Inc. — Class A | 110 | 2,796 | ||||||
| JTH Holding, Inc. — Class A* | 100 | 2,774 | ||||||
| hhgregg, Inc.* | 288 | 2,768 | ||||||
| Luby’s, Inc.* | 447 | 2,754 | ||||||
| Education Management Corp.* | 546 | 2,659 | ||||||
| Wet Seal, Inc. — Class A* | 2,006 | 2,648 | ||||||
| Tilly’s, Inc. — Class A* | 219 | 2,562 | ||||||
| UCP, Inc. — Class A* | 170 | 2,560 | ||||||
| Corinthian Colleges, Inc.* | 1,787 | 2,466 | ||||||
| Martha Stewart Living Omnimedia, | ||||||||
| Inc. — Class A* | 544 | 2,464 | ||||||
| Einstein Noah Restaurant Group, Inc. | 149 | 2,453 | ||||||
| Shiloh Industries, Inc.* | 137 | 2,430 | ||||||
| Hemisphere Media Group, Inc.* | 190 | 2,392 | ||||||
| Salem Communications Corp. — Class A | 232 | 2,318 | ||||||
| Ignite Restaurant Group, Inc.* | 164 | 2,307 | ||||||
| ReachLocal, Inc.* | 234 | 2,305 | ||||||
| Blyth, Inc. | 205 | 2,200 | ||||||
| Lincoln Educational Services Corp. | 537 | 2,024 | ||||||
| Marine Products Corp. | 236 | 1,775 | ||||||
| Burlington Stores, Inc.* | 55 | 1,624 | ||||||
| Container Store Group, Inc.* | 47 | 1,596 | ||||||
| Houghton Mifflin Harcourt Co.* | 70 | 1,423 | ||||||
| Diversified Restaurant Holdings, Inc.* | 239 | 1,195 | ||||||
| ClubCorp Holdings, Inc. | 62 | 1,172 | ||||||
| Gordmans Stores, Inc. | 196 | 1,070 | ||||||
| Vince Holding Corp.* | 40 | 1,054 | ||||||
| EveryWare Global, Inc.* | 216 | 985 | ||||||
| Beasley Broadcasting Group, | ||||||||
| Inc. — Class A | 98 | 892 | ||||||
| Trans World Entertainment Corp. | 234 | 849 | ||||||
| American Apparel, Inc.*,1 | 1,305 | 654 | ||||||
| Potbelly Corp.* | 31 | 554 | ||||||
| LGI Homes, Inc.* | 32 | 552 | ||||||
| SFX Entertainment, Inc.* | 70 | 494 | ||||||
| Body Central Corp.* | 368 | 394 | ||||||
| Total Consumer Discretionary | 4,861,852 | |||||||
| ENERGY - 4.1% | ||||||||
| Targa Resources Corp. | 744 | 73,849 | ||||||
| Kodiak Oil & Gas Corp.* | 5,979 | 72,586 | ||||||
| Rosetta Resources, Inc.* | 1,380 | 64,280 | ||||||
| SemGroup Corp. — Class A | 944 | 62,002 | ||||||
| CARBO Ceramics, Inc. | 449 | 61,958 | ||||||
| Bristow Group, Inc. | 818 | 61,775 | ||||||
| Exterran Holdings, Inc. | 1,297 | 56,912 | ||||||
| Helix Energy Solutions Group, Inc.* | 2,389 | 54,899 | ||||||
| Carrizo Oil & Gas, Inc.* | 989 | 52,872 | ||||||
| PDC Energy, Inc.* | 802 | 49,933 | ||||||
| Stone Energy Corp.* | 1,128 | 47,342 | ||||||
| 114 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Western Refining, Inc. | 1,220 | $ | 47,093 | |||||
| Scorpio Tankers, Inc. | 4,156 | 41,435 | ||||||
| SEACOR Holdings, Inc.* | 454 | 39,235 | ||||||
| Energy XXI Bermuda Ltd. | 1,646 | 38,796 | ||||||
| Hornbeck Offshore Services, Inc.* | 809 | 33,824 | ||||||
| Magnum Hunter Resources Corp.* | 3,877 | 32,955 | ||||||
| Matador Resources Co.* | 1,308 | 32,033 | ||||||
| Key Energy Services, Inc.* | 3,430 | 31,693 | ||||||
| Bonanza Creek Energy, Inc.* | 667 | 29,615 | ||||||
| C&J Energy Services, Inc.* | 1,012 | 29,510 | ||||||
| Diamondback Energy, Inc.* | 433 | 29,145 | ||||||
| Cloud Peak Energy, Inc.* | 1,370 | 28,961 | ||||||
| Bill Barrett Corp.* | 1,099 | 28,134 | ||||||
| Forum Energy Technologies, Inc.* | 890 | 27,572 | ||||||
| Gulfmark Offshore, Inc. — Class A | 601 | 27,009 | ||||||
| EPL Oil & Gas, Inc.* | 671 | 25,901 | ||||||
| Sanchez Energy Corp.* | 859 | 25,452 | ||||||
| Comstock Resources, Inc. | 1,088 | 24,861 | ||||||
| Delek US Holdings, Inc. | 832 | 24,161 | ||||||
| Arch Coal, Inc. | 4,777 | 23,024 | ||||||
| Ship Finance International Ltd. | 1,257 | 22,588 | ||||||
| Halcon Resources Corp.*,1 | 5,215 | 22,581 | ||||||
| TETRA Technologies, Inc.* | 1,761 | 22,541 | ||||||
| Newpark Resources, Inc.* | 1,945 | 22,270 | ||||||
| Penn Virginia Corp.* | 1,241 | 21,705 | ||||||
| Alpha Natural Resources, Inc.* | 4,974 | 21,140 | ||||||
| Northern Oil and Gas, Inc.* | 1,434 | 20,965 | ||||||
| Matrix Service Co.* | 589 | 19,896 | ||||||
| Geospace Technologies Corp.* | 288 | 19,057 | ||||||
| Rex Energy Corp.* | 1,018 | 19,047 | ||||||
| Parker Drilling Co.* | 2,686 | 19,044 | ||||||
| Basic Energy Services, Inc.* | 671 | 18,392 | ||||||
| Pioneer Energy Services Corp.* | 1,398 | 18,104 | ||||||
| EXCO Resources, Inc.1 | 3,228 | 18,077 | ||||||
| Green Plains Renewable Energy, Inc. | 567 | 16,987 | ||||||
| Hercules Offshore, Inc.* | 3,595 | 16,501 | ||||||
| Approach Resources, Inc.* | 786 | 16,435 | ||||||
| Contango Oil & Gas Co.* | 335 | 15,993 | ||||||
| Nordic American Tankers Ltd. | 1,619 | 15,931 | ||||||
| Athlon Energy, Inc.* | 411 | 14,570 | ||||||
| GasLog Ltd. | 617 | 14,370 | ||||||
| Clayton Williams Energy, Inc.* | 127 | 14,352 | ||||||
| RigNet, Inc.* | 264 | 14,211 | ||||||
| Clean Energy Fuels Corp.*,1 | 1,538 | 13,750 | ||||||
| W&T Offshore, Inc. | 783 | 13,554 | ||||||
| Era Group, Inc.* | 454 | 13,307 | ||||||
| ION Geophysical Corp.* | 3,003 | 12,643 | ||||||
| Triangle Petroleum Corp.* | 1,532 | 12,624 | ||||||
| Tesco Corp.* | 677 | 12,525 | ||||||
| Solazyme, Inc.* | 1,073 | 12,458 | ||||||
| PHI, Inc.* | 279 | 12,343 | ||||||
| Synergy Resources Corp.* | 1,142 | 12,277 | ||||||
| Willbros Group, Inc.* | 904 | 11,408 | ||||||
| VAALCO Energy, Inc.* | 1,309 | 11,192 | ||||||
| Goodrich Petroleum Corp.* | 704 | 11,137 | ||||||
| Resolute Energy Corp.* | 1,527 | 10,994 | ||||||
| Swift Energy Co.*,1 | 980 | 10,545 | ||||||
| Rentech, Inc.* | 5,084 | 9,660 | ||||||
| Knightsbridge Tankers Ltd. | 683 | 9,255 | ||||||
| Emerald Oil, Inc.* | 1,273 | 8,555 | ||||||
| BPZ Resources, Inc.* | 2,656 | 8,446 | ||||||
| Natural Gas Services Group, Inc.* | 274 | 8,258 | ||||||
| Warren Resources, Inc.* | 1,639 | 7,867 | ||||||
| Alon USA Energy, Inc. | 526 | 7,858 | ||||||
| Westmoreland Coal Co.* | 263 | 7,832 | ||||||
| Vantage Drilling Co.* | 4,527 | 7,741 | ||||||
| Callon Petroleum Co.* | 900 | 7,533 | ||||||
| Quicksilver Resources, Inc.*,1 | 2,804 | 7,375 | ||||||
| Abraxas Petroleum Corp.* | 1,846 | 7,310 | ||||||
| PetroQuest Energy, Inc.* | 1,282 | 7,307 | ||||||
| REX American Resources Corp.* | 123 | 7,017 | ||||||
| Gulf Island Fabrication, Inc. | 321 | 6,937 | ||||||
| Gastar Exploration, Inc.* | 1,254 | 6,859 | ||||||
| Panhandle Oil and Gas, Inc. — Class A | 153 | 6,672 | ||||||
| Nuverra Environmental Solutions, Inc.* | 321 | 6,513 | ||||||
| Renewable Energy Group, Inc.* | 477 | 5,714 | ||||||
| Forest Oil Corp.* | 2,684 | 5,126 | ||||||
| Dawson Geophysical Co. | 178 | 4,986 | ||||||
| Teekay Tankers Ltd. — Class A | 1,402 | 4,963 | ||||||
| Evolution Petroleum Corp. | 382 | 4,863 | ||||||
| Frontline Ltd.* | 1,164 | 4,575 | ||||||
| Ur-Energy, Inc.* | 2,730 | 4,232 | ||||||
| Miller Energy Resources, Inc.* | 691 | 4,063 | ||||||
| Mitcham Industries, Inc.* | 289 | 4,029 | ||||||
| FX Energy, Inc.* | 1,204 | 4,021 | ||||||
| Midstates Petroleum Company, Inc.* | 748 | 4,009 | ||||||
| Bolt Technology Corp. | 196 | 3,875 | ||||||
| Jones Energy, Inc. — Class A* | 252 | 3,815 | ||||||
| Cal Dive International, Inc.* | 2,205 | 3,749 | ||||||
| Equal Energy Ltd. | 798 | 3,655 | ||||||
| Endeavour International Corp.* | 1,065 | 3,461 | ||||||
| Apco Oil and Gas International, Inc.* | 201 | 2,904 | ||||||
| Uranium Energy Corp.* | 1,930 | 2,548 | ||||||
| Adams Resources & Energy, Inc. | 43 | 2,491 | ||||||
| Isramco, Inc.* | 18 | 2,385 | ||||||
| Amyris, Inc.* | 592 | 2,208 | ||||||
| TGC Industries, Inc.* | 361 | 2,148 | ||||||
| Hallador Energy Co. | 191 | 1,633 | ||||||
| L&L Energy, Inc.*,†† | 932 | 1,566 | ||||||
| ZaZa Energy Corp.* | 838 | 630 | ||||||
| KiOR, Inc. — Class A* | 987 | 566 | ||||||
| Total Energy | 2,101,541 | |||||||
| MATERIALS - 3.6% | ||||||||
| PolyOne Corp. | 2,239 | 82,083 | ||||||
| Axiall Corp. | 1,571 | 70,569 | ||||||
| Sensient Technologies Corp. | 1,122 | 63,293 | ||||||
| Chemtura Corp.* | 2,215 | 56,017 | ||||||
| HB Fuller Co. | 1,130 | 54,556 | ||||||
| KapStone Paper and Packaging Corp.* | 1,842 | 53,123 | ||||||
| Louisiana-Pacific Corp.* | 3,144 | 53,039 | ||||||
| Minerals Technologies, Inc. | 784 | 50,615 | ||||||
| Olin Corp. | 1,806 | 49,864 | ||||||
| Commercial Metals Co. | 2,634 | 49,730 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 115 |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Worthington Industries, Inc. | 1,193 | $ | 45,632 | |||||
| Graphic Packaging Holding Co.* | 4,417 | 44,876 | ||||||
| Texas Industries, Inc.* | 489 | 43,824 | ||||||
| Stillwater Mining Co.* | 2,662 | 39,425 | ||||||
| SunCoke Energy, Inc.* | 1,577 | 36,018 | ||||||
| Balchem Corp. | 672 | 35,025 | ||||||
| Resolute Forest Products, Inc.* | 1,576 | 31,662 | ||||||
| Kaiser Aluminum Corp. | 428 | 30,568 | ||||||
| Globe Specialty Metals, Inc. | 1,454 | 30,272 | ||||||
| Schweitzer-Mauduit International, Inc. | 709 | 30,196 | ||||||
| Flotek Industries, Inc.* | 1,079 | 30,050 | ||||||
| Clearwater Paper Corp.* | 476 | 29,831 | ||||||
| Berry Plastics Group, Inc.* | 1,248 | 28,892 | ||||||
| AMCOL International Corp. | 623 | 28,521 | ||||||
| Innophos Holdings, Inc. | 490 | 27,783 | ||||||
| Stepan Co. | 427 | 27,567 | ||||||
| Calgon Carbon Corp.* | 1,223 | 26,698 | ||||||
| PH Glatfelter Co. | 967 | 26,322 | ||||||
| A. Schulman, Inc. | 662 | 24,004 | ||||||
| Innospec, Inc. | 526 | 23,791 | ||||||
| OM Group, Inc. | 715 | 23,752 | ||||||
| Hecla Mining Co. | 7,498 | 23,019 | ||||||
| Quaker Chemical Corp. | 292 | 23,018 | ||||||
| Ferro Corp.* | 1,635 | 22,334 | ||||||
| AK Steel Holding Corp.* | 3,068 | 22,151 | ||||||
| Headwaters, Inc.* | 1,642 | 21,691 | ||||||
| Coeur Mining, Inc.* | 2,287 | 21,246 | ||||||
| RTI International Metals, Inc.* | 701 | 19,474 | ||||||
| Koppers Holdings, Inc. | 465 | 19,172 | ||||||
| Kraton Performance Polymers, Inc.* | 732 | 19,134 | ||||||
| Intrepid Potash, Inc.* | 1,228 | 18,985 | ||||||
| Neenah Paper, Inc. | 362 | 18,723 | ||||||
| US Silica Holdings, Inc. | 486 | 18,551 | ||||||
| Horsehead Holding Corp.* | 1,088 | 18,300 | ||||||
| Schnitzer Steel Industries, Inc. — Class A | 580 | 16,733 | ||||||
| Deltic Timber Corp. | 251 | 16,373 | ||||||
| LSB Industries, Inc.* | 432 | 16,165 | ||||||
| Molycorp, Inc.*,1 | 3,351 | 15,716 | ||||||
| Materion Corp. | 461 | 15,642 | ||||||
| Century Aluminum Co.* | 1,156 | 15,271 | ||||||
| Haynes International, Inc. | 273 | 14,742 | ||||||
| Wausau Paper Corp. | 1,117 | 14,219 | ||||||
| American Vanguard Corp. | 643 | 13,921 | ||||||
| Tredegar Corp. | 552 | 12,702 | ||||||
| Myers Industries, Inc. | 632 | 12,589 | ||||||
| Advanced Emissions Solutions, Inc.* | 480 | 11,779 | ||||||
| OMNOVA Solutions, Inc.* | 1,055 | 10,951 | ||||||
| Walter Energy, Inc.1 | 1,412 | 10,675 | ||||||
| Allied Nevada Gold Corp.* | 2,338 | 10,076 | ||||||
| FutureFuel Corp. | 491 | 9,967 | ||||||
| Zep, Inc. | 509 | 9,009 | ||||||
| Boise Cascade Co.* | 277 | 7,933 | ||||||
| Hawkins, Inc. | 209 | 7,679 | ||||||
| US Concrete, Inc.* | 320 | 7,520 | ||||||
| Taminco Corp.* | 355 | 7,459 | ||||||
| Landec Corp.* | 581 | 6,484 | ||||||
| AM Castle & Co.* | 393 | 5,773 | ||||||
| Olympic Steel, Inc. | 200 | 5,740 | ||||||
| Universal Stainless & Alloy Products, Inc.* | 153 | 5,167 | ||||||
| Arabian American Development Co.* | 448 | 4,861 | ||||||
| Chase Corp. | 145 | 4,572 | ||||||
| Paramount Gold and Silver Corp.* | 3,102 | 3,815 | ||||||
| Gold Resource Corp. | 746 | 3,566 | ||||||
| AEP Industries, Inc.* | 93 | 3,450 | ||||||
| Noranda Aluminum Holding Corp. | 756 | 3,107 | ||||||
| Penford Corp.* | 214 | 3,073 | ||||||
| UFP Technologies, Inc.* | 121 | 2,948 | ||||||
| KMG Chemicals, Inc. | 179 | 2,807 | ||||||
| Handy & Harman Ltd.* | 125 | 2,751 | ||||||
| Midway Gold Corp.* | 2,530 | 2,657 | ||||||
| United States Lime & Minerals, Inc. | 46 | 2,590 | ||||||
| Marrone Bio Innovations, Inc.* | 118 | 1,648 | ||||||
| General Moly, Inc.* | 1,290 | 1,277 | ||||||
| GSE Holding, Inc.* | 173 | 50 | ||||||
| Total Materials | 1,836,853 | |||||||
| CONSUMER STAPLES - 2.7% | ||||||||
| Rite Aid Corp.* | 16,446 | 103,116 | ||||||
| Hain Celestial Group, Inc.* | 862 | 78,848 | ||||||
| United Natural Foods, Inc.* | 1,107 | 78,509 | ||||||
| Darling International, Inc.* | 3,323 | 66,526 | ||||||
| TreeHouse Foods, Inc.* | 820 | 59,033 | ||||||
| Casey’s General Stores, Inc. | 861 | 58,195 | ||||||
| Boston Beer Company, Inc. — Class A* | 185 | 45,275 | ||||||
| PriceSmart, Inc. | 425 | 42,895 | ||||||
| Lancaster Colony Corp. | 415 | 41,259 | ||||||
| Post Holdings, Inc.* | 737 | 40,623 | ||||||
| Sanderson Farms, Inc. | 515 | 40,422 | ||||||
| Spectrum Brands Holdings, Inc. | 483 | 38,495 | ||||||
| Andersons, Inc. | 631 | 37,380 | ||||||
| B&G Foods, Inc. — Class A | 1,189 | 35,801 | ||||||
| J&J Snack Foods Corp. | 333 | 31,958 | ||||||
| SUPERVALU, Inc.* | 4,568 | 31,245 | ||||||
| Vector Group Ltd. | 1,426 | 30,716 | ||||||
| Snyder’s-Lance, Inc. | 1,070 | 30,163 | ||||||
| Universal Corp. | 523 | 29,230 | ||||||
| Pilgrim’s Pride Corp.* | 1,363 | 28,514 | ||||||
| WD-40 Co. | 351 | 27,227 | ||||||
| Susser Holdings Corp.* | 406 | 25,363 | ||||||
| Boulder Brands, Inc.* | 1,337 | 23,558 | ||||||
| Fresh Del Monte Produce, Inc. | 852 | 23,490 | ||||||
| Cal-Maine Foods, Inc. | 336 | 21,094 | ||||||
| Spartan Stores, Inc. | 823 | 19,102 | ||||||
| Seaboard Corp.* | 7 | 18,350 | ||||||
| Diamond Foods, Inc.* | 499 | 17,430 | ||||||
| Elizabeth Arden, Inc.* | 577 | 17,026 | ||||||
| Inter Parfums, Inc. | 370 | 13,398 | ||||||
| Tootsie Roll Industries, Inc. | 446 | 13,353 | ||||||
| Chiquita Brands International, Inc.* | 1,045 | 13,010 | ||||||
| Annie’s, Inc.* | 310 | 12,459 | ||||||
| Weis Markets, Inc. | 248 | 12,214 | ||||||
| USANA Health Sciences, Inc.* | 134 | 10,096 | ||||||
| Calavo Growers, Inc. | 270 | 9,607 | ||||||
| Harbinger Group, Inc.* | 744 | 9,099 | ||||||
| 116 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| Coca-Cola Bottling Company Consolidated | 105 | $ | 8,922 | |||||
| Medifast, Inc.* | 306 | 8,902 | ||||||
| Natural Grocers by Vitamin Cottage, Inc.* | 201 | 8,776 | ||||||
| Pantry, Inc.* | 530 | 8,130 | ||||||
| Chefs’ Warehouse, Inc.* | 371 | 7,939 | ||||||
| Central Garden and Pet Co. — Class A* | 943 | 7,799 | ||||||
| Revlon, Inc. — Class A* | 254 | 6,490 | ||||||
| Ingles Markets, Inc. — Class A | 264 | 6,288 | ||||||
| Alliance One International, Inc.* | 1,973 | 5,761 | ||||||
| Seneca Foods Corp. — Class A* | 183 | 5,761 | ||||||
| Omega Protein Corp.* | 447 | 5,395 | ||||||
| Limoneira Co. | 225 | 5,103 | ||||||
| Nutraceutical International Corp.* | 193 | 5,016 | ||||||
| National Beverage Corp.* | 250 | 4,878 | ||||||
| Inventure Foods, Inc.* | 319 | 4,460 | ||||||
| John B Sanfilippo & Son, Inc. | 187 | 4,305 | ||||||
| Orchids Paper Products Co. | 130 | 3,978 | ||||||
| Roundy’s, Inc. | 562 | 3,867 | ||||||
| Female Health Co. | 487 | 3,779 | ||||||
| Oil-Dri Corporation of America | 107 | 3,696 | ||||||
| Village Super Market, Inc. — Class A | 138 | 3,643 | ||||||
| Craft Brew Alliance, Inc.* | 237 | 3,619 | ||||||
| Nature’s Sunshine Products, Inc. | 246 | 3,390 | ||||||
| Lifevantage Corp.* | 2,304 | 3,018 | ||||||
| Star Scientific, Inc.* | 3,755 | 2,947 | ||||||
| Fairway Group Holdings Corp.* | 353 | 2,697 | ||||||
| Alico, Inc. | 69 | 2,601 | ||||||
| Synutra International, Inc.* | 387 | 2,589 | ||||||
| Farmer Bros Co.* | 127 | 2,502 | ||||||
| Griffin Land & Nurseries, Inc. | 62 | 1,875 | ||||||
| Lifeway Foods, Inc. | 96 | 1,411 | ||||||
| Total Consumer Staples | 1,383,616 | |||||||
| UTILITIES - 2.3% | ||||||||
| Cleco Corp. | 1,357 | 68,638 | ||||||
| IDACORP, Inc. | 1,127 | 62,515 | ||||||
| Piedmont Natural Gas Company, Inc. | 1,703 | 60,268 | ||||||
| Black Hills Corp. | 997 | 57,478 | ||||||
| UNS Energy Corp. | 935 | 56,128 | ||||||
| Dynegy, Inc.* | 2,248 | 56,065 | ||||||
| Southwest Gas Corp. | 1,048 | 56,016 | ||||||
| Portland General Electric Co. | 1,701 | 55,010 | ||||||
| PNM Resources, Inc. | 1,797 | 48,573 | ||||||
| ALLETE, Inc. | 903 | 47,335 | ||||||
| UIL Holdings Corp. | 1,275 | 46,933 | ||||||
| New Jersey Resources Corp. | 942 | 46,912 | ||||||
| WGL Holdings, Inc. | 1,160 | 46,470 | ||||||
| Avista Corp. | 1,354 | 41,500 | ||||||
| NorthWestern Corp. | 851 | 40,363 | ||||||
| South Jersey Industries, Inc. | 719 | 40,329 | ||||||
| Laclede Group, Inc. | 731 | 34,467 | ||||||
| El Paso Electric Co. | 902 | 32,228 | ||||||
| MGE Energy, Inc. | 783 | 30,717 | ||||||
| American States Water Co. | 871 | 28,124 | ||||||
| Northwest Natural Gas Co. | 606 | 26,670 | ||||||
| California Water Service Group | 1,078 | 25,807 | ||||||
| Otter Tail Corp. | 812 | 25,001 | ||||||
| Empire District Electric Co. | 962 | 23,396 | ||||||
| NRG Yield, Inc. — Class A | 510 | 20,160 | ||||||
| Chesapeake Utilities Corp. | 215 | 13,579 | ||||||
| Ormat Technologies, Inc. | 400 | 12,004 | ||||||
| Unitil Corp. | 311 | 10,213 | ||||||
| SJW Corp. | 345 | 10,198 | ||||||
| Connecticut Water Service, Inc. | 239 | 8,167 | ||||||
| Atlantic Power Corp. | 2,700 | 7,830 | ||||||
| Middlesex Water Co. | 352 | 7,681 | ||||||
| York Water Co. | 290 | 5,916 | ||||||
| Consolidated Water Company Ltd. | 331 | 4,363 | ||||||
| Artesian Resources Corp. — Class A | 165 | 3,706 | ||||||
| Delta Natural Gas Company, Inc. | 151 | 3,129 | ||||||
| Genie Energy Ltd. — Class B* | 286 | 2,851 | ||||||
| Pure Cycle Corp.* | 385 | 2,329 | ||||||
| Pattern Energy Group, Inc. | 62 | 1,682 | ||||||
| Total Utilities | 1,170,751 | |||||||
| TELECOMMUNICATION SERVICES - 0.5% | ||||||||
| Cogent Communications Group, Inc. | 1,062 | 37,733 | ||||||
| 8x8, Inc.* | 1,874 | 20,258 | ||||||
| Consolidated Communications Holdings, Inc. | 905 | 18,108 | ||||||
| Shenandoah Telecommunications Co. | 535 | 17,275 | ||||||
| Cincinnati Bell, Inc.* | 4,680 | 16,193 | ||||||
| Vonage Holdings Corp.* | 3,503 | 14,958 | ||||||
| Atlantic Tele-Network, Inc. | 203 | 13,382 | ||||||
| Premiere Global Services, Inc.* | 1,086 | 13,097 | ||||||
| inContact, Inc.* | 1,206 | 11,578 | ||||||
| Iridium Communications, Inc.* | 1,441 | 10,822 | ||||||
| Inteliquent, Inc. | 733 | 10,650 | ||||||
| USA Mobility, Inc. | 492 | 8,940 | ||||||
| magicJack VocalTec Ltd.* | 413 | 8,768 | ||||||
| General Communication, Inc. — Class A* | 713 | 8,135 | ||||||
| Hawaiian Telcom Holdco, Inc.* | 230 | 6,553 | ||||||
| FairPoint Communications, Inc.* | 468 | 6,365 | ||||||
| ORBCOMM, Inc.* | 881 | 6,035 | ||||||
| IDT Corp. — Class B | 348 | 5,798 | ||||||
| Lumos Networks Corp. | 348 | 4,653 | ||||||
| NTELOS Holdings Corp. | 342 | 4,617 | ||||||
| NII Holdings, Inc.* | 3,878 | 4,615 | ||||||
| Cbeyond, Inc.* | 605 | 4,386 | ||||||
| HickoryTech Corp. | 306 | 3,914 | ||||||
| Towerstream Corp.* | 1,491 | 3,504 | ||||||
| Boingo Wireless, Inc.* | 416 | 2,820 | ||||||
| Straight Path Communications, | ||||||||
| Inc. — Class B* | 176 | 1,295 | ||||||
| RingCentral, Inc. — Class A* | 31 | 561 | ||||||
| Total Telecommunication Services | 265,013 | |||||||
| Total Common Stocks | ||||||||
| (Cost $26,054,846) | 37,176,630 | |||||||
| WARRANTS†† - 0.0% | ||||||||
| Tejon Ranch Co. | ||||||||
| $10.50, 08/31/16*,† | 29 | 106 | ||||||
| Magnum Hunter Resources Corp. | ||||||||
| $8.50, 04/15/16*,1 | 444 | — | ||||||
| Total Warrants | ||||||||
| (Cost $150) | 106 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 117 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| RUSSELL 2000® FUND |
| Shares | Value | |||||||
| RIGHTS† - 0.0% | ||||||||
| Leap Wireless International | ||||||||
| Expires 03/17/15*,†† | 1,211 | $ | 3,051 | |||||
| Cubist Pharmaceuticals, Inc. | ||||||||
| Expires 12/31/16*,† | 1,197 | 778 | ||||||
| Omthera Pharmaceuticals, Inc. | ||||||||
| Expires 12/31/20*,†† | 86 | 52 | ||||||
| Central European Media Enterprises Ltd. | ||||||||
| Expires 04/25/14*,†† | 27 | — | ||||||
| Total Rights | ||||||||
| (Cost $3,801) | 3,881 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 22.2% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 6,117,238 | 6,117,238 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,581,262 | 2,581,262 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,745,538 | 1,745,538 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 813,274 | 813,274 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $11,257,312) | 11,257,312 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.5% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 127,807 | 127,807 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 114,042 | 114,042 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 21,499 | 21,499 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $263,348) | 263,348 | |||||||
| Total Investments - 96.2% | ||||||||
| (Cost $37,579,457) | $ | 48,701,277 | ||||||
| Other Assets & Liabilities, net - 3.8% | 1,947,790 | |||||||
| Total Net Assets - 100.0% | $ | 50,649,067 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (loss) | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Russell 2000 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $7,353,360) | 63 | $ | (70,420 | ) | ||||
| UNITS | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Goldman Sachs International | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $2,653,847) | 2,262 | $ | 41,015 | |||||
| Barclays Bank plc | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $753,830) | 643 | 13,646 | ||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $3,147,201) | 2,683 | 2,407 | ||||||
| (Total Notional Value | ||||||||
| $6,554,878) | $ | 57,068 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
| †† | Value determined based on Level 2 inputs, unless otherwise noted — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Total Return based on Russell 2000 Index +/- financing at a variable rate. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| 118 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® FUND
STATEMENT OF ASSETS
AND LIABILITIES
March 31, 2014
| Assets: | ||||
| Investments, at value - including $257,689 of | ||||
| securities loaned | ||||
| (cost $26,058,797) | $ | 37,180,617 | ||
| Repurchase agreements, at value | ||||
| (cost $11,520,660) | 11,520,660 | |||
| Total investments | ||||
| (cost $37,579,457) | 48,701,277 | |||
| Foreign currency, at value | ||||
| (cost $81) | 81 | |||
| Segregated cash with broker | 1,671,454 | |||
| Unrealized appreciation on swap agreements | 57,068 | |||
| Receivables: | ||||
| Fund shares sold | 1,342,010 | |||
| Variation margin | 119,206 | |||
| Dividends | 37,264 | |||
| Securities lending income | 1,436 | |||
| Interest | 8 | |||
| Total assets | 51,929,804 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 909,839 | |||
| Upon return of securities loaned | 263,348 | |||
| Management fees | 29,313 | |||
| Distribution and service fees | 11,722 | |||
| Transfer agent and administrative fees | 9,771 | |||
| Portfolio accounting fees | 5,863 | |||
| Swap settlement | 5,347 | |||
| Miscellaneous | 45,534 | |||
| Total liabilities | 1,280,737 | |||
| Net assets | $ | 50,649,067 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 41,233,014 | ||
| Accumulated net investment loss | (118,275 | ) | ||
| Accumulated net realized loss on investments | (1,574,140 | ) | ||
| Net unrealized appreciation on investments | 11,108,468 | |||
| Net assets | $ | 50,649,067 | ||
| A-Class: | ||||
| Net assets | $ | 3,219,087 | ||
| Capital shares outstanding | 85,169 | |||
| Net asset value per share | $ | 37.80 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 39.69 | ||
| C-Class: | ||||
| Net assets | $ | 3,244,741 | ||
| Capital shares outstanding | 91,759 | |||
| Net asset value per share | $ | 35.36 | ||
| H-Class: | ||||
| Net assets | $ | 44,185,239 | ||
| Capital shares outstanding | 1,171,060 | |||
| Net asset value per share | $ | 37.73 |
STATEMENT OF
OPERATIONS
Year Ended March 31, 2014
| Investment income: | ||||
| Dividends (net of foreign withholding tax of $482) | $ | 610,393 | ||
| Income from securities lending, net | 33,011 | |||
| Interest | 8,383 | |||
| Total investment income | 651,787 | |||
| Expenses: | ||||
| Management fees | 598,518 | |||
| Transfer agent and administrative fees | 199,507 | |||
| Distribution and service fees: | ||||
| A-Class | 11,543 | |||
| C-Class | 29,833 | |||
| H-Class | 180,509 | |||
| Portfolio accounting fees | 100,941 | |||
| Custodian fees | 8,885 | |||
| Trustees’ fees* | 7,968 | |||
| Line of credit interest expense | 92 | |||
| Miscellaneous | 158,329 | |||
| Total expenses | 1,296,125 | |||
| Net investment loss | (644,338 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 6,437,240 | |||
| Swap agreements | 761,558 | |||
| Futures contracts | 2,359,368 | |||
| Foreign currency | (7 | ) | ||
| Net realized gain | 9,558,159 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 2,083,427 | |||
| Swap agreements | (8,960 | ) | ||
| Futures contracts | (89,644 | ) | ||
| Net change in unrealized appreciation (depreciation) | 1,984,823 | |||
| Net realized and unrealized gain | 11,542,982 | |||
| Net increase in net assets resulting from operations | $ | 10,898,644 |
* 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 | 119 |
RUSSELL 2000® FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) in Net Assets From Operations: | ||||||||
| Net investment loss | $ | (644,338 | ) | $ | (297,416 | ) | ||
| Net realized gain (loss) on investments | 9,558,159 | (622,314 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 1,984,823 | 4,499,506 | ||||||
| Net increase in net assets resulting from operations | 10,898,644 | 3,579,776 | ||||||
| Distributions to shareholders from: | ||||||||
| Net realized gains | ||||||||
| A-Class | (144,615 | ) | — | |||||
| C-Class | (188,715 | ) | — | |||||
| H-Class | (2,108,628 | ) | — | |||||
| Total distributions to shareholders | (2,441,958 | ) | — | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 48,530,276 | 19,300,015 | ||||||
| C-Class | 36,005,575 | 40,043,936 | ||||||
| H-Class | 553,111,336 | 360,726,416 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 140,867 | — | ||||||
| C-Class | 182,177 | — | ||||||
| H-Class | 2,078,107 | — | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (49,593,502 | ) | (16,932,532 | ) | ||||
| C-Class | (35,912,850 | ) | (43,861,024 | ) | ||||
| H-Class | (619,725,426 | ) | (325,882,691 | ) | ||||
| Net increase (decrease) from capital share transactions | (65,183,440 | ) | 33,394,120 | |||||
| Net increase (decrease) in net assets | (56,726,754 | ) | 36,973,896 | |||||
| Net assets: | ||||||||
| Beginning of year | 107,375,821 | 70,401,925 | ||||||
| End of year | $ | 50,649,067 | $ | 107,375,821 | ||||
| Accumulated net investment loss at end of year | $ | (118,275 | ) | $ | (204,821 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 1,368,170 | 678,363 | ||||||
| C-Class | 1,080,807 | 1,497,023 | ||||||
| H-Class | 15,698,082 | 12,748,953 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 3,960 | — | ||||||
| C-Class | 5,461 | — | ||||||
| H-Class | 58,522 | — | ||||||
| Shares redeemed | ||||||||
| A-Class | (1,402,362 | ) | (586,707 | ) | ||||
| C-Class | (1,079,626 | ) | (1,645,575 | ) | ||||
| H-Class | (17,719,218 | ) | (11,868,039 | ) | ||||
| Net increase (decrease) in shares | (1,986,204 | ) | 824,018 | |||||
| 120 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RUSSELL 2000® 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.26 | $ | 28.20 | $ | 28.54 | $ | 22.96 | $ | 14.31 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.27 | ) | (.13 | ) | (.23 | ) | (.24 | ) | (.15 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.54 | 4.19 | (.11 | ) | 5.82 | 8.80 | ||||||||||||||
| Total from investment operations | 7.27 | 4.06 | (.34 | ) | 5.58 | 8.65 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.73 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.73 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 37.80 | $ | 32.26 | $ | 28.20 | $ | 28.54 | $ | 22.96 | ||||||||||
| Total Returnb | 22.87 | % | 14.40 | % | (1.19 | %) | 24.30 | % | 60.45 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,219 | $ | 3,723 | $ | 670 | $ | 755 | $ | 1,313 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.77 | %) | (0.44 | %) | (0.89 | %) | (1.01 | %) | (0.81 | %) | ||||||||||
| Total expenses | 1.60 | % | 1.55 | % | 1.58 | % | 1.56 | % | 1.57 | % | ||||||||||
| Portfolio turnover rate | 267 | % | 160 | % | 121 | % | 284 | % | 370 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 30.54 | $ | 26.90 | $ | 27.46 | $ | 22.29 | $ | 14.00 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.48 | ) | (.31 | ) | (.46 | ) | (.47 | ) | (.34 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.03 | 3.95 | (.10 | ) | 5.64 | 8.63 | ||||||||||||||
| Total from investment operations | 6.55 | 3.64 | (.56 | ) | 5.17 | 8.29 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.73 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.73 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 35.36 | $ | 30.54 | $ | 26.90 | $ | 27.46 | $ | 22.29 | ||||||||||
| Total Returnb | 21.78 | % | 13.53 | % | (2.04 | %) | 23.25 | % | 59.21 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,245 | $ | 2,599 | $ | 6,285 | $ | 7,068 | $ | 2,860 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.47 | %) | (1.19 | %) | (1.83 | %) | (1.87 | %) | (1.56 | %) | ||||||||||
| Total expenses | 2.37 | % | 2.31 | % | 2.34 | % | 2.31 | % | 2.30 | % | ||||||||||
| Portfolio turnover rate | 267 | % | 160 | % | 121 | % | 284 | % | 370 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 121 |
RUSSELL 2000® FUND
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.25 | $ | 28.16 | $ | 28.52 | $ | 22.93 | $ | 14.31 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.27 | ) | (.12 | ) | (.22 | ) | (.27 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.48 | 4.21 | (.14 | ) | 5.86 | 8.78 | ||||||||||||||
| Total from investment operations | 7.21 | 4.09 | (.36 | ) | 5.59 | 8.62 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.73 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.73 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 37.73 | $ | 32.25 | $ | 28.16 | $ | 28.52 | $ | 22.93 | ||||||||||
| Total Returnb | 22.69 | % | 14.52 | % | (1.26 | %) | 24.32 | % | 60.24 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 44,185 | $ | 101,053 | $ | 63,447 | $ | 32,389 | $ | 32,790 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.78 | %) | (0.42 | %) | (0.83 | %) | (1.09 | %) | (0.83 | %) | ||||||||||
| Total expenses | 1.59 | % | 1.52 | % | 1.58 | % | 1.57 | % | 1.56 | % | ||||||||||
| Portfolio turnover rate | 267 | % | 160 | % | 121 | % | 284 | % | 370 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| 122 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 123 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, 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 H-Class returned -23.46% while the Russell 2000 Index returned 24.90% over the same time period.
Among sectors, the biggest performance contributors to the underlying index during the period were Information Technology and Health Care. No sector detracted. Telecommunication Services contributed least to performance of the underlying index for the period, followed by the Utilities sector.
SunEdison, Inc., Isis Pharmaceuticals, Inc. and Rite Aid Corp. were the largest contributors to performance of the underlying index for the year. Axiall Corp., Infinity Pharmaceuticals, Inc. and Coeur Mining, Inc. were the leading detractors from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates:
| A-Class | March 31, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 124 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||
| 1 Year | 5 Year | 10 Year | ||||
| A-Class Shares | -23.59% | -25.52% | -12.86% | |||
| A-Class Shares with sales charge† | -27.23% | -26.24% | -13.29% | |||
| C-Class Shares | -24.08% | -26.06% | -13.49% | |||
| C-Class Shares with CDSC‡ | -24.83% | -26.06% | -13.49% | |||
| H-Class Shares | -23.46% | -25.49% | -12.84% | |||
| Russell 2000 Index | 24.90% | 24.31% | 8.53% |
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 125 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE RUSSELL 2000® STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 84.9% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 9,024,815 | $ | 9,024,815 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 3,808,159 | 3,808,159 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 2,575,207 | 2,575,207 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,199,831 | 1,199,831 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $16,608,012) | 16,608,012 | |||||||
| Total Investments - 84.9% | ||||||||
| (Cost $16,608,012) | $ | 16,608,012 | ||||||
| Other Assets & Liabilities, net - 15.1% | 2,953,230 | |||||||
| Total Net Assets - 100.0% | $ | 19,561,242 | ||||||
| Unrealized | ||||||||
| Units | Gain (Loss) | |||||||
| OTC EQUITY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/28/142 | ||||||||
| (Notional Value $7,509,787) | 6,402 | $ | 9,700 | |||||
| Barclays Bank plc | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/30/142 | ||||||||
| (Notional Value $5,439,165) | 4,637 | (98,436 | ) | |||||
| Goldman Sachs International | ||||||||
| April 2014 Russell 2000 Index Swap, | ||||||||
| Terminating 04/29/142 | ||||||||
| (Notional Value $6,554,918) | 5,588 | (101,867 | ) | |||||
| (Total Notional Value | ||||||||
| $19,503,870) | $ | (190,603 | ) | |||||
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreements — See Note 5. |
| 2 | Total Return based on Russell 2000 Index +/- financing at a variable rate. |
| plc — Public Limited Company |
| 126 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE RUSSELL 2000® STRATEGY FUND
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $16,608,012) | $ | 16,608,012 | ||
| Segregated cash with broker | 2,997,490 | |||
| Unrealized appreciation on swap agreements | 9,700 | |||
| Receivables: | ||||
| Fund shares sold | 356,001 | |||
| Interest | 11 | |||
| Total assets | 19,971,214 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 200,303 | |||
| Payable for: | ||||
| Fund shares redeemed | 166,186 | |||
| Management fees | 13,437 | |||
| Swap settlement | 9,027 | |||
| Distribution and service fees | 4,109 | |||
| Transfer agent and administrative fees | 3,733 | |||
| Portfolio accounting fees | 1,493 | |||
| Miscellaneous | 11,684 | |||
| Total liabilities | 409,972 | |||
| Net assets | $ | 19,561,242 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 83,763,873 | ||
| Accumulated net investment loss | (62,483 | ) | ||
| Accumulated net realized loss on investments | (63,949,545 | ) | ||
| Net unrealized depreciation on investments | (190,603 | ) | ||
| Net assets | $ | 19,561,242 | ||
| A-Class: | ||||
| Net assets | $ | 7,302,176 | ||
| Capital shares outstanding | 221,208 | |||
| Net asset value per share | $ | 33.01 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 34.66 | ||
| C-Class: | ||||
| Net assets | $ | 567,893 | ||
| Capital shares outstanding | 18,566 | |||
| Net asset value per share | $ | 30.59 | ||
| H-Class: | ||||
| Net assets | $ | 11,691,173 | ||
| Capital shares outstanding | 353,125 | |||
| Net asset value per share | $ | 33.11 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Interest | $ | 4,466 | ||
| Total investment income | 4,466 | |||
| Expenses: | ||||
| Management fees | 157,001 | |||
| Transfer agent and administrative fees | 43,611 | |||
| Distribution and service fees: | ||||
| A-Class | 14,238 | |||
| C-Class | 5,362 | |||
| H-Class | 28,033 | |||
| Portfolio accounting fees | 17,444 | |||
| Custodian fees | 2,098 | |||
| Trustees’ fees* | 1,627 | |||
| Miscellaneous | 34,389 | |||
| Total expenses | 303,803 | |||
| Net investment loss | (299,337 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | (4,505,218 | ) | ||
| Futures contracts | (1,776,288 | ) | ||
| Net realized loss | (6,281,506 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Swap agreements | (167,759 | ) | ||
| Futures contracts | 72 | |||
| Net change in unrealized appreciation (depreciation) | (167,687 | ) | ||
| Net realized and unrealized loss | (6,449,193 | ) | ||
| Net decrease in net assets resulting from operations | $ | (6,748,530 | ) | |
* 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 |
INVERSE RUSSELL 2000® STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (299,337 | ) | $ | (349,622 | ) | ||
| Net realized loss on investments | (6,281,506 | ) | (4,103,057 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | (167,687 | ) | 43,338 | |||||
| Net decrease in net assets resulting from operations | (6,748,530 | ) | (4,409,341 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 23,165,472 | 4,824,492 | ||||||
| C-Class | 3,936,557 | 1,964,837 | ||||||
| H-Class | 92,194,810 | 105,081,288 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (14,117,385 | ) | (4,493,515 | ) | ||||
| C-Class | (3,635,185 | ) | (2,258,787 | ) | ||||
| H-Class | (89,100,370 | ) | (105,574,736 | ) | ||||
| Net increase (decrease) from capital share transactions | 12,443,899 | (456,421 | ) | |||||
| Net increase (decrease) in net assets | 5,695,369 | (4,865,762 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 13,865,873 | 18,731,635 | ||||||
| End of year | $ | 19,561,242 | $ | 13,865,873 | ||||
| Accumulated net investment loss at end of year | $ | (62,483 | ) | $ | (49,409 | ) | ||
| Capital Share Activity:* | ||||||||
| Shares sold | ||||||||
| A-Class | 617,161 | 92,885 | ||||||
| C-Class | 116,767 | 39,130 | ||||||
| H-Class | 2,419,872 | 1,965,767 | ||||||
| Shares redeemed | ||||||||
| A-Class | (410,651 | ) | (89,877 | ) | ||||
| C-Class | (108,355 | ) | (45,972 | ) | ||||
| H-Class | (2,363,113 | ) | (1,999,087 | ) | ||||
| Net increase (decrease) in shares | 271,681 | (37,154 | ) | |||||
*Capital share activity for the periods presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements.
| 128 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.21 | $ | 52.38 | $ | 59.31 | $ | 81.01 | $ | 144.06 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.61 | ) | (.81 | ) | (1.02 | ) | (1.14 | ) | (1.62 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (9.59 | ) | (8.36 | ) | (5.91 | ) | (20.56 | ) | (61.43 | ) | ||||||||||
| Total from investment operations | (10.20 | ) | (9.17 | ) | (6.93 | ) | (21.70 | ) | (63.05 | ) | ||||||||||
| Net asset value, end of period | $ | 33.01 | $ | 43.21 | $ | 52.38 | $ | 59.31 | $ | 81.01 | ||||||||||
| Total Returnb | (23.59 | %) | (17.53 | %) | (11.68 | %) | (26.78 | %) | (43.77 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,302 | $ | 635 | $ | 612 | $ | 1,114 | $ | 1,765 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.69 | %) | (1.60 | %) | (1.66 | %) | (1.53 | %) | (1.58 | %) | ||||||||||
| Total expenses | 1.72 | % | 1.72 | % | 1.75 | % | 1.71 | % | 1.71 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — |
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 40.30 | $ | 49.22 | $ | 56.14 | $ | 77.26 | $ | 138.44 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.83 | ) | (1.14 | ) | (1.41 | ) | (1.65 | ) | (2.28 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (8.88 | ) | (7.78 | ) | (5.51 | ) | (19.47 | ) | (58.90 | ) | ||||||||||
| Total from investment operations | (9.71 | ) | (8.92 | ) | (6.92 | ) | (21.12 | ) | (61.18 | ) | ||||||||||
| Net asset value, end of period | $ | 30.59 | $ | 40.30 | $ | 49.22 | $ | 56.14 | $ | 77.26 | ||||||||||
| Total Returnb | (24.08 | %) | (18.16 | %) | (12.29 | %) | (27.34 | %) | (44.20 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 568 | $ | 409 | $ | 837 | $ | 1,158 | $ | 2,003 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.45 | %) | (2.35 | %) | (2.43 | %) | (2.28 | %) | (2.34 | %) | ||||||||||
| Total expenses | 2.47 | % | 2.47 | % | 2.51 | % | 2.46 | % | 2.46 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 129 |
| INVERSE RUSSELL 2000® STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.26 | $ | 52.42 | $ | 59.37 | $ | 81.03 | $ | 144.14 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.65 | ) | (.84 | ) | (1.05 | ) | (1.14 | ) | (1.59 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (9.50 | ) | (8.32 | ) | (5.90 | ) | (20.52 | ) | (61.52 | ) | ||||||||||
| Total from investment operations | (10.15 | ) | (9.16 | ) | (6.95 | ) | (21.66 | ) | (63.11 | ) | ||||||||||
| Net asset value, end of period | $ | 33.11 | $ | 43.26 | $ | 52.42 | $ | 59.37 | $ | 81.03 | ||||||||||
| Total Returnb | (23.46 | %) | (17.46 | %) | (11.72 | %) | (26.73 | %) | (43.79 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 11,691 | $ | 12,822 | $ | 17,283 | $ | 9,572 | $ | 25,924 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.69 | %) | (1.62 | %) | (1.70 | %) | (1.53 | %) | (1.58 | %) | ||||||||||
| Total expenses | 1.72 | % | 1.74 | % | 1.77 | % | 1.71 | % | 1.71 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — |
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements. |
| 130 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 131 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, the Government Long Bond 1.2x Strategy Fund Investor Class returned -4.37%. The price movement of the Long Treasury Bond was 1.00% for the same period. The Fund maintained a daily correlation of over 99% to its benchmark.
The return of a comparison index, the Barclays Long Treasury Bond Index, was -4.18%.
At the beginning of the period, the yield on the 30-year bond was 3.10%, and rose to a high of 3.97% at December 31, 2013, before sliding to 3.72% at March 31, 2014.
At the beginning of the period, yields were range-bound, supported by Federal Reserve policy, strong demand and low inflation.
The market changed abruptly in May 2013, however, when the then-Federal Reserve chairman Ben Bernanke announced that the Fed might soon taper its quantitative easing policy. Investors rushed immediately to take profits and the long bond yield began to climb. Signs of a strengthening economy and recovery in the housing market pushed the 30-year yield higher during the summer until September, when the Fed did an about face and stated that it would not cut its stimulus policy for the time being.
Lower yields prevailed through September and October, but were short-lived. Signs of improving growth made the taper program more likely and the market pushed the 30-year bond yield higher in November and December. As anticipated, the Fed finally came through with a certain plan to begin its taper program. The combination of Fed news and increasingly strong economic reports drove yields higher.
In the first quarter of 2014, inclement U.S. weather caused weaker-than-expected economic data. At the same time, emerging-market volatility driven by reactions to the Fed’s tapering drove investors back to U.S. Treasuries, with the long bond yield ending the period at 3.72%.
Derivatives in the Fund are used to provide additional exposure to 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 contributed to the Fund’s 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.
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 Dates: | |
| Investor Class | January 3, 1994 |
| Advisor Class | August 1, 2003 |
| A-Class | March 31, 2004 |
| C-Class | May 2, 2001 |
The Fund invests principally in U.S. Government securities and in derivative investments such as futures contracts.
| 132 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | |
| Investor Class Shares | -4.37% | 4.52% | 6.42% |
| Advisor Class Shares | -4.93% | 3.99% | 5.81% |
| A-Class Shares | -4.40% | 4.37% | 6.20% |
| A-Class Shares with sales charge† | -8.94% | 3.35% | 5.68% |
| C-Class Shares | -5.33% | 3.52% | 5.35% |
| C-Class Shares with CDSC‡ | -6.27% | 3.52% | 5.35% |
| Daily Price Movement of Long Treasury Bond** | 1.00% | 0.42% | -0.74% |
| Barclays Long Treasury Bond Index | -4.18% | 4.81% | 6.12% |
| * | 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 Barclays Long Treasury Bond Index and Daily Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, has no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ** | Does not reflect any interest. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 133 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| GOVERNMENT LONG BOND 1.2x STRATEGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| U.S. GOVERNMENT SECURITIES† - 47.3% | ||||||||
| U.S. Treasury Bond | ||||||||
| 3.62% due 02/15/44 | $ | 83,230,000 | $ | 84,218,357 | ||||
| Total U.S. Government Securities | ||||||||
| (Cost $83,187,446) | 84,218,357 | |||||||
| REPURCHASE AGREEMENTS††,1 - 0.0% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 23,500 | 23,500 | ||||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 9,916 | 9,916 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 6,706 | 6,706 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 3,124 | 3,124 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $43,246) | 43,246 | |||||||
| Total Investments - 47.3% | ||||||||
| (Cost $83,230,692) | $ | 84,261,603 | ||||||
| Other Assets & Liabilities, net - 52.7% | 94,017,800 | |||||||
| Total Net Assets - 100.0% | $ | 178,279,403 | ||||||
| Contracts | Unrealized Gain | |||||||
| INTEREST RATE FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 U.S. Treasury Ultra Long Bond | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $146,892,938) | 1,017 | $ | 289,348 | |||||
| † | 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 5. |
| 134 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $83,187,446) | $ | 84,218,357 | ||
| Repurchase agreements, at value | ||||
| (cost $43,246) | 43,246 | |||
| Total investments | ||||
| (cost $83,230,692) | 84,261,603 | |||
| Segregated cash with broker | 205,200 | |||
| Receivables: | ||||
| Fund shares sold | 134,063,746 | |||
| Interest | 375,052 | |||
| Variation margin | 45,891 | |||
| Total assets | 218,951,492 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 39,740,506 | |||
| Fund shares redeemed | 705,370 | |||
| Management fees | 53,442 | |||
| Distribution and service fees | 38,352 | |||
| Transfer agent and administrative fees | 21,377 | |||
| Portfolio accounting fees | 10,688 | |||
| Miscellaneous | 102,354 | |||
| Total liabilities | 40,672,089 | |||
| Net assets | $ | 178,279,403 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 226,764,053 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (49,804,909 | ) | ||
| Net unrealized appreciation on investments | 1,320,259 | |||
| Net assets | $ | 178,279,403 | ||
| Investor Class: | ||||
| Net assets | $ | 43,572,845 | ||
| Capital shares outstanding | 951,371 | |||
| Net asset value per share | $ | 45.80 | ||
| Advisor Class: | ||||
| Net assets | $ | 129,784,718 | ||
| Capital shares outstanding | 2,853,672 | |||
| Net asset value per share | $ | 45.48 | ||
| A-Class: | ||||
| Net assets | $ | 1,723,797 | ||
| Capital shares outstanding | 37,418 | |||
| Net asset value per share | $ | 46.07 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 48.37 | ||
| C-Class: | ||||
| Net assets | $ | 3,198,043 | ||
| Capital shares outstanding | 69,848 | |||
| Net asset value per share | $ | 45.79 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Interest | $ | 4,202,829 | ||
| Total investment income | 4,202,829 | |||
| Expenses: | ||||
| Management fees | 978,385 | |||
| Transfer agent and administrative fees | 391,358 | |||
| Distribution and service fees: | ||||
| Advisor Class | 544,058 | |||
| A-Class | 23,935 | |||
| C-Class | 33,056 | |||
| Portfolio accounting fees | 187,560 | |||
| Registration fees | 130,470 | |||
| Trustees’ fees* | 24,484 | |||
| Custodian fees | 23,174 | |||
| Line of credit interest expense | 383 | |||
| Miscellaneous | 155,485 | |||
| Total expenses | 2,492,348 | |||
| Net investment income | 1,710,481 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (25,442,386 | ) | ||
| Futures contracts | (20,518,519 | ) | ||
| Net realized loss | (45,960,905 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | (1,239,705 | ) | ||
| Futures contracts | 1,106,762 | |||
| Net change in unrealized appreciation (depreciation) | (132,943 | ) | ||
| Net realized and unrealized loss | (46,093,848 | ) | ||
| Net decrease in net assets resulting from operations | $ | (44,383,367 | ) | |
| * | 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 |
| GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,710,481 | $ | 2,593,966 | ||||
| Net realized gain (loss) on investments | (45,960,905 | ) | 27,126,384 | |||||
| Net change in unrealized appreciation (depreciation) on investments | (132,943 | ) | 1,096,853 | |||||
| Net increase (decrease) in net assets resulting from operations | (44,383,367 | ) | 30,817,203 | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Investor Class | (898,854 | ) | (2,127,527 | ) | ||||
| Advisor Class | (703,095 | ) | (551,392 | ) | ||||
| A-Class | (99,323 | ) | (66,997 | ) | ||||
| C-Class | (9,209 | ) | (24,074 | ) | ||||
| Net realized gains | ||||||||
| Investor Class | — | (623,474 | ) | |||||
| Advisor Class | — | (95,242 | ) | |||||
| A-Class | — | (10,206 | ) | |||||
| C-Class | — | (24,298 | ) | |||||
| Return of capital | ||||||||
| Investor Class | (7,266 | ) | — | |||||
| Advisor Class | (5,684 | ) | — | |||||
| A-Class | (803 | ) | — | |||||
| C-Class | (74 | ) | — | |||||
| Total distributions to shareholders | (1,724,308 | ) | (3,523,210 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 1,219,761,863 | 4,398,937,441 | ||||||
| Advisor Class | 6,476,276,741 | 2,577,283,551 | ||||||
| A-Class | 103,303,063 | 169,090,892 | ||||||
| C-Class | 26,953,816 | 58,589,050 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 874,942 | 2,688,476 | ||||||
| Advisor Class | 689,127 | 641,252 | ||||||
| A-Class | 43,748 | 50,869 | ||||||
| C-Class | 7,193 | 44,860 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (1,452,469,764 | ) | (4,168,594,233 | ) | ||||
| Advisor Class | (6,413,503,973 | ) | (2,508,113,796 | ) | ||||
| A-Class | (115,219,148 | ) | (163,895,099 | ) | ||||
| C-Class | (28,044,431 | ) | (58,947,953 | ) | ||||
| Net increase (decrease) from capital share transactions | (181,326,823 | ) | 307,775,310 | |||||
| Net increase (decrease) in net assets | (227,434,498 | ) | 335,069,303 | |||||
| Net assets: | ||||||||
| Beginning of year | 405,713,901 | 70,644,598 | ||||||
| End of year | $ | 178,279,403 | $ | 405,713,901 | ||||
| Undistributed net investment income at end of year | $ | — | $ | — | ||||
| 136 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| Investor Class | 26,724,760 | 87,897,462 | ||||||
| Advisor Class | 145,113,873 | 52,673,378 | ||||||
| A-Class | 2,253,656 | 3,401,515 | ||||||
| C-Class | 593,997 | 1,161,049 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 18,706 | 52,202 | ||||||
| Advisor Class | 15,528 | 12,499 | ||||||
| A-Class | 976 | 996 | ||||||
| C-Class | 163 | 872 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (31,595,986 | ) | (83,122,899 | ) | ||||
| Advisor Class | (144,429,030 | ) | (50,794,215 | ) | ||||
| A-Class | (2,534,796 | ) | (3,328,074 | ) | ||||
| C-Class | (619,014 | ) | (1,166,940 | ) | ||||
| Net increase (decrease) in shares | (4,457,167 | ) | 6,787,845 | |||||
| * | Capital share activity for the periods presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 137 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.55 | $ | 44.73 | $ | 34.28 | $ | 32.88 | $ | 41.21 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .61 | .57 | .96 | 1.08 | 1.08 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (2.76 | ) | 4.21 | 10.45 | 1.40 | (8.33 | ) | |||||||||||||
| Total from investment operations | (2.15 | ) | 4.78 | 11.41 | 2.48 | (7.25 | ) | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.60 | ) | (.72 | ) | (.96 | ) | (1.08 | ) | (1.08 | ) | ||||||||||
| Net realized gains | — | (.24 | ) | — | — | — | ||||||||||||||
| Total distributions | (.60 | ) | (.96 | ) | (.96 | ) | (1.08 | ) | (1.08 | ) | ||||||||||
| Net asset value, end of period | $ | 45.80 | $ | 48.55 | $ | 44.73 | $ | 34.28 | $ | 32.88 | ||||||||||
| Total Returnb | (4.37 | %) | 10.63 | % | 33.38 | % | 7.42 | % | (17.71 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 43,573 | $ | 281,800 | $ | 43,709 | $ | 44,707 | $ | 282,388 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.22 | % | 1.15 | % | 2.24 | % | �� | 3.03 | % | 3.16 | % | |||||||||
| Total expenses | 0.97 | % | 0.95 | % | 0.95 | % | 0.98 | % | 0.98 | % | ||||||||||
| Portfolio turnover rate | 2,661 | % | 1,759 | % | 2,322 | % | 1,930 | % | 1,503 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.23 | $ | 44.33 | $ | 34.08 | $ | 32.65 | $ | 40.97 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .25 | .33 | .75 | .93 | .96 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | (2.63 | ) | 4.26 | 10.25 | 1.40 | (8.38 | ) | |||||||||||||
| Total from investment operations | (2.38 | ) | 4.59 | 11.00 | 2.33 | (7.42 | ) | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.37 | ) | (.45 | ) | (.75 | ) | (.90 | ) | (.90 | ) | ||||||||||
| Net realized gains | — | (.24 | ) | — | — | — | ||||||||||||||
| Total distributions | (.37 | ) | (.69 | ) | (.75 | ) | (.90 | ) | (.90 | ) | ||||||||||
| Net asset value, end of period | $ | 45.48 | $ | 48.23 | $ | 44.33 | $ | 34.08 | $ | 32.65 | ||||||||||
| Total Returnb | (4.93 | %) | 10.21 | % | 32.56 | % | 7.03 | % | (18.18 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 129,785 | $ | 103,845 | $ | 11,600 | $ | 31,420 | $ | 28,990 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.64 | % | 0.63 | % | 1.77 | % | 2.46 | % | 2.76 | % | ||||||||||
| Total expenses | 1.46 | % | 1.43 | % | 1.45 | % | 1.48 | % | 1.48 | % | ||||||||||
| Portfolio turnover rate | 2,661 | % | 1,759 | % | 2,322 | % | 1,930 | % | 1,503 | % | ||||||||||
| 138 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| GOVERNMENT LONG BOND 1.2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.73 | $ | 44.77 | $ | 34.34 | $ | 32.89 | $ | 41.25 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .48 | .48 | .87 | .99 | .99 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (2.65 | ) | 4.29 | 10.43 | 1.45 | (8.36 | ) | |||||||||||||
| Total from investment operations | (2.17 | ) | 4.77 | 11.30 | 2.44 | (7.37 | ) | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.49 | ) | (.57 | ) | (.87 | ) | (.99 | ) | (.99 | ) | ||||||||||
| Net realized gains | — | (.24 | ) | — | — | — | ||||||||||||||
| Total distributions | (.49 | ) | (.81 | ) | (.87 | ) | (.99 | ) | (.99 | ) | ||||||||||
| Net asset value, end of period | $ | 46.07 | $ | 48.73 | $ | 44.77 | $ | 34.34 | $ | 32.89 | ||||||||||
| Total Returnb | (4.40 | %) | 10.62 | % | 33.00 | % | 7.35 | % | (17.98 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,724 | $ | 15,476 | $ | 10,885 | $ | 2,753 | $ | 5,576 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.04 | % | 0.94 | % | 2.02 | % | 2.75 | % | 2.84 | % | ||||||||||
| Total expenses | 1.22 | % | 1.20 | % | 1.20 | % | 1.23 | % | 1.24 | % | ||||||||||
| Portfolio turnover rate | 2,661 | % | 1,759 | % | 2,322 | % | 1,930 | % | 1,503 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 48.51 | $ | 44.63 | $ | 34.25 | $ | 32.82 | $ | 41.16 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .12 | .15 | .57 | .72 | .75 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (2.71 | ) | 4.21 | 10.35 | 1.43 | (8.34 | ) | |||||||||||||
| Total from investment operations | (2.59 | ) | 4.36 | 10.92 | 2.15 | (7.59 | ) | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.13 | ) | (.24 | ) | (.54 | ) | (.72 | ) | (.75 | ) | ||||||||||
| Net realized gains | — | (.24 | ) | — | — | — | ||||||||||||||
| Total distributions | (.13 | ) | (.48 | ) | (.54 | ) | (.72 | ) | (.75 | ) | ||||||||||
| Net asset value, end of period | $ | 45.79 | $ | 48.51 | $ | 44.63 | $ | 34.25 | $ | 32.82 | ||||||||||
| Total Returnb | (5.33 | %) | 9.69 | % | 32.01 | % | 6.47 | % | (18.56 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,198 | $ | 4,594 | $ | 4,451 | $ | 6,091 | $ | 12,695 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.34 | % | 0.31 | % | 1.32 | % | 1.93 | % | 2.17 | % | ||||||||||
| Total expenses | 1.97 | % | 1.94 | % | 1.95 | % | 1.97 | % | 2.00 | % | ||||||||||
| Portfolio turnover rate | 2,661 | % | 1,759 | % | 2,322 | % | 1,930 | % | 1,503 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 12 in Notes to Financial Statements. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 139 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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.
High Yield Strategy Fund H-Class returned 7.86% for the one year period ended March 31, 2014. For comparison, the Barclays U.S. Corporate High Yield Index returned 7.54%.
The communications and consumer non-cyclical industries contributed most to the performance of the underlying index. No sector detracted from return of the underlying index, but the REITs segment contributed least.
From a ratings perspective, credits with a BB- rating contributed most to the performance of the underlying index, fol-lowed by holdings with a lower, CCC+ rating. The only category of bonds detracting from return was that with a C rating.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| A-Class | April 16, 2007 |
| C-Class | April 16, 2007 |
| H-Class | April 16, 2007 |
The Fund invests principally in derivative investments such as high yield credit default swap agreements and futures contracts.
| 140 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | |||
| Inception | |||
| 1 Year | 5 Year | (04/16/07) | |
| A-Class Shares | 7.53% | 14.40% | 7.01% |
| A-Class Shares with sales charge† | 2.44% | 13.30% | 6.26% |
| C-Class Shares | 6.74% | 13.57% | 6.21% |
| C-Class Shares with CDSC‡ | 5.84% | 13.57% | 6.21% |
| H-Class Shares | 7.86% | 14.49% | 7.04% |
| Barclays U.S. Corporate High Yield Index | 7.54% | 18.25% | 8.70% |
| S&P 500 Index | 21.86% | 21.16% | 5.83% |
| * | 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 Barclays U.S. Corporate High Yield Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 141 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| HIGH YIELD STRATEGY FUND | |
| Shares | Value | |||||||
| EXCHANGE TRADED FUNDS† - 5.5% | ||||||||
| iShares iBoxx $ High Yield | ||||||||
| Corporate Bond ETF1 | 60,906 | $ | 5,748,917 | |||||
| Total Exchange Traded Funds | ||||||||
| (Cost $5,585,585) | 5,748,917 | |||||||
| MUTUAL FUNDS†,5 - 21.9% | ||||||||
| Guggenheim Strategy Fund II | 920,000 | 22,981,600 | ||||||
| Total Mutual Funds | ||||||||
| (Cost $23,000,000) | 22,981,600 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 66.6% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 37,970,141 | 37,970,141 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 16,022,083 | 16,022,083 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 10,834,681 | 10,834,681 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 5,048,054 | 5,048,054 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $69,874,959) | 69,874,959 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 4.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 2,130,041 | 2,130,041 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,900,653 | 1,900,653 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05 % - 0.08% | ||||||||
| due 04/01/14 | 358,306 | 358,306 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $4,389,000) | 4,389,000 | |||||||
| Total Investments - 98.2% | ||||||||
| (Cost $102,849,544) | $ | 102,994,476 | ||||||
| Other Assets & Liabilities, net - 1.8% | 1,919,898 | |||||||
| Total Net Assets - 100.0% | $ | 104,914,374 |
| Unrealized | ||||||||
| Contracts | Loss | |||||||
| INTEREST RATE FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 U.S. Treasury 5 Year Note | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $92,795,625) | 780 | $ | (495,412 | ) | ||||
CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENT PROTECTION SOLD††, 4
| Protection | Upfront | |||||||||||||||||||||||
| Premium | Maturity | Notional | Notional | Premiums | Unrealized | |||||||||||||||||||
| Index | Counterparty | Rate | Date | Principal | Value | Paid | Appreciation | |||||||||||||||||
| CDX.NA.HY-22 Index | Goldman Sachs International | 5.00 | % | 06/20/19 | $ | 17,500,000 | $ | (18,805,073 | ) | $ | 1,249,284 | $ | 55,789 | |||||||||||
| CDX.NA.HY-22 Index | Barclays Bank plc | 5.00 | % | 06/20/19 | 74,100,000 | (79,626,052 | ) | 5,290,187 | 235,865 | |||||||||||||||
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 11. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 11. |
| 4 | Credit Default Swaps — See Note 6. |
| 5 | Affiliated fund — See Note 16. |
| 142 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| HIGH YIELD STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments in unaffiliated issuers, at value – including $4,304,184 of securities loaned | ||||
| (cost $5,585,585) | $ | 5,748,917 | ||
| Investments in affiliated issuers, at value | ||||
| (cost $23,000,000) | 22,981,600 | |||
| Repurchase agreements, at value | ||||
| (cost $74,263,959) | 74,263,959 | |||
| Total investments | ||||
| (cost $102,849,544) | 102,994,476 | |||
| Unamortized upfront payments paid on credit default swaps | 6,539,471 | |||
| Segregated cash with broker | 872,543 | |||
| Unrealized appreciation on swap agreements | 291,654 | |||
| Receivables: | ||||
| Fund shares sold | 517,032 | |||
| Protection fees on credit default swaps | 152,713 | |||
| Variation margin | 56,555 | |||
| Dividends | 7,913 | |||
| Securities lending income | 1,018 | |||
| Total assets | 111,433,375 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 4,389,000 | |||
| Due to broker | 1,756,886 | |||
| Fund shares redeemed | 164,213 | |||
| Management fees | 61,889 | |||
| Distribution and service fees | 23,702 | |||
| Transfer agent and administrative fees | 20,630 | |||
| Portfolio accounting fees | 8,252 | |||
| Miscellaneous | 94,429 | |||
| Total liabilities | 6,519,001 | |||
| Net assets | $ | 104,914,374 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 104,495,979 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized gain on investments | 477,220 | |||
| Net unrealized depreciation on investments | (58,825 | ) | ||
| Net assets | $ | 104,914,374 | ||
| A-Class: | ||||
| Net assets | $ | 12,499,252 | ||
| Capital shares outstanding | 545,967 | |||
| Net asset value per share | $ | 22.89 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 24.05 | ||
| C-Class: | ||||
| Net assets | $ | 5,099,696 | ||
| Capital shares outstanding | 239,585 | |||
| Net asset value per share | $ | 21.29 | ||
| H-Class: | ||||
| Net assets | $ | 87,315,426 | ||
| Capital shares outstanding | 3,806,887 | |||
| Net asset value per share | $ | 22.94 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends from securities of unaffiliated issuers | $ | 750,355 | ||
| Dividends from securities of affiliated issuers | 7,913 | |||
| Interest | 54,890 | |||
| Income from securities lending, net | 9,826 | |||
| Total investment income | 822,984 | |||
| Expenses: | ||||
| Management fees | 1,171,173 | |||
| Transfer agent and administrative fees | 390,391 | |||
| Distribution and service fees: | ||||
| A-Class | 38,865 | |||
| C-Class | 56,018 | |||
| H-Class | 337,522 | |||
| Portfolio accounting fees | 147,003 | |||
| Registration fees | 166,947 | |||
| Trustees’ fees* | 32,412 | |||
| Custodian fees | 14,661 | |||
| Prime broker interest expense | 15,850 | |||
| Miscellaneous | 55,360 | |||
| Total expenses | 2,426,202 | |||
| Net investment loss | (1,603,218 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments in unaffiliated issuers | 393,833 | |||
| Swap agreements | 10,910,521 | |||
| Futures contracts | (2,095,549 | ) | ||
| Net realized gain | 9,208,805 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments in unaffiliated issuers | (1,001,499 | ) | ||
| Investments in affiliated issuers | (18,400 | ) | ||
| Swap agreements | (450,313 | ) | ||
| Futures contracts | (858,174 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (2,328,385 | ) | ||
| Net realized and unrealized gain | 6,880,420 | |||
| Net increase in net assets resulting from operations | $ | 5,277,202 |
* 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 | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (1,603,218 | ) | $ | (3,556,053 | ) | ||
| Net realized gain on investments | 9,208,805 | 38,742,737 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (2,328,385 | ) | 4,323,218 | |||||
| Net increase in net assets resulting from operations | 5,277,202 | 39,509,902 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | (1,483,249 | ) | (512,061 | ) | ||||
| C-Class | (223,483 | ) | (118,088 | ) | ||||
| H-Class | (4,204,914 | ) | (7,099,893 | ) | ||||
| Net realized gains | ||||||||
| A-Class | (3,838,006 | ) | (289,960 | ) | ||||
| C-Class | (578,277 | ) | (66,869 | ) | ||||
| H-Class | (10,880,499 | ) | (4,020,392 | ) | ||||
| Total distributions to shareholders | (21,208,428 | ) | (12,107,263 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 191,756,789 | 180,394,541 | ||||||
| C-Class | 21,843,169 | 58,421,116 | ||||||
| H-Class | 546,082,437 | 857,060,522 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 2,855,693 | 378,053 | ||||||
| C-Class | 726,119 | 169,710 | ||||||
| H-Class | 12,967,381 | 10,977,334 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (188,407,437 | ) | (183,362,099 | ) | ||||
| C-Class | (23,916,955 | ) | (59,616,169 | ) | ||||
| H-Class | (894,910,014 | ) | (726,159,066 | ) | ||||
| Net increase (decrease) from capital share transactions | (331,002,818 | ) | 138,263,942 | |||||
| Net increase (decrease) in net assets | (346,934,044 | ) | 165,666,581 | |||||
| Net assets: | ||||||||
| Beginning of year | 451,848,418 | 286,181,837 | ||||||
| End of year | $ | 104,914,374 | $ | 451,848,418 | ||||
| Undistributed net investment income at end of year | $ | — | $ | 5,911,646 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 7,639,730 | 7,565,849 | ||||||
| C-Class | 915,383 | 2,584,176 | ||||||
| H-Class | 21,905,501 | 36,387,768 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 126,079 | 15,798 | ||||||
| C-Class | 34,397 | 7,470 | ||||||
| H-Class | 571,502 | 459,495 | ||||||
| Shares redeemed | ||||||||
| A-Class | (7,648,199 | ) | (7,671,852 | ) | ||||
| C-Class | (1,002,209 | ) | (2,634,577 | ) | ||||
| H-Class | (35,953,373 | ) | (31,221,244 | ) | ||||
| Net increase (decrease) in shares | (13,411,189 | ) | 5,492,883 | |||||
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 25.16 | $ | 22.93 | $ | 21.98 | $ | 20.42 | $ | 16.64 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.30 | ) | (.22 | ) | (.27 | ) | (.30 | ) | (.26 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.13 | 3.13 | 1.77 | 3.37 | 5.39 | |||||||||||||||
| Total from investment operations | 1.83 | 2.91 | 1.50 | 3.07 | 5.13 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.14 | ) | (.43 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net realized gains | (2.96 | ) | (.25 | ) | — | — | — | |||||||||||||
| Total distributions | (4.10 | ) | (.68 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net asset value, end of period | $ | 22.89 | $ | 25.16 | $ | 22.93 | $ | 21.98 | $ | 20.42 | ||||||||||
| Total Returnb | 7.53 | % | 12.86 | % | 6.94 | % | 15.21 | % | 31.07 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 12,499 | $ | 10,777 | $ | 11,890 | $ | 14,561 | $ | 4,800 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.21 | %) | (0.92 | %) | (1.21 | %) | (1.40 | %) | (1.37 | %) | ||||||||||
| Total expensesc | 1.53 | % | 1.50 | % | 1.49 | % | 1.54 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 205 | % | 95 | % | 583 | % | — | — | ||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 23.83 | $ | 21.92 | $ | 21.19 | $ | 19.87 | $ | 16.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.44 | ) | (.37 | ) | (.45 | ) | (.45 | ) | (.40 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.00 | 2.96 | 1.73 | 3.28 | 5.29 | |||||||||||||||
| Total from investment operations | 1.56 | 2.59 | 1.28 | 2.83 | 4.89 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.14 | ) | (.43 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net realized gains | (2.96 | ) | (.25 | ) | — | — | — | |||||||||||||
| Total distributions | (4.10 | ) | (.68 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net asset value, end of period | $ | 21.29 | $ | 23.83 | $ | 21.92 | $ | 21.19 | $ | 19.87 | ||||||||||
| Total Returnb | 6.74 | % | 11.98 | % | 6.16 | % | 14.40 | % | 30.17 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,100 | $ | 6,958 | $ | 7,343 | $ | 6,129 | $ | 3,351 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.89 | %) | (1.62 | %) | (2.10 | %) | (2.13 | %) | (2.13 | %) | ||||||||||
| Total expensesc | 2.28 | % | 2.27 | % | 2.25 | % | 2.28 | % | 2.29 | % | ||||||||||
| Portfolio turnover rate | 205 | % | 95 | % | 583 | % | — | — | ||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 145 |
| HIGH YIELD STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 25.12 | $ | 22.90 | $ | 21.95 | $ | 20.38 | $ | 16.61 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.24 | ) | (.24 | ) | (.28 | ) | (.30 | ) | (.26 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.16 | 3.14 | 1.78 | 3.38 | 5.38 | |||||||||||||||
| Total from investment operations | 1.92 | 2.90 | 1.50 | 3.08 | 5.12 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (1.14 | ) | (.43 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net realized gains | (2.96 | ) | (.25 | ) | — | — | — | |||||||||||||
| Total distributions | (4.10 | ) | (.68 | ) | (.55 | ) | (1.51 | ) | (1.35 | ) | ||||||||||
| Net asset value, end of period | $ | 22.94 | $ | 25.12 | $ | 22.90 | $ | 21.95 | $ | 20.38 | ||||||||||
| Total Returnb | 7.86 | % | 12.83 | % | 6.95 | % | 15.29 | % | 31.07 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 87,315 | $ | 434,113 | $ | 266,950 | $ | 116,106 | $ | 16,368 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.97 | %) | (0.99 | %) | (1.26 | %) | (1.38 | %) | (1.37 | %) | ||||||||||
| Total expensesc | 1.53 | % | 1.51 | % | 1.49 | % | 1.53 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 205 | % | 95 | % | 583 | % | — | — | ||||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
c Does not include expenses of the underlying funds in which the Fund invests.
| 146 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 147 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
INVERSE HIGH YIELD STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that inversely correlate, before fees and expenses, to the performance of the high yield bond market.
Inverse High Yield Strategy Fund H-Class returned -10.94% for the one year period ended March 31, 2014. For comparison, the Barclays U.S. Corporate High Yield Index returned 7.54%.
The communications and consumer non-cyclical industries contributed most to the performance of the underlying index. No sector detracted from return of the underlying index, but the REITs segment contributed least.
From a ratings perspective, credits with a BB- rating contributed most to the performance of the underlying index, followed by holdings with a lower, CCC+ rating. The only category of bonds detracting from return was that with a C rating.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings to ensure that they are consistent with their strategies, as frequently as daily.
The effects of compounding may cause the longer-term correlation of the fund to its benchmark to diminish. The apparent discrepancy between the leveraged and unleveraged indices is the result of compounding, which is described briefly on page 6 of this report.
Performance displayed represents past performance which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| A-Class | April 16, 2007 |
| C-Class | April 16, 2007 |
| H-Class | April 16, 2007 |
The Fund invests principally in derivative investments such as high yield credit default swap agreements and futures contracts.
| 148 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (04/16/07) | ||||||||||
| A-Class Shares | -11.09 | % | -17.14 | % | -11.10 | % | ||||||
| A-Class Shares with sales charge† | -15.33 | % | -17.95 | % | -11.72 | % | ||||||
| C-Class Shares | -11.75 | % | -17.77 | % | -11.73 | % | ||||||
| C-Class Shares with CDSC‡ | -12.63 | % | -17.77 | % | -11.73 | % | ||||||
| H-Class Shares | -10.94 | % | -17.11 | % | -11.05 | % | ||||||
| Barclays U.S. Corporate High Yield Index | 7.54 | % | 18.25 | % | 8.70 | % | ||||||
| S&P 500 Index | 21.86 | % | 21.16 | % | 5.83 | % | ||||||
| * | 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 Barclays U.S. Corporate High Yield Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 149 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE HIGH YIELD STRATEGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 96.7% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 4,815,755 | $ | 4,815,755 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,032,082 | 2,032,082 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,374,163 | 1,374,163 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 640,245 | 640,245 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $8,862,245) | 8,862,245 | |||||||
| Total Investments - 96.7% | ||||||||
| (Cost $8,862,245) | $ | 8,862,245 | ||||||
| Other Assets & Liabilities, net - 3.3% | 306,812 | |||||||
| Total Net Assets - 100.0% | $ | 9,169,057 | ||||||
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| INTEREST RATE FUTURES CONTRACTS SOLD SHORT† | ||||||||
| June 2014 U.S. Treasury 5 Year Note | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $8,684,719) | 73 | $ | 25,661 | |||||
CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENT PROTECTION PURCHASED††
| Protection | Upfront | |||||||||||||||||||||||
| Premium | Maturity | Notional | Notional | Premiums | Unrealized | |||||||||||||||||||
| Index | Counterparty | Rate | Date | Principal | Value | Received | Depreciation | |||||||||||||||||
| CDX.NA.HY-22 Index | Barclays Bank plc | 5.00 | % | 06/20/19 | $ | 8,500,000 | $ | 9,133,893 | $ | (610,190 | ) | $ | (23,703 | ) | ||||||||||
| † | 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 5. |
| 150 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE HIGH YIELD STRATEGY FUND |
| STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $8,862,245) | $ | 8,862,245 | ||
| Segregated cash with broker | 965,749 | |||
| Receivables: | ||||
| Fund shares sold | 12,498 | |||
| Total assets | 9,840,492 | |||
| Liabilities: | ||||
| Unamortized upfront premiums | ||||
| received on credit default swaps | 610,190 | |||
| Unrealized depreciation on swap agreements | 23,703 | |||
| Payable for: | ||||
| Protection fees on credit default swaps | 14,161 | |||
| Variation margin | 5,359 | |||
| Management fees | 3,042 | |||
| Distribution and service fees | 1,847 | |||
| Transfer agent and administrative fees | 1,014 | |||
| Portfolio accounting fees | 405 | |||
| Miscellaneous | 11,714 | |||
| Total liabilities | 671,435 | |||
| Net assets | $ | 9,169,057 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 24,798,373 | ||
| Accumulated net investment loss | (181,265 | ) | ||
| Accumulated net realized loss on investments | (15,450,009 | ) | ||
| Net unrealized appreciation on investments | 1,958 | |||
| Net assets | $ | 9,169,057 | ||
| A-Class: | ||||
| Net assets | $ | 5,155,450 | ||
| Capital shares outstanding | 242,348 | |||
| Net asset value per share | $ | 21.27 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 22.38 | ||
| C-Class: | ||||
| Net assets | $ | 1,560,907 | ||
| Capital shares outstanding | 77,149 | |||
| Net asset value per share | $ | 20.23 | ||
| H-Class: | ||||
| Net assets | $ | 2,452,700 | ||
| Capital shares outstanding | 114,788 | |||
| Net asset value per share | $ | 21.37 |
| STATEMENT OF OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Interest | $ | 5,410 | ||
| Total investment income | 5,410 | |||
| Expenses: | ||||
| Management fees | 221,233 | |||
| Transfer agent and administrative fees | 73,744 | |||
| Distribution and service fees: | ||||
| A-Class | 21,323 | |||
| C-Class | 16,434 | |||
| H-Class | 48,313 | |||
| Portfolio accounting fees | 29,497 | |||
| Custodian fees | 3,273 | |||
| Trustees’ fees* | 2,629 | |||
| Prime broker interest expense | 3,338 | |||
| Miscellaneous | 43,467 | |||
| Total expenses | 463,251 | |||
| Net investment loss | (457,841 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 44,654 | |||
| Swap agreements | (3,380,378 | ) | ||
| Futures contracts | 1,532,550 | |||
| Net realized loss | (1,803,174 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Swap agreements | (2,830 | ) | ||
| Futures contracts | 34,821 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 31,991 | |||
| Net realized and unrealized loss | (1,771,183 | ) | ||
| Net decrease in net assets resulting from operations | $ | (2,229,024 | ) |
* 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 | 151 |
| INVERSE HIGH YIELD STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (457,841 | ) | $ | (269,189 | ) | ||
| Net realized loss on investments | (1,803,174 | ) | (4,159,614 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | 31,991 | (105,367 | ) | |||||
| Net decrease in net assets resulting from operations | (2,229,024 | ) | (4,534,170 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 143,759,590 | 60,080,922 | ||||||
| C-Class | 10,211,762 | 8,417,111 | ||||||
| H-Class | 283,765,472 | 384,851,085 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (137,648,553 | ) | (59,399,320 | ) | ||||
| C-Class | (10,474,214 | ) | (6,874,799 | ) | ||||
| H-Class | (289,618,110 | ) | (385,744,592 | ) | ||||
| Net increase (decrease) from capital share transactions | (4,053 | ) | 1,330,407 | |||||
| Net decrease in net assets | (2,233,077 | ) | (3,203,763 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 11,402,134 | 14,605,897 | ||||||
| End of year | $ | 9,169,057 | $ | 11,402,134 | ||||
| Accumulated net investment loss at end of year | $ | (181,265 | ) | $ | (227,498 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 6,275,459 | 2,222,764 | ||||||
| C-Class | 459,566 | 339,193 | ||||||
| H-Class | 12,130,203 | 14,453,392 | ||||||
| Shares redeemed | ||||||||
| A-Class | (6,039,639 | ) | (2,235,986 | ) | ||||
| C-Class | (471,060 | ) | (276,015 | ) | ||||
| H-Class | (12,398,442 | ) | (14,543,669 | ) | ||||
| Net decrease in shares | (43,913 | ) | (40,321 | ) | ||||
| 152 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 23.98 | $ | 28.15 | $ | 31.99 | $ | 38.51 | $ | 55.13 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.35 | ) | (.37 | ) | (.43 | ) | (.47 | ) | (.63 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (2.36 | ) | (3.80 | ) | (3.41 | ) | (6.05 | ) | (15.60 | ) | ||||||||||
| Total from investment operations | (2.71 | ) | (4.17 | ) | (3.84 | ) | (6.52 | ) | (16.23 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | — | — | (.39 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.39 | ) | ||||||||||||||
| Net asset value, end of period | $ | 21.27 | $ | 23.98 | $ | 28.15 | $ | 31.99 | $ | 38.51 | ||||||||||
| Total Returnb | (11.30 | %) | (14.81 | %) | (11.98 | %) | (16.96 | %) | 29.47 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,155 | $ | 157 | $ | 556 | $ | 1,512 | $ | 2,269 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.52 | %) | (1.38 | %) | (1.39 | %) | (1.39 | %) | (1.43 | %) | ||||||||||
| Total expenses | 1.54 | % | 1.49 | % | 1.51 | % | 1.53 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 22.98 | $ | 27.21 | $ | 31.12 | $ | 37.77 | $ | 54.49 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.50 | ) | (.53 | ) | (.55 | ) | (.72 | ) | (.95 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (2.25 | ) | (3.70 | ) | (3.36 | ) | (5.93 | ) | (15.38 | ) | ||||||||||
| Total from investment operations | (2.75 | ) | (4.23 | ) | (3.91 | ) | (6.65 | ) | (16.33 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | — | — | (.39 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.39 | ) | ||||||||||||||
| Net asset value, end of period | $ | 20.23 | $ | 22.98 | $ | 27.21 | $ | 31.12 | $ | 37.77 | ||||||||||
| Total Returnb | (11.97 | %) | (15.51 | %) | (12.60 | %) | (17.61 | %) | (30.00 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,561 | $ | 2,037 | $ | 693 | $ | 2,535 | $ | 2,055 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.28 | %) | (2.13 | %) | (1.87 | %) | (2.13 | %) | (2.18 | %) | ||||||||||
| Total expenses | 2.30 | % | 2.25 | % | 2.26 | % | 2.28 | % | 2.29 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 153 |
| INVERSE HIGH YIELD STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 24.04 | $ | 28.22 | $ | 32.04 | $ | 38.60 | $ | 55.26 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.35 | ) | (.36 | ) | (.47 | ) | (.50 | ) | (.61 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | (2.32 | ) | (3.82 | ) | (3.35 | ) | (6.06 | ) | (15.66 | ) | ||||||||||
| Total from investment operations | (2.67 | ) | (4.18 | ) | (3.82 | ) | (6.56 | ) | (16.27 | ) | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | — | — | (.39 | ) | ||||||||||||||
| Total distributions | — | — | — | — | (.39 | ) | ||||||||||||||
| Net asset value, end of period | $ | 21.37 | $ | 24.04 | $ | 28.22 | $ | 32.04 | $ | 38.60 | ||||||||||
| Total Returnb | (11.11 | %) | (14.81 | %) | (11.92 | %) | (16.99 | %) | (29.47 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,453 | $ | 9,208 | $ | 13,357 | $ | 9,699 | $ | 27,954 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.50 | %) | (1.38 | %) | (1.51 | %) | (1.38 | %) | (1.43 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.51 | % | 1.53 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 154 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE RYDEX FUNDS ANNUAL REPORT | 155 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
U.S. GOVERNMENT MONEY MARKET FUND
OBJECTIVE: Seeks to provide security of principal, high current income, and liquidity.
For the one-year period ended March 31, 2014, U.S. Government Money Market Fund returned 0.00%.
Continued low short-term interest rates during the period meant another difficult year for money market funds, since the Federal Reserve reduced its interest rate target to near zero in 2008.
On a positive note, investors are sticking with money market funds despite very low yields. There was only a slight decline in assets under management during the year. In June, the Securities and Exchange Commission issued a proposal for further regulation of money market mutual funds. This is just a proposal, which is expected to take months, if not years, before new rules are determined and actually take effect.
Money market rates are expected to remain low for the near term, as cash investment needs remained high. Relief is expected only when the Federal Reserve raises short-term rates.
Performance displayed represents past performance, which is no guarantee of future results.
An investment in the U.S. Government Money Market 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)
FADN — Federal Agency Discount Notes
FAN — Federal Agency Notes
| Inception Date: | December 1, 1993 |
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.
| 156 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||
| Money Market Class | 0.00% | 0.00% | 1.26% |
| THE RYDEX FUNDS ANNUAL REPORT | 157 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| U.S. GOVERNMENT MONEY MARKET FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| FEDERAL AGENCY DISCOUNT NOTES†† - 15.4% | ||||||||
| Farmer Mac1 | ||||||||
| 0.15% due 04/23/14 | $ | 10,000,000 | $ | 9,999,084 | ||||
| 0.16% due 06/18/14 | 10,000,000 | 9,996,534 | ||||||
| 0.15% due 09/15/14 | 10,000,000 | 9,993,042 | ||||||
| 0.16% due 09/23/14 | 10,000,000 | 9,992,222 | ||||||
| 0.15% due 12/10/14 | 10,000,000 | 9,989,458 | ||||||
| 0.17% due 02/04/15 | 10,000,000 | 9,985,408 | ||||||
| Total Farmer Mac | 59,955,748 | |||||||
| Federal Farm Credit Bank1 | ||||||||
| 0.11% due 06/06/14 | 10,000,000 | 9,997,983 | ||||||
| 0.11% due 08/11/14 | 10,000,000 | 9,995,967 | ||||||
| 0.12% due 08/19/14 | 10,000,000 | 9,995,333 | ||||||
| Total Federal Farm Credit Bank | 29,989,283 | |||||||
| Freddie Mac2 | ||||||||
| 0.15% due 04/08/14 | 10,000,000 | 9,999,708 | ||||||
| Federal Home Loan Bank1 | ||||||||
| 0.17% due 05/01/14 | 10,000,000 | 9,998,542 | ||||||
| Fannie Mae2 | ||||||||
| 0.12% due 09/15/14 | 10,000,000 | 9,994,433 | ||||||
| Total Federal Agency Discount Notes | ||||||||
| (Cost $119,937,714) | 119,937,714 | |||||||
| FEDERAL AGENCY NOTES†† - 10.3% | ||||||||
| Federal Home Loan Bank1 | ||||||||
| 0.16% due 06/11/14 | 10,000,000 | 10,000,000 | ||||||
| 0.16% due 06/30/14 | 10,000,000 | 10,000,000 | ||||||
| 0.18% due 04/15/14 | 10,000,000 | 9,999,999 | ||||||
| 0.20% due 04/24/15 | 10,000,000 | 10,000,000 | ||||||
| 0.12% due 04/11/14 | 10,000,000 | 9,999,912 | ||||||
| 0.19% due 01/06/15 | 10,000,000 | 9,999,809 | ||||||
| 0.12% due 09/16/14 | 10,000,000 | 9,999,698 | ||||||
| 0.12% due 09/12/14 | 10,000,000 | 9,997,443 | ||||||
| Total Federal Home Loan Bank | 79,996,861 | |||||||
| Total Federal Agency Notes | ||||||||
| (Cost $79,996,861) | 79,996,861 | |||||||
| COMMERCIAL PAPER†† - 18.1% | ||||||||
| General Electric Capital Corp. | ||||||||
| 0.18% due 04/24/14 | 15,000,000 | 14,998,275 | ||||||
| UBS Finance Delaware LLC | ||||||||
| 0.20% due 05/05/14 | 10,000,000 | 9,998,064 | ||||||
| 0.30% due 04/03/14 | 5,000,000 | 4,999,917 | ||||||
| Total UBS Finance Delaware LLC | 14,997,981 | |||||||
| ING US Funding LLC | ||||||||
| 0.21% due 05/12/14 | 10,000,000 | 9,997,608 | ||||||
| 0.25% due 04/11/14 | 5,000,000 | 4,999,653 | ||||||
| Total ING US Funding LLC | 14,997,261 | |||||||
| Societe Generale North America, Inc. | ||||||||
| 0.23% due 05/02/14 | 15,000,000 | 14,997,093 | ||||||
| Prudential plc | ||||||||
| 0.16% due 04/08/143 | 10,000,000 | 9,999,689 | ||||||
| 0.23% due 08/11/143 | 5,000,000 | 4,995,783 | ||||||
| Total Prudential plc | 14,995,472 | |||||||
| Coca-Cola Co. | ||||||||
| 0.16% due 06/09/143 | 15,000,000 | 14,995,400 | ||||||
| Sheffield Receivables Corp. | ||||||||
| 0.20% due 07/24/143 | 10,000,000 | 9,993,667 | ||||||
| 0.20% due 05/13/143 | 5,000,000 | 4,998,833 | ||||||
| Total Sheffield Receivables Corp. | 14,992,500 | |||||||
| Jupiter Securitization Company LLC | ||||||||
| 0.20% due 07/14/143 | 10,000,000 | 9,994,222 | ||||||
| BNP Paribas Finance, Inc. | ||||||||
| 0.31% due 06/13/14 | 10,000,000 | 9,993,714 | ||||||
| Barclays US Funding LLC | ||||||||
| 0.46% due 05/23/14 | 10,000,000 | 9,993,356 | ||||||
| Nestle Capital Corp. | ||||||||
| 0.17% due 09/11/143 | 7,000,000 | 6,994,612 | ||||||
| Total Commercial Paper | ||||||||
| (Cost $141,949,886) | 141,949,886 | |||||||
| REPURCHASE AGREEMENTS†† - 59.7% | ||||||||
| Individual Repurchase Agreement | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 to be repurchased | ||||||||
| at $148,441,914 secured by: | ||||||||
| U.S. Treasury Note, 4.25% 08/15/15 | ||||||||
| with a par value of $142,039,900 | ||||||||
| and fair value of $151,410,726 | 148,441,873 | 148,441,873 | ||||||
| Joint Repurchase Agreements4 | ||||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 49,154,376 | 49,154,376 | ||||||
| HSBC Group issued 03/31/14 at | ||||||||
| 0.01% due 04/01/14 | 172,261,522 | 172,261,522 | ||||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 72,688,388 | 72,688,388 | ||||||
| Deutsche Bank issued 03/31/14 at | ||||||||
| 0.02% due 04/01/14 | 22,901,821 | 22,901,821 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $465,447,980) | 465,447,980 | |||||||
| Total Investments - 103.5% | ||||||||
| (Cost $807,332,441) | $ | 807,332,441 | ||||||
| Other Assets & Liabilities, net - (3.5)% | (27,197,628 | ) | ||||||
| Total Net Assets - 100.0% | $ | 780,134,813 | ||||||
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
| 2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
| 3 | Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $61,972,206 (cost $61,972,206), or 7.9% of total net assets. |
| 4 | Repurchase Agreements — See Note 5. |
| 158 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| U.S. GOVERNMENT MONEY MARKET FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $341,884,461) | $ | 341,884,461 | ||
| Repurchase agreements, at value | ||||
| (cost $465,447,980) | 465,447,980 | |||
| Total investments | ||||
| (cost $807,332,441) | 807,332,441 | |||
| Receivables: | ||||
| Fund shares sold | 30,050,300 | |||
| Interest | 29,439 | |||
| Total assets | 837,412,180 | |||
| Liabilities: | ||||
| Overdraft due to custodian bank | 11,810 | |||
| Payable for: | ||||
| Fund shares redeemed | 56,762,332 | |||
| Miscellaneous | 503,225 | |||
| Total liabilities | 57,277,367 | |||
| Net assets | $ | 780,134,813 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 780,112,645 | ||
| Undistributed net investment income | 225 | |||
| Accumulated net realized gain on investments | 21,943 | |||
| Net assets | $ | 780,134,813 | ||
| Capital shares outstanding | 780,688,677 | |||
| Net asset value per share | $ | 1.00 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Interest | $ | 813,470 | ||
| Total investment income | 813,470 | |||
| Expenses: | ||||
| Management fees | 4,591,285 | |||
| Transfer agent and administrative fees | 1,836,534 | |||
| Portfolio accounting fees | 611,998 | |||
| Registration fees | 526,334 | |||
| Custodian fees | 104,776 | |||
| Trustees’ fees* | 98,073 | |||
| Line of credit interest expense | 1,042 | |||
| Miscellaneous | 814,821 | |||
| Total expenses | 8,584,863 | |||
| Less: | ||||
| Expenses waived by service company | (2,445,964 | ) | ||
| Expenses waived by Advisor | (5,325,766 | ) | ||
| Total waived expenses | (7,771,730 | ) | ||
| Net expenses | 813,133 | |||
| Net investment income | 337 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 21,943 | |||
| Net realized gain | 21,943 | |||
| Net increase in net assets resulting from operations | $ | 22,280 | ||
| * | 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 | 159 |
| U.S. GOVERNMENT MONEY MARKET FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013a | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 337 | $ | 344 | ||||
| Net realized gain on investments | 21,943 | 1,465 | ||||||
| Net increase in net assets resulting from operations | 22,280 | 1,809 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| Money Market Class* | (335 | ) | (345 | ) | ||||
| Investor2 Class | — | (3 | ) | |||||
| Advisor Class | — | (22 | ) | |||||
| A-Class | — | (3 | ) | |||||
| C-Class | — | (3 | ) | |||||
| Net Realized Gains | ||||||||
| Money Market Class* | (1,204 | ) | — | |||||
| Total distributions to shareholders | (1,539 | ) | (376 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Money Market Class* | 12,276,487,338 | 13,013,527,296 | ||||||
| Investor2 Class | — | 5,842,956 | ||||||
| Advisor Class | — | 1,158,477,495 | ||||||
| A-Class | — | 74,372,553 | ||||||
| C-Class | — | 87,542,579 | ||||||
| Distributions reinvested | ||||||||
| Money Market Class* | 1,240 | 242 | ||||||
| Investor2 Class | — | 1 | ||||||
| Advisor Class | — | 21 | ||||||
| A-Class | — | 2 | ||||||
| C-Class | — | 1 | ||||||
| Cost of shares redeemed | ||||||||
| Money Market Class* | (12,344,744,809 | ) | (13,061,917,403 | ) | ||||
| Investor2 Class | — | (8,730,690 | ) | |||||
| Advisor Class | — | (1,602,575,758 | ) | |||||
| A-Class | — | (83,203,673 | ) | |||||
| C-Class | — | (78,326,643 | ) | |||||
| Conversion activity** | ||||||||
| Money Market Class* | — | 289,192,453 | ||||||
| Investor2 Class | — | (34,998,123 | ) | |||||
| Advisor Class | — | (179,664,763 | ) | |||||
| A-Class | — | (29,552,538 | ) | |||||
| C-Class | — | (44,977,029 | ) | |||||
| Net decrease from capital share transactions | (68,256,231 | ) | (494,991,021 | ) | ||||
| Net decrease in net assets | (68,235,490 | ) | (494,989,588 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 848,370,303 | 1,343,359,891 | ||||||
| End of year | $ | 780,134,813 | $ | 848,370,303 | ||||
| Undistributed net investment income at end of year | $ | 225 | $ | — | ||||
| 160 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| U.S. GOVERNMENT MONEY MARKET FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013a | |||||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| Money Market Class* | 12,276,487,140 | 13,013,011,949 | ||||||
| Investor2 Class | — | 5,842,955 | ||||||
| Advisor Class | — | 1,158,365,043 | ||||||
| A-Class | — | 74,372,552 | ||||||
| C-Class | — | 87,542,579 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Money Market Class* | 1,240 | 296 | ||||||
| Investor2 Class | — | 1 | ||||||
| Advisor Class | — | 25 | ||||||
| A-Class | — | 2 | ||||||
| C-Class | — | 1 | ||||||
| Shares redeemed | ||||||||
| Money Market Class* | (12,344,744,809 | ) | (13,061,402,052 | ) | ||||
| Investor2 Class | — | (8,730,690 | ) | |||||
| Advisor Class | — | (1,602,463,309 | ) | |||||
| A-Class | — | (83,203,673 | ) | |||||
| C-Class | — | (78,326,643 | ) | |||||
| Conversion activity** | ||||||||
| Money Market Class* | — | 289,368,668 | ||||||
| Investor2 Class | — | (34,994,846 | ) | |||||
| Advisor Class | — | (179,777,212 | ) | |||||
| A-Class | — | (29,569,296 | ) | |||||
| C-Class | — | (45,027,314 | ) | |||||
| Net decrease in shares | (68,256,429 | ) | (494,990,964 | ) | ||||
| * | The Money Market Class commenced operations on June 15, 2012. Operating results presented reflect the operating history of the Investor Class for periods prior to June 15, 2012 — See Note 13. |
| ** | Effective June 15, 2012, the Fund’s Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares and Investor2 Class shares were converted into the newly created Money Market Class — See Note 13. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 161 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Money Market Classa | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| 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) | — | b | — | b | — | b | — | b | — | b | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | — | b | — | b | — | b | — | b | — | |||||||||||
| Total from investment operations | — | b | — | b | — | b | — | b | — | b | ||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
| Net realized gains | (— | )b | — | (— | )b | (— | )b | — | ||||||||||||
| Total distributions | (— | )b | (— | )b | (— | )b | (— | )b | (— | )b | ||||||||||
| Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||
| Total Return | 0.00 | % | 0.00 | % | 0.00 | % | 0.01 | % | 0.01 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 780,135 | $ | 848,370 | $ | 607,565 | $ | 833,899 | $ | 872,765 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.00 | %d | 0.00 | %d | 0.00 | %d | 0.01 | % | 0.01 | % | ||||||||||
| Total expenses | 0.93 | % | 0.95 | % | 0.91 | % | 0.94 | % | 0.93 | % | ||||||||||
| Net expensesc | 0.09 | % | 0.17 | % | 0.11 | % | 0.22 | % | 0.37 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Effective June 15, 2012, the Fund’s Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares and Investor2 Class shares were converted into the newly created Money Market Class. The financial highlights for periods prior to that date reflect the performance of the former Investor Class. |
| b | Less than $0.01 per share. |
| c | Net expense information reflects the expense ratios after expense waivers. d Less than 0.01%. |
| 162 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| NOTES TO FINANCIAL STATEMENTS |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers certain Target Beta Funds (the “Funds”), while the other funds are contained in separate reports. Only A-Class, C-Class, H-Class, Advisor Class, Investor Class and Money Market Class shares had been issued by the Funds.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
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.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Funds’ securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Funds and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
The Trust calculates a NAV twice each business day; at 10:45 a.m. and at the close of the New York Stock Exchange (“NYSE”), usually 4:00 p.m. for the Russell 2000® Fund and the S&P 500® Fund. All other Funds in this report will price at the afternoon NAV. The NAV is calculated using the current market value of each Fund’s total assets as of the respective time of calculation. These financial statements are based on the March 31, 2014, afternoon NAV.
Equity securities listed on an exchange (NYSE or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized
| THE RYDEX FUNDS ANNUAL REPORT | 163 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
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 swap agreements and credit default swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s market value is then adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreements.
The U.S. Government Money Market Fund values debt securities at amortized cost pursuant to Rule 2a-7 of the 1940 Act, which approximates market value.
With the exception of the U.S. Government Money Market Fund, U.S. government securities are valued by either independent pricing services, the last traded fill price, or at the reported bid price at the close of business. Other 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 yields, 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 and repurchase agreements are valued at amortized cost, which approximates market value.
Open-end investment companies (“Mutual Funds”) are valued at their net asset value per share (“NAV”) as of the close of business on the valuation date. Exchange Traded Funds (“ETFs”) and closed-end investment companies are valued at the last quoted sales price.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts and options thereupon, and other derivative investments, 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; and (iii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer.
C. Dividends from net investment income are declared daily in the Government Long Bond 1.2x Strategy Fund and the U.S. Government Money Market Fund. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions of net investment income in the remaining Funds and distributions of net realized gains, if any, in all Funds are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
D. Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
E. Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement
| 164 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
or termination of the agreement are recognized as realized gains or losses.
Credit default swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
F. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain and loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
G. 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.
H. The Funds may leave cash overnight in their cash account with the custodian, U.S. Bank. 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.
Segregated cash with the broker is held as collateral for investments in derivative instruments such as futures contracts or swap agreements.
I. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution fees relating to A-Class shares and service and distribution fees related to Advisor Class shares and C-Class shares, are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.
J. 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.
2. Financial Instruments
As part of their investment strategy, the Funds utilize a variety of derivative instruments including futures and swap agreements. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities.
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 and related options, 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 the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded
| THE RYDEX FUNDS ANNUAL REPORT | 165 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
futures, guarantees against default. Cash deposits are shown as restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A credit default swap enables a Fund to buy or sell protection against a defined credit event of an issuer or a basket of securities. Generally, the seller of credit protection against an issuer or basket of securities receives a periodic payment from the buyer to compensate against potential default events. If a default event occurs, the seller must pay the buyer the full notional value of the reference obligation in exchange for the reference obligation. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the Fund selling the credit protection. A Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which the Fund is selling credit protection, the default of a third party issuer. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
The Nova Fund, Mid-Cap 1.5x Strategy Fund, Russell 2000® 1.5x Strategy Fund and Government Long Bond 1.2x Strategy Fund use derivative instruments to achieve leveraged exposure to their respective underlying indices. Since these Funds’ investment strategy involves consistently applied 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. In addition, as investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, this creates an opportunity for increased net income but, at the same time, additional leverage risk. The Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile and riskier than if they had not been leveraged.
In conjunction with the use of futures and swap agreements, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or the repurchase agreements allocated to each Fund.
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.
3. Fees and Other Transactions with Affiliates
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.
| Management Fees | ||||
| Fund | (as a % of Net Assets) | |||
| Nova Fund | 0.75 | % | ||
| S&P 500® Fund | 0.75 | % | ||
| Inverse S&P 500® Strategy Fund | 0.90 | % | ||
| Inverse Nasdaq-100® Strategy Fund | 0.90 | % | ||
| Mid-Cap 1.5x Strategy Fund | 0.90 | % | ||
| Inverse Mid-Cap Strategy Fund | 0.90 | % | ||
| Russell 2000® 1.5x Strategy Fund | 0.90 | % | ||
| Russell 2000® Fund | 0.75 | % | ||
| Inverse Russell 2000® Strategy Fund | 0.90 | % | ||
| Government Long Bond 1.2x Strategy Fund | 0.50 | % | ||
| High Yield Strategy Fund | 0.75 | % | ||
| Inverse High Yield Strategy Fund | 0.75 | % | ||
| U.S. Government Money Market Fund | 0.50 | % | ||
RFS provides transfer agent and administrative services to the Trust for fees calculated at the annualized rates below based on the average daily net assets of the Funds. For these services, RFS receives the following:
| Transfer Agent and | ||||
| Administrative Fees | ||||
| Fund | (as a % of Net Assets) | |||
| Government Long Bond 1.2x Strategy Fund | 0.20 | % | ||
| U.S. Government Money Market Fund | 0.20 | % | ||
| Remaining Funds | 0.25 | % | ||
RFS also provides accounting services to the Funds for fees calculated at annualized rates below, based on the average daily net assets of each Fund. Effective August 1, 2013, S&P 500® Fund and Russell 2000® Fund increased their fund accounting fees to 0.15% of fund net assets.
| 166 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| Fund Accounting Fees | (as a % of net assets) | |||
| S&P 500® Fund | 0.15 | % | ||
| Russell 2000® Fund | 0.15 | % | ||
| Remaining Funds | ||||
| On the first $250 million | 0.10 | % | ||
| On the next $250 million | 0.075 | % | ||
| On the next $250 million | 0.05 | % | ||
| Over $750 million | 0.03 | % | ||
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution and Shareholder Services Plan applicable to its Advisor Class shares and a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services. With regard to Advisor Class shares only, if a Service Provider provides shareholder services, GFD will receive shareholder servicing fees from the Funds 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 shareholder services it performs.
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
GI and its affiliates have voluntarily agreed to waive their fees, including but not limited to accounting, shareholder services and investment advisory fees, in an attempt to maintain a positive net yield for the U.S. Government Money Market Fund. GI or its affiliates may terminate this voluntary waiver at any time upon notice to the Fund. When shareholder services fees are waived, dealer compensation will be reduced to the extent of such waiver.
For the year ended March 31, 2014, GFD retained sales charges of $333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
4. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).
Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.
| THE RYDEX FUNDS ANNUAL REPORT | 167 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The following table summarizes the inputs used to value the Funds’ net assets at March 31, 2014:
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Assets | �� | |||||||||||||||||||||||
| Nova Fund | $ | 94,741,239 | $ | 272,257 | $ | 18,784,747 | $ | 336,603 | $ | — | $ | 114,134,846 | ||||||||||||
| S&P 500® Fund | 165,993,076 | 474,871 | 119,403,663 | 610,366 | — | 286,481,976 | ||||||||||||||||||
| Inverse S&P 500® Strategy Fund | 22,990,800 | — | 59,203,039 | — | — | 82,193,839 | ||||||||||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | 10,407,900 | 38,895 | — | 10,446,795 | ||||||||||||||||||
| Mid-Cap 1.5x Strategy Fund | 20,154,863 | 54,878 | 4,543,340 | 148,297 | — | 24,901,378 | ||||||||||||||||||
| Inverse Mid-Cap Strategy Fund | — | — | 4,009,107 | — | — | 4,009,107 | ||||||||||||||||||
| Russell 2000® 1.5x Strategy Fund | 15,714,834 | — | 3,634,272 | 93,276 | — | 19,442,382 | ||||||||||||||||||
| Russell 2000® Fund | 37,171,976 | — | 11,529,301 | 57,068 | — | 48,758,345 | ||||||||||||||||||
| Inverse Russell 2000® Strategy Fund | — | — | 16,608,012 | 9,700 | — | 16,617,712 | ||||||||||||||||||
| Government Long Bond 1.2x Strategy Fund | 84,218,357 | 289,348 | 43,246 | — | — | 84,550,951 | ||||||||||||||||||
| High Yield Strategy Fund | 28,730,517 | — | 74,263,959 | 291,654 | — | 103,286,130 | ||||||||||||||||||
| Inverse High Yield Strategy Fund | — | 25,661 | 8,862,245 | — | — | 8,887,906 | ||||||||||||||||||
| U.S. Government Money Market Fund | — | — | 807,332,441 | — | — | 807,332,441 | ||||||||||||||||||
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Inverse S&P 500® Strategy Fund | $ | — | $ | 62,991 | $ | — | $ | 589,119 | $ | — | $ | 652,110 | ||||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | — | 18,570 | — | 18,570 | ||||||||||||||||||
| Inverse Mid-Cap Strategy Fund | — | — | — | 53,267 | — | 53,267 | ||||||||||||||||||
| Russell 2000® 1.5x Strategy Fund | — | 102,613 | — | — | — | 102,613 | ||||||||||||||||||
| Russell 2000® Fund | — | 70,420 | — | — | — | 70,420 | ||||||||||||||||||
| Inverse Russell 2000® Strategy Fund | — | — | — | 200,303 | — | 200,303 | ||||||||||||||||||
| High Yield Strategy Fund | — | 495,412 | — | — | — | 495,412 | ||||||||||||||||||
| Inverse High Yield Strategy Fund | — | — | — | 23,703 | — | 23,703 | ||||||||||||||||||
| * | Other financial instruments may include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end. |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in the investment’s valuation changes. The Funds recognize transfers between the levels as of the beginning of the period. As of March 31, 2014, Russell 2000® 1.5x Strategy Fund and Russell 2000® Fund had securities with a total value of $2,584 and $5,538 respectively, transfer from Level 1 to Level 2 based on a change in availability of market information.
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.
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 U.S. Government Agencies. 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.
| 168 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| HSBC Group | U.S. Treasury Strips | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 519,000,000 | $ | 519,000,144 | 11/15/39 - 05/15/40 | $ | 1,347,115,400 | $ | 529,380,006 | |||||||||
| RBC Capital Markets | U.S. TIP Notes | |||||||||||||||||
| 0.02% | 0.13% - 2.50% | |||||||||||||||||
| Due 04/01/14 | 219,000,000 | 219,000,091 | 07/15/16 - 07/15/22 | 156,009,700 | 175,640,035 | |||||||||||||
| U.S. Treasury Strips | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 11/15/26 - 02/15/36 | 81,000,000 | 47,740,000 | ||||||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Notes | |||||||||||||||||
| 0.01% | 1.25% - 7.88% | |||||||||||||||||
| Due 04/01/14 | 148,095,295 | 148,095,336 | 08/15/15 - 02/15/21 | 137,725,900 | 151,057,202 | |||||||||||||
| Deutsche Bank | U.S. Treasury Note | |||||||||||||||||
| 0.02% | 0.88% | |||||||||||||||||
| Due 04/01/14 | 69,000,000 | 69,000,038 | 09/15/16 | 70,039,600 | 70,380,047 | |||||||||||||
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. Disclosures about Credit Derivatives
In accordance with its principal investment strategy, the High Yield Strategy Fund enters into credit default swaps as a seller of protection primarily to gain exposure similar to the high yield bond market. 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 seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. If a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The Notional Principal reflects the maximum potential amount the Fund could be required to make as a seller of credit protection if a credit event occurs. As the seller of protection, the Fund receives periodic premium payments from the counterparty and may also receive or pay an upfront premium adjustment to the stated periodic premium. In the event a credit event occurs, an adjustment will be made to any upfront premiums that were received by a reduction of 1.00% per credit event.
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The table on page 142 included in the Schedule of Investments summarizes the information with regard to sold protection on credit default swap contracts as of March 31, 2014.
7. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations.
| THE RYDEX FUNDS ANNUAL REPORT | 169 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The following Funds utilized derivatives for the following purposes:
| Fund Name | Index Exposure | Liquidity | Leverage |
| Nova Fund | x | x | x |
| S&P 500® Fund | x | x | — |
| Inverse S&P 500® Strategy Fund | x | x | — |
| Inverse NASDAQ-100® Strategy Fund | x | x | — |
| Mid-Cap 1.5x Strategy Fund | x | x | x |
| Inverse Mid-Cap Strategy Fund | x | x | — |
| Russell 2000® 1.5x Strategy Fund | x | x | x |
| Russell 2000® Fund | x | x | — |
| Inverse Russell 2000® Strategy Fund | x | x | — |
| Government Long Bond 1.2x Strategy Fund | x | x | x |
| High Yield Strategy Fund | x | x | — |
| Inverse High Yield Strategy Fund | x | x | — |
The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Funds’ net assets on a daily basis.
| Approximate percentage of Fund’s |
| net assets on a daily basis |
| Fund | Long | Short | ||||||
| Nova Fund | 75 | % | — | |||||
| S&P 500® Fund | 45 | % | — | |||||
| Inverse S&P 500® Strategy Fund | — | 100 | % | |||||
| Inverse NASDAQ-100® Strategy Fund | — | 100 | % | |||||
| Mid-Cap 1.5x Strategy Fund | 75 | % | — | |||||
| Inverse Mid-Cap Strategy Fund | — | 100 | % | |||||
| Russell 2000® 1.5x Strategy Fund | 75 | % | — | |||||
| Russell 2000® Fund | 25 | % | — | |||||
| Inverse Russell 2000® Strategy Fund | — | 100 | % | |||||
| Government Long Bond 1.2x Strategy Fund | 80 | % | — | |||||
| High Yield Strategy Fund* | 90 | % | — | |||||
| Inverse High Yield Strategy Fund* | — | 95 | % | |||||
*These Funds utilize a combination of currency and/or financial-linked derivatives to obtain exposure to their benchmarks. The gross derivative instrument exposure is 180% and 195% for the High Yield Strategy and Inverse High Yield Strategy Fund, respectively.
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2014:
| Derivative Investment Type | Asset Derivatives | Liability Derivatives |
| Equity/Interest Rate contracts | Variation margin | Variation margin |
| Equity/Credit contracts | Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31, 2014:
Asset Derivative Investments Value
| Futures | Swaps | Futures | Swaps | Total Value at | ||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | March 31, | ||||||||||||||||
| Fund | Contracts* | Contracts | Contracts* | Contracts | 2014 | |||||||||||||||
| Nova Fund | $ | 272,257 | $ | 336,603 | $ | — | $ | — | $ | 608,860 | ||||||||||
| S&P 500® Fund | 474,871 | 610,366 | — | — | 1,085,237 | |||||||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | 38,895 | — | — | 38,895 | |||||||||||||||
| Mid-Cap 1.5x Strategy Fund | 54,878 | 148,297 | — | — | 203,175 | |||||||||||||||
| Russell 2000® 1.5x Strategy Fund | — | 93,276 | — | — | 93,276 | |||||||||||||||
| Russell 2000® Fund | — | 57,068 | — | — | 57,068 | |||||||||||||||
| Inverse Russell 2000® Strategy Fund | — | 9,700 | — | — | 9,700 | |||||||||||||||
| Government Long Bond 1.2x Strategy Fund | — | — | 289,348 | — | 289,348 | |||||||||||||||
| High Yield Strategy Fund | — | — | — | 291,654 | 291,654 | |||||||||||||||
| Inverse High Yield Strategy Fund | — | — | 25,661 | — | 25,661 | |||||||||||||||
| 170 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
Liability Derivative Investments Value
| Futures | Swaps | Futures | Swaps | Total Value at | ||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | March 31, | ||||||||||||||||
| Fund | Contracts* | Contracts | Contracts* | Contracts | 2014 | |||||||||||||||
| Inverse S&P 500® Strategy Fund | $ | 62,991 | $ | 589,119 | $ | — | $ | — | $ | 652,110 | ||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | 18,570 | — | — | 18,570 | |||||||||||||||
| Inverse Mid-Cap Strategy Fund | — | 53,267 | — | — | 53,267 | |||||||||||||||
| Russell 2000® 1.5x Strategy Fund | 102,613 | — | — | — | 102,613 | |||||||||||||||
| Russell 2000® Fund | 70,420 | — | — | — | 70,420 | |||||||||||||||
| Inverse Russell 2000® Strategy Fund | — | 200,303 | — | — | 200,303 | |||||||||||||||
| High Yield Strategy Fund | — | — | 495,412 | — | 495,412 | |||||||||||||||
| Inverse High Yield Strategy Fund | — | — | — | 23,703 | 23,703 | |||||||||||||||
| * | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended March 31, 2014:
| 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 March 31, 2014:
| Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations |
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Nova Fund | $ | 1,869,674 | $ | 9,130,015 | $ | — | $ | — | $ | 10,999,689 | ||||||||||
| S&P 500® Fund | (1,501,671 | ) | 63,012 | — | — | (1,438,659 | ) | |||||||||||||
| Inverse S&P 500® Strategy Fund | (11,003,914 | ) | (26,247,179 | ) | — | — | (37,251,093 | ) | ||||||||||||
| Inverse NASDAQ-100® Strategy Fund | (1,284,158 | ) | (2,140,350 | ) | — | — | (3,424,508 | ) | ||||||||||||
| Mid-Cap 1.5x Strategy Fund | 2,781,382 | 1,432,186 | — | — | 4,213,568 | |||||||||||||||
| Inverse Mid-Cap Strategy Fund | (307,841 | ) | (711,420 | ) | — | — | (1,019,261 | ) | ||||||||||||
| Russell 2000® 1.5x Strategy Fund | 2,406,473 | 2,382,696 | — | — | 4,789,169 | |||||||||||||||
| Russell 2000® Fund | 2,359,368 | 761,558 | — | — | 3,120,926 | |||||||||||||||
| Inverse Russell 2000® Strategy Fund | (1,776,288 | ) | (4,505,218 | ) | — | — | (6,281,506 | ) | ||||||||||||
| Government Long Bond 1.2x Strategy Fund | — | — | (20,518,519 | ) | — | (20,518,519 | ) | |||||||||||||
| High Yield Strategy Fund | — | — | (2,095,549 | ) | 10,910,521 | 8,814,972 | ||||||||||||||
| Inverse High Yield Strategy Fund | — | — | 1,532,550 | (3,380,378 | ) | (1,847,828 | ) | |||||||||||||
| Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations |
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Nova Fund | $ | 263,695 | $ | 101,744 | $ | — | $ | — | $ | 365,439 | ||||||||||
| S&P 500® Fund | 472,968 | 350,872 | — | — | 823,840 | |||||||||||||||
| Inverse S&P 500® Strategy Fund | 198,052 | (200,682 | ) | — | — | (2,630 | ) | |||||||||||||
| Inverse NASDAQ-100® Strategy Fund | 17,114 | 47,899 | — | — | 65,013 | |||||||||||||||
| Mid-Cap 1.5x Strategy Fund | (624,939 | ) | (64,442 | ) | — | — | (689,381 | ) | ||||||||||||
| Inverse Mid-Cap Strategy Fund | 29,490 | (47,768 | ) | — | — | (18,278 | ) | |||||||||||||
| Russell 2000® 1.5x Strategy Fund | (108,018 | ) | 39,426 | — | — | (68,592 | ) | |||||||||||||
| Russell 2000® Fund | (89,644 | ) | (8,960 | ) | — | — | (98,604 | ) | ||||||||||||
| Inverse Russell 2000® Strategy Fund | 72 | (167,759 | ) | — | — | (167,687 | ) | |||||||||||||
| Government Long Bond 1.2x Strategy Fund | — | — | 1,106,762 | — | 1,106,762 | |||||||||||||||
| High Yield Strategy Fund | — | — | (858,174 | ) | (450,313 | ) | (1,308,487 | ) | ||||||||||||
| Inverse High Yield Strategy Fund | — | — | 34,821 | (2,830 | ) | 31,991 | ||||||||||||||
| THE RYDEX FUNDS ANNUAL REPORT | 171 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
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 distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| Nova Fund | $ | 13,399,767 | ||
| S&P 500® Fund | 19,748,208 | |||
| Inverse S&P 500® Strategy Fund | 37,877,636 | |||
| Inverse NASDAQ-100® Strategy Fund | 17,351,209 | |||
| Mid-Cap 1.5x Strategy Fund | 7,314,398 | |||
| Russell 2000® 1.5x Strategy Fund | 4,511,523 | |||
| Russell 2000® Fund | 3,998,405 | |||
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Return | Total | |||||||||||||
| Fund | Income | Capital Gain | of Capital | Distributions | ||||||||||||
| Nova Fund | $ | — | $ | — | $ | — | $ | — | ||||||||
| S&P 500® Fund | 402,265 | — | — | 402,265 | ||||||||||||
| Inverse S&P 500® Strategy Fund | — | — | — | — | ||||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | — | — | ||||||||||||
| Mid-Cap 1.5x Strategy Fund | — | — | — | — | ||||||||||||
| Inverse Mid-Cap Strategy Fund | — | — | — | — | ||||||||||||
| Russell 2000® 1.5x Strategy Fund | — | — | — | — | ||||||||||||
| Russell 2000® Fund | 2,441,958 | — | — | 2,441,958 | ||||||||||||
| Inverse Russell 2000® Strategy Fund | — | — | — | — | ||||||||||||
| Government Long Bond 1.2x Strategy Fund | 1,710,481 | — | 13,827 | 1,724,308 | ||||||||||||
| High Yield Strategy Fund | 21,208,428 | — | — | 21,208,428 | ||||||||||||
| Inverse High Yield Strategy Fund | — | — | — | — | ||||||||||||
| U.S. Government Money Market Fund | 1,539 | — | — | 1,539 | ||||||||||||
| 172 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| Nova Fund | $ | 72,406 | $ | — | $ | 72,406 | ||||||
| S&P 500® Fund | 606,873 | — | 606,873 | |||||||||
| Inverse S&P 500® Strategy Fund | — | — | — | |||||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | — | |||||||||
| Mid-Cap 1.5x Strategy Fund | — | — | — | |||||||||
| Inverse Mid-Cap Strategy Fund | — | — | — | |||||||||
| Russell 2000® 1.5x Strategy Fund | — | — | — | |||||||||
| Russell 2000® Fund | — | — | — | |||||||||
| Inverse Russell 2000® Strategy Fund | — | — | — | |||||||||
| Government Long Bond 1.2x Strategy Fund | 3,523,210 | — | 3,523,210 | |||||||||
| High Yield Strategy Fund | 7,730,042 | 4,377,221 | 12,107,263 | |||||||||
| Inverse High Yield Strategy Fund | — | — | — | |||||||||
| U.S. Government Money Market Fund | 376 | — | 376 | |||||||||
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | (Depreciation) | Carryforward1 | ||||||||||||
| Nova Fund | $ | 169,151 | $ | — | $ | 22,181,142 | $ | (18,553,242 | ) | |||||||
| S&P 500® Fund | — | 2,899,418 | 58,015,730 | — | ||||||||||||
| Inverse S&P 500® Strategy Fund | — | — | (591,256 | ) | (363,836,149 | ) | ||||||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | 20,325 | (64,465,387 | ) | |||||||||||
| Mid-Cap 1.5x Strategy Fund | 227,935 | 409,228 | 5,579,338 | — | ||||||||||||
| Inverse Mid-Cap Strategy Fund | — | — | (53,267 | ) | (16,872,743 | ) | ||||||||||
| Russell 2000® 1.5x Strategy Fund | — | 244,398 | 5,235,991 | — | ||||||||||||
| Russell 2000® Fund | — | — | 9,515,631 | — | ||||||||||||
| Inverse Russell 2000® Strategy Fund | — | — | (190,603 | ) | (63,949,545 | ) | ||||||||||
| Government Long Bond 1.2x Strategy Fund | — | — | 467,025 | (48,951,675 | ) | |||||||||||
| High Yield Strategy Fund | — | — | 418,395 | — | ||||||||||||
| Inverse High Yield Strategy Fund | — | — | (23,702 | ) | (15,424,348 | ) | ||||||||||
| U.S. Government Money Market Fund | 22,168 | — | — | — | ||||||||||||
1A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Total | ||||||||||||||||||||||||||||||||
| Expires in | Expires in | Expires in | Expires in | Expires in | Unlimited | Unlimited | Capital Loss | |||||||||||||||||||||||||
| Fund | 2015 | 2016 | 2017 | 2018 | 2019 | Short-Term | Long-Term | Carryforward | ||||||||||||||||||||||||
| Nova Fund | $ | — | $ | — | $ | (16,337,372 | ) | $ | (2,215,870 | ) | $ | — | $ | — | $ | — | $ | (18,553,242 | ) | |||||||||||||
| Inverse S&P 500® Strategy Fund | (59,724,340 | ) | — | — | (107,667,355 | ) | (64,265,070 | ) | (111,198,928 | ) | (20,980,456 | ) | (363,836,149 | ) | ||||||||||||||||||
| Inverse NASDAQ-100® Strategy Fund | (15,380,081 | ) | (8,534,020 | ) | — | (16,105,314 | ) | (9,266,829 | ) | (12,770,947 | ) | (2,408,196 | ) | (64,465,387 | ) | |||||||||||||||||
| Inverse Mid-Cap Strategy Fund | (3,855,787 | ) | (850,800 | ) | — | (6,411,872 | ) | (1,499,847 | ) | (3,491,020 | ) | (763,417 | ) | (16,872,743 | ) | |||||||||||||||||
| Inverse Russell 2000® Strategy Fund | (13,474,576 | ) | (7,459,340 | ) | — | (15,938,452 | ) | (10,451,551 | ) | (13,014,411 | ) | (3,611,215 | ) | (63,949,545 | ) | |||||||||||||||||
| Government Long Bond 1.2x Strategy Fund | — | — | — | — | — | (37,304,621 | ) | (11,647,054 | ) | (48,951,675 | ) | |||||||||||||||||||||
| Inverse High Yield Strategy Fund | — | — | — | (3,356,295 | ) | (4,361,182 | ) | (7,706,871 | ) | — | (15,424,348 | ) | ||||||||||||||||||||
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 typically due to late year loss deferrals, losses deferred due to wash sales, utilization of earnings and profits on shareholder redemptions, and "mark to market" of futures contracts and passive foreign investment companies (PFICs) for tax purposes. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent,
| THE RYDEX FUNDS ANNUAL REPORT | 173 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on the net assets or NAV per share.
On the Statements of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| Nova Fund | $ | (11,912 | ) | $ | — | $ | 11,912 | |||||
| S&P 500® Fund | 1,628,381 | 3,540 | (1,631,921 | ) | ||||||||
| Inverse S&P 500® Strategy Fund | (40,241,703 | ) | 2,364,067 | 37,877,636 | ||||||||
| Inverse NASDAQ-100® Strategy Fund | (17,586,748 | ) | 235,539 | 17,351,209 | ||||||||
| Mid-Cap 1.5x Strategy Fund | 1,774,161 | 431,696 | (2,205,857 | ) | ||||||||
| Inverse Mid-Cap Strategy Fund | (61,429 | ) | 61,429 | — | ||||||||
| Russell 2000® 1.5x Strategy Fund | 738,722 | 347,812 | (1,086,534 | ) | ||||||||
| Russell 2000® Fund | 3,280,236 | 730,884 | (4,011,120 | ) | ||||||||
| Inverse Russell 2000® Strategy Fund | (286,263 | ) | 286,263 | — | ||||||||
| Government Long Bond 1.2x Strategy Fund | (13,827 | ) | 13,827 | — | ||||||||
| High Yield Strategy Fund | 13,885,761 | 1,603,218 | (15,488,979 | ) | ||||||||
| Inverse High Yield Strategy Fund | (1,651,358 | ) | 504,074 | 1,147,284 | ||||||||
| U.S. Government Money Market Fund | — | 223 | (223 | ) | ||||||||
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| Nova Fund | $ | 91,681,447 | $ | 21,999,240 | $ | (154,701 | ) | $ | 21,844,539 | |||||||
| S&P 500® Fund | 227,991,375 | 57,514,613 | (109,249 | ) | 57,405,364 | |||||||||||
| Inverse S&P 500® Strategy Fund | 82,195,976 | 7,063 | (9,200 | ) | (2,137 | ) | ||||||||||
| Inverse NASDAQ-100® Strategy Fund | 10,407,900 | — | — | — | ||||||||||||
| Mid-Cap 1.5x Strategy Fund | 19,267,162 | 5,562,153 | (131,112 | ) | 5,431,041 | |||||||||||
| Inverse Mid-Cap Strategy Fund | 4,009,107 | — | — | — | ||||||||||||
| Russell 2000® 1.5x Strategy Fund | 14,206,391 | 5,220,432 | (77,717 | ) | 5,142,715 | |||||||||||
| Russell 2000® Fund | 39,242,714 | 9,853,691 | (395,128 | ) | 9,458,563 | |||||||||||
| Inverse Russell 2000® Strategy Fund | 16,608,012 | — | — | — | ||||||||||||
| Government Long Bond 1.2x Strategy Fund | 83,794,578 | 467,025 | — | 467,025 | ||||||||||||
| High Yield Strategy Fund | 102,867,737 | 146,983 | (20,242 | ) | 126,741 | |||||||||||
| Inverse High Yield Strategy Fund | 8,862,245 | — | — | — | ||||||||||||
| U.S. Government Money Market Fund | 807,332,441 | — | — | — | ||||||||||||
Pursuant to Federal income tax regulations applicable to investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2014:
| Fund | Ordinary | Capital | ||||||
| S&P 500® Fund | $ | (16,281 | ) | $ | — | |||
| Inverse S&P 500® Strategy Fund | (382,578 | ) | — | |||||
| Inverse Mid-Cap Strategy Fund | (15,573 | ) | — | |||||
| Russell 2000® 1.5x Strategy Fund | (56,648 | ) | — | |||||
| Russell 2000® Fund | (99,578 | ) | — | |||||
| Inverse Russell 2000® Strategy Fund | (62,483 | ) | — | |||||
| Inverse High Yield Strategy Fund | (181,266 | ) | — | |||||
| 174 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
9. Securities Transactions
For the year ended March 31, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, derivatives and short-term investments, were as follows:
| Fund | Purchases | Sales | ||||||
| Nova Fund | $ | 217,553,864 | $ | 183,954,873 | ||||
| S&P 500® Fund | 411,033,012 | 501,104,388 | ||||||
| Inverse S&P 500® Strategy Fund | 23,000,000 | — | ||||||
| Inverse NASDAQ-100® Strategy Fund | — | — | ||||||
| Mid-Cap 1.5x Strategy Fund | 172,909,414 | 197,815,242 | ||||||
| Inverse Mid-Cap Strategy Fund | — | — | ||||||
| Russell 2000® 1.5x Strategy Fund | 139,932,509 | 158,752,977 | ||||||
| Russell 2000® Fund | 129,646,381 | 162,748,020 | ||||||
| Inverse Russell 2000® Strategy Fund | — | — | ||||||
| High Yield Strategy Fund | 27,956,663 | 45,642,332 | ||||||
| Inverse High Yield Strategy Fund | 6,573,952 | 6,618,607 | ||||||
| U.S. Government Money Market Fund | 20,000,000 | — | ||||||
For the year ended March 31, 2014, the cost of purchases and proceeds from sales of government securities were:
| Fund | Purchases | Sales | ||||||
| Government Long Bond 1.2x Strategy Fund | $ | 3,375,076,483 | $ | 3,500,048,073 | ||||
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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Funds did not have any borrowings under this agreement at March 31, 2014.
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Average Daily Balance | |||
| Nova Fund | $ 44,811 | |||
| S&P 500 Fund | 28,542 | |||
| Russell 2000® 1.5x Strategy Fund | 43,556 | |||
| Russell 2000® Fund | 7,249 | |||
| Government Long Bond 1.2x Strategy Fund | 30,214 | |||
| U.S. Government Money Market Fund | 82,225 | |||
11. 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, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies and cash. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
| THE RYDEX FUNDS ANNUAL REPORT | 175 |
NOTES TO FINANCIAL STATEMENTS (continued)
At March 31, 2014, the Funds participated in securities lending as follows:
| Cash | ||||||||
| Value of | Collateral | |||||||
| Fund | Securities Loaned | Received | ||||||
| Nova Fund | $ 6,592 | $ 6,800 | ||||||
| S&P 500® Fund | 55,494 | 56,700 | ||||||
| Mid-Cap 1.5x Strategy Fund | 146,050 | 149,145 | ||||||
| Russell 2000® 1.5x Strategy Fund | 58,592 | 61,043 | ||||||
| Russell 2000® Fund | 257,689 | 263,348 | ||||||
| High Yield Strategy Fund | 4,304,184 | 4,389,000 | ||||||
Cash collateral received was invested in joint repurchase agreements at March 31, 2014:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| BNP Paribas Securities Corp. | U.S. TIP Bond | |||||||||||||||||
| 0.05% | 0.75% | |||||||||||||||||
| Due 04/01/14 | $2,390,672 | $2,390,675 | 02/15/42 | $2,690,478 | $2,438,419 | |||||||||||||
| HSBC Securities, Inc. | Fannie Mae Strips | |||||||||||||||||
| 0.05% | 0.00% | |||||||||||||||||
| Due 04/01/14 | 2,133,215 | 2,133,218 | 07/15/14 - 01/15/30 | 2,691,600 | 2,175,821 | |||||||||||||
| Deutsche Bank Securities, Inc. | U.S. Treasury Note/Bond | |||||||||||||||||
| 0.05% - 0.08% | 1.75% - 8.75% | |||||||||||||||||
| Due 04/01/14 | 402,147 | 402,147 | 05/15/17 - 05/15/23 | 388,040 | 372,669 | |||||||||||||
| Fannie Mae Strip | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 05/15/30 | 72,233 | 37,528 | ||||||||||||||||
12. Reverse Share Splits
A reverse share split occurred for the following funds at the close of business:
| Fund | Effective Date | Split Type |
| Inverse NASDAQ-100® Strategy Fund | February 21, 2014 | One-for-Five Reverse Split |
| Inverse Mid-Cap Strategy Fund | February 7, 2014 | One-for-Three Reverse Split |
| Inverse Russell 2000® Strategy Fund | February 7, 2014 | One-for-Three Reverse Split |
| Government Long Bond 1.2x Strategy Fund | February 7, 2014 | One-for-Three Reverse Split |
The effect of these transactions was to divide the number of outstanding shares of the Funds by the respective split ratio, resulting in a corresponding increase in net asset value per share. The share transactions presented in the statement of changes in net assets and the per share data in the financial highlights for each of the periods presented prior to the effective date have been restated to reflect these reverse share splits. There were no changes in net assets, results of operations or total return as a result of these transactions.
13. U.S. Government Money Market Fund Consolidation
Effective June 15, 2012, 816,436,768 Investor Class shares, 179,777,212 Advisor Class shares, 29,569,296 A-Class shares, 45,027,314 C-Class shares, and 34,994,846 Investor2 Class shares of the U.S. Government Money Market Fund (the “Fund”) were converted to the Fund’s new share class, the Money Market Class shares, at a 1 for 1 conversion ratio. The Money Market Class shares expense structure was substantially similar to the former Investor Class. Accordingly, for financial reporting purposes, the Money Market Class’ operating results presented in the financial statements and financial highlights reflect the operating history of the Investor Class for periods prior to June 15, 2012.
14. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected
| 176 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (concluded) |
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 the Tribune Company 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 Series Funds, 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 Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
| THE RYDEX FUNDS ANNUAL REPORT | 177 |
NOTES TO FINANCIAL STATEMENTS (concluded)
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168; U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
15. 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 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, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP.
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of Assets | ||||||||||||||||||||||||||
| Gross Amounts Offset | Presented on the | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statements of | Statements of Assets | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Assets1 | Assets and Liabilities | and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| Nova Fund | Swap equity contracts | $336,603 | $ — | $336,603 | $ — | $ — | $336,603 | |||||||||||||||||||
| S&P 500® Fund | Swap equity contracts | 610,366 | — | 610,366 | — | — | 610,366 | |||||||||||||||||||
| Inverse NASDAQ-100® | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 38,895 | — | 38,895 | — | — | 38,895 | |||||||||||||||||||
| Mid-Cap 1.5x Strategy Fund | Swap equity contracts | 148,297 | — | 148,297 | — | — | 148,297 | |||||||||||||||||||
| Russell 2000® 1.5x | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 93,276 | — | 93,276 | — | — | 93,276 | |||||||||||||||||||
| Russell 2000® Fund | Swap equity contracts | 57,068 | — | 57,068 | — | — | 57,068 | |||||||||||||||||||
| Inverse Russell 2000® | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 9,700 | — | 9,700 | — | — | 9,700 | |||||||||||||||||||
| 178 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (concluded) |
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of | ||||||||||||||||||||||||||
| Gross Amounts Offset | Liabilities Presented | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statements of | on the Statements of | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Liabilities1 | Assets and Liabilities | Assets and Liabilities | Instruments | Pledged2 | Amount | |||||||||||||||||||
| Inverse S&P 500® | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | $589,119 | $ — | $589,119 | $ — | $ — | $589,119 | |||||||||||||||||||
| Inverse NASDAQ-100® | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 18,570 | — | 18,570 | — | — | 18,570 | |||||||||||||||||||
| Inverse Mid-Cap | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 53,267 | — | 53,267 | — | — | 53,267 | |||||||||||||||||||
| Inverse Russell 2000® | ||||||||||||||||||||||||||
| Strategy Fund | Swap equity contracts | 200,303 | — | 200,303 | — | — | 200,303 | |||||||||||||||||||
1 Exchange traded futures and centrally cleared swaps are excluded from these reported amounts.
2 Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as Segregated cash with broker on the Statements of Assets and Liabilities.
16. Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act. The Funds may invest in the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, and Guggenheim Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The financial statements on Form N-CSR dated March 31, 2014 of the Cash Management will be available publicly or upon request. Transactions during the period ended March 31, 2014 in which the portfolio company is an “affiliated person” are as follows:
| Value | Value | Shares | Investment | |||||||||||||||||||||||
| Fund | Security | 03/28/13 | Additions | Reductions | 03/31/14 | 03/31/14 | Income | |||||||||||||||||||
| Inverse S&P 500® Strategy Fund | Mutual Fund: | |||||||||||||||||||||||||
| Guggenheim Strategy Fund I | $ — | $23,000,000 | $ — | $22,990,800 | 920,000 | $13,365 | ||||||||||||||||||||
| High Yield Strategy Fund | Mutual Fund: | |||||||||||||||||||||||||
| Guggenheim Strategy Fund II | — | 23,000,000 | — | 22,981,600 | 920,000 | 7,913 | ||||||||||||||||||||
| THE RYDEX FUNDS ANNUAL REPORT | 179 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Nova Fund, S&P 500® Fund, Inverse S&P 500® Strategy Fund, Inverse NASDAQ-100® Strategy Fund, Mid-Cap 1.5x Strategy Fund, Inverse Mid-Cap Strategy Fund, Russell 2000® 1.5x Strategy Fund, Russell 2000® Fund, Inverse Russell 2000® Strategy Fund, Government Long Bond 1.2x Strategy Fund, High Yield Strategy Fund, Inverse High Yield Strategy Fund and U.S. Government Money Market Fund (thirteen of the series constituting the Rydex Series Funds) (the “Funds”) as of March 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at March 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
May 30, 2014
| 180 | THE RYDEX FUNDS ANNUAL REPORT |
| OTHER INFORMATION (Unaudited) |
Tax Information
This information is being provided as required by the Internal Revenue Code (IRC). Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
| Fund | % Qualifying | |||
| S&P 500® Fund | 100.00 | % | ||
| Russell 2000® Fund | 4.02 | % | ||
The following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:
| Fund | % Qualifying | |||
| S&P 500® Fund | 100.00 | % | ||
| Russell 2000® Fund | 4.02 | % | ||
Additionally, of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:
| Fund | % Qualifying | % STCG Qualifying | ||||||
| Russell 2000® Fund | 0.00 | % | 100.00 | % | ||||
| Government Long Bond 1.2x Strategy Fund | 100.00 | % | 0.00 | % | ||||
| High Yield Strategy Fund | 100.00 | % | 100.00 | % | ||||
| U.S. Government Money Market Fund | 100.00 | % | 0.00 | % | ||||
With respect to the taxable year ended March 31, 2014, 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:
| Mid-Cap 1.5x | Russell 2000® | ||||||||||||||||
| S&P 500® Fund | Strategy Fund | 1.5x Strategy Fund | Russell 2000® Fund | ||||||||||||||
| From long-term capital gains, subject to the 15% rate gains category: | $ | — | $ | — | $ | — | $ | — | |||||||||
| From long-term capital gains, using proceeds from shareholder redemptions: | 1,677,322 | 1,744,161 | 1,074,060 | 1,617,213 |
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.
| THE RYDEX FUNDS ANNUAL REPORT | 181 |
| OTHER INFORMATION (Unaudited) |
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
| 182 | 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 calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEE
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Donald C. Cacciapaglia* (1951) | Trustee from 2012 to present. | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present).
Former: Chairman and Chief Executive Officer, Channel Capital Group, Inc. (2002–2010). | 214 | Delaware Life (2013–present); Guggenheim Life and Annuity Company (2011–present); Paragon Life Insurance Company of Indiana (2011–present). | ||||
| INDEPENDENT TRUSTEES | ||||||||
| Corey A. Colehour (1945) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Retired. | 131 | None. | ||||
| J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Governance and Nominating Committees from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | Trustee of Epiphany Funds (4) (2009–present). | ||||
| John O. Demaret (1940) | Trustee from 1998 to present and Chairman of the Board from 2006 to present; Member and Chairman of the Audit Committee from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | None. | ||||
| Werner E. Keller (1940) | Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005–present). | 131 | None. |
| THE RYDEX FUNDS ANNUAL REPORT | 183 |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
INDEPENDENT TRUSTEES - concluded
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Thomas F. Lydon, Jr. (1960) | Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present. | Current: President, Global Trends Investments (registered investment adviser) (1996–present). | 131 | Board of Directors of US Global Investors (GROW) (1995–present). | ||||
| Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Chairman and Member of the Governance and Nominating Committees from 1998 to present. | Retired. Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977–2010). | 131 | None. | ||||
| Roger Somers (1944) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Current: Founder and Chief Executive Officer, Arrow Limousine (1962–present). | 131 | None. |
OFFICERS
| Position(s) Held with | ||||
| Name, Address | the Trust, Term of | |||
| and Year of Birth of | Office and Length of | Principal Occupation(s) | ||
| Officer | Time Served | During Past 5 Years | ||
| Donald C. Cacciapaglia (1951) | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present).
Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. (2002–2010). | ||
| Michael P. Byrum (1970) | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010–present); President and Chief Investment Officer, Rydex Holdings, LLC (2008–present); Director and Chairman, Advisory Research Center, Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC (2005–present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009–2010) and Secretary (2002–2010), Rydex Fund Services, LLC; Director (200832010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors, LLC; Director (2008–2010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors II, LLC. | ||
| Nikolaos Bonos (1963) | Vice President and Treasurer (2003-present). | Current: Treasurer and Vice President, certain other funds in the Fund Complex (2003–present); Senior Vice President, Security Investors, LLC (2010–present); Chief Executive Officer, Guggenheim Specialized Products, LLC (2009–present); President and Chief Executive Officer, Rydex Fund Services, LLC (2009–present); Vice President, Rydex Holdings, LLC (2008–present).
Former: Senior Vice President, Security Global Investors, LLC (2010–2011); Senior Vice President, Rydex Advisors, LLC (2006–2011); Senior Vice President, Rydex Advisors II, LLC (2006–2011). |
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
| 184 | THE RYDEX FUNDS ANNUAL REPORT |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
OFFICERS - concluded
| Position(s) Held with | ||||
| Name, Address | the Trust, Term of | |||
| and Year of Birth of | Office and Length of | Principal Occupation(s) | ||
| Officer | Time Served | During Past 5 Years | ||
| Elisabeth Miller (1968) | Chief Compliance Officer (2012–present). | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012–present); Chief Compliance Officer, Security Investors, LLC (2012–present); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012–present); Vice President, Guggenheim Funds Distributors, LLC (2014–present).
Former: Chief Compliance Officer, Guggenheim Distributors, LLC (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); Senior Manager, Guggenheim Distributors, LLC (2004–2009). | ||
| Joseph M. Arruda (1966) | Assistant Treasurer (2006–present). | Current: Assistant Treasurer, certain other funds in the Fund Complex (2006–present); Vice President, Security Investors, LLC (2010–present); Chief Financial Officer and Manager, Guggenheim Specialized Products, LLC (2009–present).
Former: Vice President, Security Global Investors, LLC (2010–2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010). | ||
| Amy J. Lee (1961) | Vice President (2009-present) and Secretary (2012–present). | Current: Chief Legal Officer, certain other funds in the Fund Complex (2013–present); Senior Managing Director, Guggenheim Investments (2012–present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004–2012). |
| THE RYDEX FUNDS ANNUAL REPORT | 185 |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments. com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
| 186 | THE RYDEX FUNDS ANNUAL REPORT |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)(concluded) |
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| THE RYDEX FUNDS ANNUAL REPORT | 187 |
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3.31.2014
Rydex Funds Annual Report
| Domestic Equity Funds | International Equity Funds | |
| S&P 500® Pure Growth Fund | Europe 1.25x Strategy Fund | |
| S&P 500® Pure Value Fund | Japan 2x Strategy Fund | |
| S&P MidCap 400® Pure Growth Fund | Specialty Funds | |
| S&P MidCap 400® Pure Value Fund | Strengthening Dollar 2x Strategy Fund | |
| S&P SmallCap 600® Pure Growth Fund | Weakening Dollar 2x Strategy Fund | |
| S&P SmallCap 600® Pure Value Fund |
| RTB2-ANN-0314x0315 | guggenheiminvestments.com |
Go Green! Eliminate Mailbox Clutter
Go paperless with Guggenheim Investments eDelivery—a service giving you full online access to account information and documents. Save time, cut down on mailbox clutter and be a friend to the environment with eDelivery.
With Guggenheim Investments eDelivery you can:
| · | View online confirmations and statements at your convenience. | |
| · | Receive email notifications when your most recent confirmations, statements and other account documents are available for review. | |
| · | Access prospectuses, annual reports and semiannual reports online. |
If you have questions about Guggenheim Investments eDelivery services, contact one of our Shareholder Service Representatives at 800.820.0888.
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604
| TABLE OF CONTENTS |
| THE RYDEX FUNDS ANNUAL REPORT | 1 |
| March 31, 2014 |
Dear Shareholder:
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for a selection of our Rydex Funds (the "Funds"). This report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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,
Donald C. Cacciapaglia
President
April 30, 2014
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.
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 |
| March 31, 2014 |
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. • The Funds are subject to active trading and tracking error risks, which may increase volatility, impact the Funds’ ability to achieve their investment objective and may decrease the Funds’ performance. • These Funds are considered non-diversified and can invest a greater portion of their assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of Fund shares than would occur in a more diversified fund. • 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 indirect exposure to foreign currencies subjects the Fund to the risk that those currencies will appreciate in value relative to the U.S. dollar. • The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. These risks may cause the Fund to experience higher losses and/or volatility than a Fund that does not invest in derivatives, use leverage or have exposure to foreign currencies. • Also, the Fund is subject to active trading and tracking error risks that may increase volatility, decrease performance and impact the Fund’s ability to achieve its investment objective. 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) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
| 4 | THE RYDEX FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
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.
Europe STOXX 50® Index provides a blue-chip representation of super-sector leaders in Europe. The index covers 50 stocks from developed European countries such as Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
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® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
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.
The 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 COMP OUNDING OF RETURNS (Unaudited) |
Many of the Funds described in this report are benchmarked daily to leveraged and/or inverse leveraged versions of published indices. To properly evaluate the performance of these funds, it is essential to understand the effect of mathematical compounding on their respective returns.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period. 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 | |||||||||||||||||||||
| Level | Performance | Expectation | Fund NAV | Performance | Assessment | |||||||||||||||||||
| Start | 100 | $ | 10.00 | |||||||||||||||||||||
| Day 1 | 106 | 6.0 | % | 9.0 | % | $ | 10.90 | 9.0 | % | In line | ||||||||||||||
| Day 2 | 99 | -6.6 | % | -9.9 | % | $ | 9.82 | -9.9 | % | In line | ||||||||||||||
| Cumulative | -1.0 | % | -1.5 | % | -1.8 | % | -0.3 | % | ||||||||||||||||
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
| 6 | THE RYDEX FUNDS ANNUAL REPORT |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a Fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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 FUNDS ANNUAL REPORT | 7 |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| S&P 500® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 14.88 | % | $1,000.00 | $1,148.80 | $8.14 | |||||||||||||
| C-Class | 2.27 | % | 14.44 | % | 1,000.00 | 1,144.40 | 12.14 | |||||||||||||
| H-Class | 1.52 | % | 14.88 | % | 1,000.00 | 1,148.80 | 8.14 | |||||||||||||
| S&P 500® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 17.27 | % | 1,000.00 | 1,172.70 | 8.23 | |||||||||||||
| C-Class | 2.27 | % | 16.84 | % | 1,000.00 | 1,168.40 | 12.27 | |||||||||||||
| H-Class | 1.52 | % | 17.28 | % | 1,000.00 | 1,172.80 | 8.23 | |||||||||||||
| S&P MidCap 400® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 11.04 | % | 1,000.00 | 1,110.40 | 8.00 | |||||||||||||
| C-Class | 2.27 | % | 10.63 | % | 1,000.00 | 1,106.30 | 11.92 | |||||||||||||
| H-Class | 1.52 | % | 11.03 | % | 1,000.00 | 1,110.30 | 8.00 | |||||||||||||
| S&P MidCap 400® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 10.03 | % | 1,000.00 | 1,100.30 | 7.96 | |||||||||||||
| C-Class | 2.27 | % | 9.59 | % | 1,000.00 | 1,095.90 | 11.86 | |||||||||||||
| H-Class | 1.52 | % | 10.02 | % | 1,000.00 | 1,100.20 | 7.96 | |||||||||||||
| S&P SmallCap 600® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.53 | % | 9.15 | % | 1,000.00 | 1,091.50 | 7.98 | |||||||||||||
| C-Class | 2.28 | % | 8.75 | % | 1,000.00 | 1,087.50 | 11.87 | |||||||||||||
| H-Class | 1.52 | % | 9.17 | % | 1,000.00 | 1,091.70 | 7.93 | |||||||||||||
| S&P SmallCap 600® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 13.09 | % | 1,000.00 | 1,130.90 | 8.08 | |||||||||||||
| C-Class | 2.27 | % | 12.64 | % | 1,000.00 | 1,126.40 | 12.03 | |||||||||||||
| H-Class | 1.53 | % | 13.05 | % | 1,000.00 | 1,130.50 | 8.13 | |||||||||||||
| Europe 1.25x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.77 | % | 9.78 | % | 1,000.00 | 1,097.80 | 9.26 | |||||||||||||
| C-Class | 2.48 | % | 9.30 | % | 1,000.00 | 1,093.00 | 12.94 | |||||||||||||
| H-Class | 1.72 | % | 9.73 | % | 1,000.00 | 1,097.30 | 8.99 | |||||||||||||
| Japan 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | (8.27 | %) | 1,000.00 | 917.30 | 7.27 | |||||||||||||
| C-Class | 2.28 | % | (8.56 | %) | 1,000.00 | 914.40 | 10.88 | |||||||||||||
| H-Class | 1.53 | % | (8.24 | %) | 1,000.00 | 917.60 | 7.31 | |||||||||||||
| Strengthening Dollar 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | (1.87 | %) | 1,000.00 | 981.30 | 8.50 | |||||||||||||
| C-Class | 2.47 | % | (2.19 | %) | 1,000.00 | 978.10 | 12.18 | |||||||||||||
| H-Class | 1.72 | % | (1.87 | %) | 1,000.00 | 981.30 | 8.50 | |||||||||||||
| Weakening Dollar 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | (0.33 | %) | 1,000.00 | 996.70 | 8.56 | |||||||||||||
| C-Class | 2.47 | % | (0.66 | %) | 1,000.00 | 993.40 | 12.28 | |||||||||||||
| H-Class | 1.72 | % | (0.34 | %) | 1,000.00 | 996.60 | 8.56 | |||||||||||||
| 8 | THE RYDEX FUNDS ANNUAL REPORT |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 2. Based on hypothetical 5% return (before expenses) | ||||||||||||||||||||
| S&P 500® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | $1,000.00 | $1,017.35 | $7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| H-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| S&P 500® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| H-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| S&P MidCap 400® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| H-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| S&P MidCap 400® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| H-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| S&P SmallCap 600® Pure Growth Fund | ||||||||||||||||||||
| A-Class | 1.53 | % | 5.00 | % | 1,000.00 | 1,017.30 | 7.70 | |||||||||||||
| C-Class | 2.28 | % | 5.00 | % | 1,000.00 | 1,013.56 | 11.45 | |||||||||||||
| H-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| S&P SmallCap 600® Pure Value Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.27 | % | 5.00 | % | 1,000.00 | 1,013.61 | 11.40 | |||||||||||||
| H-Class | 1.53 | % | 5.00 | % | 1,000.00 | 1,017.30 | 7.70 | |||||||||||||
| Europe 1.25x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.77 | % | 5.00 | % | 1,000.00 | 1,016.11 | 8.90 | |||||||||||||
| C-Class | 2.48 | % | 5.00 | % | 1,000.00 | 1,012.57 | 12.44 | |||||||||||||
| H-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| Japan 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.52 | % | 5.00 | % | 1,000.00 | 1,017.35 | 7.64 | |||||||||||||
| C-Class | 2.28 | % | 5.00 | % | 1,000.00 | 1,013.56 | 11.45 | |||||||||||||
| H-Class | 1.53 | % | 5.00 | % | 1,000.00 | 1,017.30 | 7.70 | |||||||||||||
| Strengthening Dollar 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| C-Class | 2.47 | % | 5.00 | % | 1,000.00 | 1,012.62 | 12.39 | |||||||||||||
| H-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| Weakening Dollar 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| C-Class | 2.47 | % | 5.00 | % | 1,000.00 | 1,012.62 | 12.39 | |||||||||||||
| H-Class | 1.72 | % | 5.00 | % | 1,000.00 | 1,016.36 | 8.65 | |||||||||||||
| 1 | Annualized. |
| 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 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
| THE RYDEX FUNDS ANNUAL REPORT | 9 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P 500® Pure Growth Fund H-Class returned 30.79%, compared with a gain of 33.13% for the S&P 500 Pure Growth Index. The Fund maintained a daily correlation of over 99% to its benchmark.
Consumer Discretionary was the sector contributing most to performance, followed by Health Care. No sector detracted from performance, but the sectors contributing least were Energy and Consumer Staples.
Stocks contributing the most to return of the underlying index were Netflix, Inc., Actavis plc and Southwest Airlines Co. Denbury Resources, Inc., D.R. Horton, Inc. and Tesoro Corp. 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 Dates: | |
| A-Class | September 1, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Huntington Bancshares, Inc. | 2.1 | % | ||
| TripAdvisor, Inc. | 1.9 | % | ||
| Safeway, Inc. | 1.9 | % | ||
| Keurig Green Mountain, Inc. | 1.8 | % | ||
| Actavis plc | 1.8 | % | ||
| Michael Kors Holdings Ltd. | 1.8 | % | ||
| Facebook, Inc. — Class A | 1.8 | % | ||
| Chipotle Mexican Grill, Inc. — Class A | 1.7 | % | ||
| Southwest Airlines Co. | 1.7 | % | ||
| Netflix, Inc. | 1.6 | % | ||
| Top Ten Total | 18.1 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 10 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 29.78% | 25.51% | 7.14% | |||||||||
| C-Class Shares with CDSC‡ | 28.78% | 25.51% | 7.14% | |||||||||
| H-Class Shares | 30.79% | 26.48% | 7.95% | |||||||||
| S&P 500 Pure Growth Index | 33.13% | 28.77% | 10.77% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 30.75% | 26.47% | 8.67% | |||||||||
| A-Class Shares with sales charge† | 24.53% | 25.24% | 8.12% | |||||||||
| S&P 500 Pure Growth Index | 33.13% | 28.77% | 11.76% | |||||||||
| * | 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 11 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P 500® PURE GROWTH FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.4% | ||||||||
| CONSUMER DISCRETIONARY - 28.0% | ||||||||
| TripAdvisor, Inc.* | 29,537 | $ | 2,675,756 | |||||
| Michael Kors Holdings Ltd.* | 27,100 | 2,527,617 | ||||||
| Chipotle Mexican Grill, Inc. — Class A* | 4,300 | 2,442,615 | ||||||
| Netflix, Inc.* | 6,555 | 2,307,557 | ||||||
| Wynn Resorts Ltd. | 9,511 | 2,112,869 | ||||||
| Priceline Group, Inc.* | 1,771 | 2,110,837 | ||||||
| News Corp. — Class A* | 119,800 | 2,062,956 | ||||||
| Harman International Industries, Inc. | 17,800 | 1,893,920 | ||||||
| Goodyear Tire & Rubber Co. | 69,200 | 1,808,196 | ||||||
| DIRECTV* | 18,979 | 1,450,376 | ||||||
| Fossil Group, Inc.* | 11,690 | 1,363,171 | ||||||
| Amazon.com, Inc.* | 4,044 | 1,360,887 | ||||||
| Tractor Supply Co. | 16,500 | 1,165,395 | ||||||
| Comcast Corp. — Class A | 23,100 | 1,155,462 | ||||||
| Wyndham Worldwide Corp. | 15,260 | 1,117,490 | ||||||
| Discovery Communications, Inc. — Class A* | 11,333 | 937,239 | ||||||
| BorgWarner, Inc. | 14,668 | 901,642 | ||||||
| Interpublic Group of Companies, Inc. | 50,400 | 863,856 | ||||||
| Johnson Controls, Inc. | 17,400 | 823,368 | ||||||
| NIKE, Inc. — Class B | 10,800 | 797,688 | ||||||
| CBS Corp. — Class B | 12,690 | 784,242 | ||||||
| Graham Holdings Co. — Class B | 1,100 | 774,125 | ||||||
| Viacom, Inc. — Class B | 8,600 | 730,914 | ||||||
| VF Corp. | 11,500 | 711,620 | ||||||
| Dollar Tree, Inc.* | 12,000 | 626,160 | ||||||
| O’Reilly Automotive, Inc.* | 4,200 | 623,238 | ||||||
| Time Warner Cable, Inc. | 4,380 | 600,848 | ||||||
| Starbucks Corp. | 7,800 | 572,364 | ||||||
| Bed Bath & Beyond, Inc.* | 8,200 | 564,160 | ||||||
| Harley-Davidson, Inc. | 8,400 | 559,524 | ||||||
| Mohawk Industries, Inc.* | 3,900 | 530,322 | ||||||
| TJX Companies, Inc. | 8,468 | 513,584 | ||||||
| Total Consumer Discretionary | 39,469,998 | |||||||
| INFORMATION TECHNOLOGY - 15.4% | ||||||||
| Facebook, Inc. — Class A* | 41,900 | 2,524,057 | ||||||
| Seagate Technology plc | 39,417 | 2,213,659 | ||||||
| Western Digital Corp. | 20,300 | 1,863,946 | ||||||
| Alliance Data Systems Corp.* | 6,300 | 1,716,435 | ||||||
| First Solar, Inc.* | 24,100 | 1,681,939 | ||||||
| VeriSign, Inc.* | 30,800 | 1,660,428 | ||||||
| Google, Inc. — Class A* | 1,399 | 1,559,199 | ||||||
| Cognizant Technology Solutions | ||||||||
| Corp. — Class A* | 27,202 | 1,376,693 | ||||||
| MasterCard, Inc. — Class A | 13,550 | 1,012,185 | ||||||
| Salesforce.com, Inc.* | 15,786 | 901,223 | ||||||
| QUALCOMM, Inc. | 11,368 | 896,480 | ||||||
| Electronic Arts, Inc.* | 30,500 | 884,805 | ||||||
| SanDisk Corp. | 10,100 | 820,019 | ||||||
| Fidelity National Information Services, Inc. | 12,600 | 673,470 | ||||||
| Visa, Inc. — Class A | 2,979 | 643,047 | ||||||
| Yahoo!, Inc.* | 17,479 | 627,496 | ||||||
| Micron Technology, Inc.* | 24,500 | 579,670 | ||||||
| Total Information Technology | 21,634,751 | |||||||
| FINANCIALS - 14.9% | ||||||||
| Huntington Bancshares, Inc. | 299,837 | 2,989,375 | ||||||
| KeyCorp | 156,500 | 2,228,560 | ||||||
| Fifth Third Bancorp | 88,200 | 2,024,190 | ||||||
| Comerica, Inc. | 38,800 | 2,009,840 | ||||||
| Prudential Financial, Inc. | 19,900 | 1,684,535 | ||||||
| Discover Financial Services | 24,160 | 1,405,871 | ||||||
| Ameriprise Financial, Inc. | 12,050 | 1,326,344 | ||||||
| SLM Corp. | 50,386 | 1,233,449 | ||||||
| Moody’s Corp. | 14,523 | 1,151,964 | ||||||
| Charles Schwab Corp. | 40,000 | 1,093,200 | ||||||
| Torchmark Corp. | 9,500 | 747,650 | ||||||
| BlackRock, Inc. — Class A | 2,100 | 660,408 | ||||||
| American Express Co. | 7,070 | 636,512 | ||||||
| Macerich Co. | 10,100 | 629,533 | ||||||
| Invesco Ltd. | 17,000 | 629,000 | ||||||
| IntercontinentalExchange Group, Inc. | 2,400 | 474,792 | ||||||
| Total Financials | 20,925,223 | |||||||
| HEALTH CARE - 14.7% | ||||||||
| Actavis plc* | 12,490 | 2,571,067 | ||||||
| Vertex Pharmaceuticals, Inc.* | 29,913 | 2,115,447 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 6,886 | 2,067,728 | ||||||
| Celgene Corp.* | 14,521 | 2,027,132 | ||||||
| Biogen Idec, Inc.* | 6,029 | 1,844,090 | ||||||
| Gilead Sciences, Inc.* | 25,128 | 1,780,570 | ||||||
| Boston Scientific Corp.* | 111,700 | 1,510,184 | ||||||
| Alexion Pharmaceuticals, Inc.* | 8,480 | 1,290,062 | ||||||
| Allergan, Inc. | 9,500 | 1,178,950 | ||||||
| Cigna Corp. | 13,000 | 1,088,490 | ||||||
| Perrigo Company plc | 5,300 | 819,698 | ||||||
| Thermo Fisher Scientific, Inc. | 6,800 | 817,632 | ||||||
| Cerner Corp.* | 13,904 | 782,100 | ||||||
| St. Jude Medical, Inc. | 10,700 | 699,673 | ||||||
| Total Health Care | 20,592,823 | |||||||
| ENERGY - 8.3% | ||||||||
| Helmerich & Payne, Inc. | 16,900 | 1,817,764 | ||||||
| Halliburton Co. | 27,600 | 1,625,364 | ||||||
| EOG Resources, Inc. | 8,130 | 1,594,862 | ||||||
| Pioneer Natural Resources Co. | 8,178 | 1,530,431 | ||||||
| Cabot Oil & Gas Corp. | 43,000 | 1,456,840 | ||||||
| Range Resources Corp. | 11,500 | 954,155 | ||||||
| Noble Energy, Inc. | 11,450 | 813,408 | ||||||
| Schlumberger Ltd. | 7,000 | 682,500 | ||||||
| Equities Corp. | 6,800 | 659,396 | ||||||
| Kinder Morgan, Inc. | 16,500 | 536,085 | ||||||
| Total Energy | 11,670,805 | |||||||
| INDUSTRIALS - 8.1% | ||||||||
| Southwest Airlines Co. | 101,244 | 2,390,371 | ||||||
| Delta Air Lines, Inc. | 59,200 | 2,051,280 | ||||||
| Textron, Inc. | 42,000 | 1,650,180 | ||||||
| PACCAR, Inc. | 19,840 | 1,338,010 | ||||||
| Robert Half International, Inc. | 23,200 | 973,240 | ||||||
| Boeing Co. | 6,680 | 838,273 | ||||||
| 12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P 500® PURE GROWTH FUND |
| Shares | Value | |||||||
| Pitney Bowes, Inc. | 29,200 | $ | 758,908 | |||||
| Flowserve Corp. | 9,100 | 712,894 | ||||||
| Precision Castparts Corp. | 2,700 | 682,452 | ||||||
| Total Industrials | 11,395,608 | |||||||
| CONSUMER STAPLES - 6.2% | ||||||||
| Safeway, Inc. | 72,000 | 2,659,680 | ||||||
| Keurig Green Mountain, Inc. | 24,500 | 2,586,955 | ||||||
| Constellation Brands, Inc. — Class A* | 24,598 | 2,090,092 | ||||||
| Monster Beverage Corp.* | 10,276 | 713,668 | ||||||
| Coca-Cola Enterprises, Inc. | 12,600 | 601,776 | ||||||
| Total Consumer Staples | 8,652,171 | |||||||
| MATERIALS - 3.8% | ||||||||
| LyondellBasell Industries N.V. — Class A | 20,000 | 1,778,800 | ||||||
| Sealed Air Corp. | 34,800 | 1,143,876 | ||||||
| Ecolab, Inc. | 9,654 | 1,042,535 | ||||||
| Eastman Chemical Co. | 9,732 | 838,996 | ||||||
| PPG Industries, Inc. | 3,033 | 586,764 | ||||||
| Total Materials | 5,390,971 | |||||||
| Total Common Stocks | ||||||||
| (Cost $113,798,891) | 139,732,350 | |||||||
| Face Amount | ||||||||
| REPURCHASE AGREEMENTS††,1 - 0.8% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 605,723 | 605,723 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 255,594 | 255,594 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 172,842 | 172,842 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 80,530 | 80,530 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $1,114,689) | 1,114,689 | |||||||
| Total Investments - 100.2% | ||||||||
| (Cost $114,913,580) | $ | 140,847,039 | ||||||
| Other Assets & Liabilities, net - (0.2)% | (324,419 | ) | ||||||
| Total Net Assets - 100.0% | $ | 140,522,620 | ||||||
| * | 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 5. |
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
| S&P 500® PURE GROWTH FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $113,798,891) | $ | 139,732,350 | ||
| Repurchase agreements, at value | ||||
| (cost $1,114,689) | 1,114,689 | |||
| Total investments | ||||
| (cost $114,913,580) | 140,847,039 | |||
| Receivables: | ||||
| Securities sold | 3,302,605 | |||
| Fund shares sold | 527,926 | |||
| Dividends | 112,692 | |||
| Interest | 1 | |||
| Total assets | 144,790,263 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 3,961,954 | |||
| Management fees | 112,872 | |||
| Distribution and service fees | 47,794 | |||
| Transfer agent and administrative fees | 37,624 | |||
| Portfolio accounting fees | 15,050 | |||
| Miscellaneous | 92,349 | |||
| Total liabilities | 4,267,643 | |||
| Net assets | $ | 140,522,620 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 118,188,977 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (3,599,816 | ) | ||
| Net unrealized appreciation on investments | 25,933,459 | |||
| Net assets | $ | 140,522,620 | ||
| A-Class: | ||||
| Net assets | $ | 19,977,956 | ||
| Capital shares outstanding | 393,217 | |||
| Net asset value per share | $ | 50.81 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 53.34 | ||
| C-Class: | ||||
| Net assets | $ | 17,042,308 | ||
| Capital shares outstanding | 362,073 | |||
| Net asset value per share | $ | 47.07 | ||
| H-Class: | ||||
| Net assets | $ | 103,502,356 | ||
| Capital shares outstanding | 2,037,551 | |||
| Net asset value per share | $ | 50.80 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends | $ | 1,145,841 | ||
| Interest | 195 | |||
| Total investment income | 1,146,036 | |||
| Expenses: | ||||
| Management fees | 837,114 | |||
| Transfer agent and administrative fees | 279,038 | |||
| Distribution and service fees: | ||||
| A-Class | 40,864 | |||
| C-Class | 121,779 | |||
| H-Class | 207,729 | |||
| Portfolio accounting fees | 111,614 | |||
| Custodian fees | 12,515 | |||
| Trustees’ fees* | 8,905 | |||
| Line of credit interest expense | 736 | |||
| Miscellaneous | 172,778 | |||
| Total expenses | 1,793,072 | |||
| Net investment loss | (647,036 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 9,974,053 | |||
| Net realized gain | 9,974,053 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 8,963,993 | |||
| Net change in unrealized appreciation (depreciation) | 8,963,993 | |||
| Net realized and unrealized gain | 18,938,046 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 18,291,010 | ||
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P 500® PURE GROWTH FUND |
| STATEMENTS OF CHANGES IN NET ASSETS | ||||||||
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (647,036 | ) | $ | (421,412 | ) | ||
| Net realized gain on investments | 9,974,053 | 6,628,478 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 8,963,993 | 4,519,502 | ||||||
| Net increase in net assets resulting from operations | 18,291,010 | 10,726,568 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 37,301,868 | 30,199,935 | ||||||
| C-Class | 12,501,975 | 5,764,339 | ||||||
| H-Class | 636,709,145 | 334,423,793 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (35,975,939 | ) | (19,263,351 | ) | ||||
| C-Class | (7,186,094 | ) | (9,351,215 | ) | ||||
| H-Class | (597,296,078 | ) | (327,419,156 | ) | ||||
| Net increase from capital share transactions | 46,054,877 | 14,354,345 | ||||||
| Net increase in net assets | 64,345,887 | 25,080,913 | ||||||
| Net assets: | ||||||||
| Beginning of year | 76,176,733 | 51,095,820 | ||||||
| End of year | $ | 140,522,620 | $ | 76,176,733 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (155,123 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 826,973 | 876,613 | ||||||
| C-Class | 292,518 | 180,850 | ||||||
| H-Class | 14,083,714 | 9,972,171 | ||||||
| Shares redeemed | ||||||||
| A-Class | (819,808 | ) | (572,944 | ) | ||||
| C-Class | (170,107 | ) | (299,082 | ) | ||||
| H-Class | (13,397,258 | ) | (9,682,045 | ) | ||||
| Net increase in shares | 816,032 | 475,563 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.86 | $ | 34.54 | $ | 33.15 | $ | 26.51 | $ | 15.82 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.23 | ) | (.13 | ) | (.20 | ) | (.18 | ) | (.18 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 12.18 | 4.45 | 1.82 | 6.82 | 10.87 | |||||||||||||||
| Total from investment operations | 11.95 | 4.32 | 1.62 | 6.64 | 10.69 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | (.23 | ) | — | — | ||||||||||||||
| Total distributions | — | — | (.23 | ) | — | — | ||||||||||||||
| Net asset value, end of period | $ | 50.81 | $ | 38.86 | $ | 34.54 | $ | 33.15 | $ | 26.51 | ||||||||||
| Total Returnb | 30.75 | % | 12.51 | % | 4.96 | % | 25.05 | % | 67.57 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 19,978 | $ | 15,001 | $ | 2,846 | $ | 2,704 | $ | 1,774 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.51 | %) | (0.38 | %) | (0.62 | %) | (0.65 | %) | (0.81 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.51 | % | 1.52 | % | 1.53 | % | 1.52 | % | ||||||||||
| Portfolio turnover rate | 594 | % | 421 | % | 586 | % | 808 | % | 699 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 36.27 | $ | 32.48 | $ | 31.42 | $ | 25.32 | $ | 15.23 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.52 | ) | (.38 | ) | (.41 | ) | (.41 | ) | (.30 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.32 | 4.17 | 1.70 | 6.51 | 10.39 | |||||||||||||||
| Total from investment operations | 10.80 | 3.79 | 1.29 | 6.10 | 10.09 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | (.23 | ) | — | — | ||||||||||||||
| Total distributions | — | — | (.23 | ) | — | — | ||||||||||||||
| Net asset value, end of period | $ | 47.07 | $ | 36.27 | $ | 32.48 | $ | 31.42 | $ | 25.32 | ||||||||||
| Total Returnb | 29.78 | % | 11.70 | % | 4.15 | % | 24.09 | % | 66.25 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 17,042 | $ | 8,692 | $ | 11,623 | $ | 8,384 | $ | 6,494 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.24 | %) | (1.19 | %) | (1.35 | %) | (1.53 | %) | (1.40 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.25 | % | 2.26 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 594 | % | 421 | % | 586 | % | 808 | % | 699 | % | ||||||||||
| 16 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P 500® PURE GROWTH FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.84 | $ | 34.52 | $ | 33.13 | $ | 26.50 | $ | 15.81 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.23 | ) | (.15 | ) | (.19 | ) | (.26 | ) | (.14 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 12.19 | 4.47 | 1.81 | 6.89 | 10.83 | |||||||||||||||
| Total from investment operations | 11.96 | 4.32 | 1.62 | 6.63 | 10.69 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | — | — | (.23 | ) | — | — | ||||||||||||||
| Total distributions | — | — | (.23 | ) | — | — | ||||||||||||||
| Net asset value, end of period | $ | 50.80 | $ | 38.84 | $ | 34.52 | $ | 33.13 | $ | 26.50 | ||||||||||
| Total Returnb | 30.79 | % | 12.51 | % | 4.96 | % | 25.02 | % | 67.62 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 103,502 | $ | 52,483 | $ | 36,627 | $ | 38,831 | $ | 15,874 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.50 | %) | (0.43 | %) | (0.59 | %) | (0.89 | %) | (0.60 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.51 | % | 1.55 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 594 | % | 421 | % | 586 | % | 808 | % | 699 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 17 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P 500® Pure Value Fund H-Class returned 32.21%, compared with a gain of 34.56% for the S&P 500 Pure Value Index. The Fund maintained a daily correlation of over 99% to its benchmark.
The Financials sector was the leading contributor to performance of the underlying index, followed by the Health Care sector. No sector detracted from performance. The Telecommunications Services sector contributed least to performance of the underlying index, followed by the Utilities sector.
The strongest contributors to performance of the underlying index for the year included Genworth Financial, Inc. — Class A, WellPoint, Inc. and Assurant, Inc. The stocks detracting most from performance of the underlying index were General Motors Co., Tenet Healthcare Corp. and J.C. Penney Co., 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 Dates: | |
| A-Class | September 1, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | |
| Alcoa, Inc. | 2.4% |
| Berkshire Hathaway, Inc. — Class B | 2.2% |
| WellPoint, Inc. | 2.0% |
| Nabors Industries Ltd. | 1.9% |
| Valero Energy Corp. | 1.9% |
| Tyson Foods, Inc. — Class A | 1.8% |
| Genworth Financial, Inc. — Class A | 1.7% |
| Assurant, Inc. | 1.6% |
| Humana, Inc. | 1.6% |
| Murphy Oil Corp. | 1.6% |
| Top Ten Total | 18.7% |
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 18 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 31.21% | 32.74% | 6.51% | |||||||||
| C-Class Shares with CDSC‡ | 30.21% | 32.74% | 6.51% | |||||||||
| H-Class Shares | 32.21% | 33.73% | 7.31% | |||||||||
| S&P 500 Pure Value Index | 34.56% | 37.40% | 11.56% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| (09/01/04) | ||||||||||||
| A-Class Shares | 32.21% | 33.68% | 7.69% | |||||||||
| A-Class Shares with sales charge† | 25.93% | 32.37% | 7.15% | |||||||||
| S&P 500 Pure Value Index | 34.56% | 37.40% | 11.68% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Pure Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 19 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P 500® PURE VALUE FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.3% | ||||||||
| FINANCIALS - 25.3% | ||||||||
| Berkshire Hathaway, Inc. — Class B* | 21,890 | $ | 2,735,593 | |||||
| Genworth Financial, Inc. — Class A* | 116,880 | 2,072,282 | ||||||
| Assurant, Inc. | 30,733 | 1,996,416 | ||||||
| Unum Group | 45,427 | 1,604,027 | ||||||
| Hartford Financial Services Group, Inc. | 44,013 | 1,552,339 | ||||||
| American International Group, Inc. | 29,896 | 1,495,099 | ||||||
| XL Group plc — Class A | 47,172 | 1,474,125 | ||||||
| MetLife, Inc. | 27,894 | 1,472,803 | ||||||
| Allstate Corp. | 25,370 | 1,435,435 | ||||||
| Capital One Financial Corp. | 14,957 | 1,154,082 | ||||||
| SunTrust Banks, Inc. | 28,485 | 1,133,418 | ||||||
| Loews Corp. | 25,146 | 1,107,681 | ||||||
| Bank of America Corp. | 62,816 | 1,080,435 | ||||||
| Morgan Stanley | 33,816 | 1,054,045 | ||||||
| PNC Financial Services Group, Inc. | 11,553 | 1,005,111 | ||||||
| JPMorgan Chase & Co. | 16,229 | 985,263 | ||||||
| Goldman Sachs Group, Inc. | 5,403 | 885,282 | ||||||
| Travelers Companies, Inc. | 10,170 | 865,467 | ||||||
| ACE Ltd. | 8,250 | 817,245 | ||||||
| Bank of New York Mellon Corp. | 22,400 | 790,496 | ||||||
| NASDAQ OMX Group, Inc. | 20,285 | 749,328 | ||||||
| BB&T Corp. | 16,736 | 672,285 | ||||||
| Hudson City Bancorp, Inc. | 68,100 | 669,423 | ||||||
| Wells Fargo & Co. | 10,480 | 521,275 | ||||||
| Chubb Corp. | 5,660 | 505,438 | ||||||
| Cincinnati Financial Corp. | 10,300 | 501,198 | ||||||
| M&T Bank Corp. | 3,700 | 448,810 | ||||||
| Aflac, Inc. | 7,090 | 446,954 | ||||||
| Progressive Corp. | 17,700 | 428,694 | ||||||
| Total Financials | 31,660,049 | |||||||
| UTILITIES - 16.0% | ||||||||
| NRG Energy, Inc. | 57,880 | 1,840,584 | ||||||
| Exelon Corp. | 48,960 | 1,643,099 | ||||||
| Entergy Corp. | 19,970 | 1,334,995 | ||||||
| Integrys Energy Group, Inc. | 20,927 | 1,248,295 | ||||||
| Pepco Holdings, Inc. | 58,742 | 1,203,036 | ||||||
| FirstEnergy Corp. | 28,880 | 982,786 | ||||||
| Edison International | 17,200 | 973,692 | ||||||
| AES Corp. | 62,200 | 888,216 | ||||||
| PG&E Corp. | 19,100 | 825,120 | ||||||
| SCANA Corp. | 15,500 | 795,460 | ||||||
| Xcel Energy, Inc. | 26,200 | 795,432 | ||||||
| Consolidated Edison, Inc. | 14,700 | 788,655 | ||||||
| Public Service Enterprise Group, Inc. | 20,640 | 787,210 | ||||||
| DTE Energy Co. | 10,100 | 750,329 | ||||||
| PPL Corp. | 22,080 | 731,731 | ||||||
| Pinnacle West Capital Corp. | 12,800 | 699,648 | ||||||
| AGL Resources, Inc. | 14,100 | 690,336 | ||||||
| Northeast Utilities | 14,800 | 673,400 | ||||||
| Duke Energy Corp. | 9,200 | 655,224 | ||||||
| American Electric Power Company, Inc. | 11,900 | 602,854 | ||||||
| TECO Energy, Inc. | 33,200 | 569,380 | ||||||
| CMS Energy Corp. | 17,600 | 515,328 | ||||||
| Total Utilities | 19,994,810 | |||||||
| ENERGY - 15.8% | ||||||||
| Nabors Industries Ltd. | 95,758 | 2,360,434 | ||||||
| Valero Energy Corp. | 43,404 | 2,304,752 | ||||||
| Murphy Oil Corp. | 30,780 | 1,934,830 | ||||||
| Phillips 66 | 23,278 | 1,793,803 | ||||||
| Hess Corp. | 19,011 | 1,575,632 | ||||||
| Tesoro Corp. | 27,900 | 1,411,461 | ||||||
| Rowan Companies plc — Class A* | 30,140 | 1,015,115 | ||||||
| Apache Corp. | 10,090 | 836,966 | ||||||
| Baker Hughes, Inc. | 12,679 | 824,389 | ||||||
| Transocean Ltd.1 | 19,700 | 814,398 | ||||||
| Ensco plc — Class A | 14,870 | 784,839 | ||||||
| Denbury Resources, Inc. | 47,400 | 777,360 | ||||||
| Chevron Corp. | 6,420 | 763,402 | ||||||
| Marathon Oil Corp. | 20,144 | 715,515 | ||||||
| Noble Corporation plc | 20,500 | 671,170 | ||||||
| ConocoPhillips | 7,732 | 543,946 | ||||||
| Exxon Mobil Corp. | 5,200 | 507,936 | ||||||
| Total Energy | 19,635,948 | |||||||
| CONSUMER DISCRETIONARY - 8.6% | ||||||||
| General Motors Co. | 39,800 | 1,369,915 | ||||||
| AutoNation, Inc.* | 24,700 | 1,314,781 | ||||||
| Staples, Inc. | 102,230 | 1,159,288 | ||||||
| Ford Motor Co. | 72,560 | 1,131,936 | ||||||
| Kohl’s Corp. | 18,930 | 1,075,224 | ||||||
| DR Horton, Inc. | 42,500 | 920,125 | ||||||
| Target Corp. | 15,050 | 910,676 | ||||||
| Whirlpool Corp. | 5,048 | 754,474 | ||||||
| PulteGroup, Inc. | 38,900 | 746,491 | ||||||
| Carnival Corp. | 19,300 | 730,698 | ||||||
| Macy’s, Inc. | 9,540 | 565,627 | ||||||
| Total Consumer Discretionary | 10,679,235 | |||||||
| CONSUMER STAPLES - 7.8% | ||||||||
| Tyson Foods, Inc. — Class A | 50,223 | 2,210,314 | ||||||
| Archer-Daniels-Midland Co. | 44,360 | 1,924,780 | ||||||
| Kroger Co. | 28,470 | 1,242,716 | ||||||
| Sysco Corp. | 27,192 | 982,447 | ||||||
| CVS Caremark Corp. | 12,295 | 920,404 | ||||||
| Wal-Mart Stores, Inc. | 9,600 | 733,728 | ||||||
| Molson Coors Brewing Co. — Class B | 12,198 | 717,974 | ||||||
| Costco Wholesale Corp. | 4,800 | 536,064 | ||||||
| ConAgra Foods, Inc. | 13,300 | 412,699 | ||||||
| Total Consumer Staples | 9,681,126 | |||||||
| HEALTH CARE - 7.5% | ||||||||
| WellPoint, Inc. | 25,244 | 2,513,039 | ||||||
| Humana, Inc. | 17,296 | 1,949,605 | ||||||
| Aetna, Inc. | 19,148 | 1,435,526 | ||||||
| 20 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P 500® PURE VALUE FUND |
| Shares | Value | |||||||
| Express Scripts Holding Co.* | 14,000 | $ | 1,051,260 | |||||
| UnitedHealth Group, Inc. | 12,705 | 1,041,683 | ||||||
| Cardinal Health, Inc. | 13,767 | 963,415 | ||||||
| Quest Diagnostics, Inc. | 7,000 | 405,440 | ||||||
| Total Health Care | 9,359,968 | |||||||
| MATERIALS - 6.0% | ||||||||
| Alcoa, Inc. | 229,201 | 2,949,816 | ||||||
| Allegheny Technologies, Inc. | 21,670 | 816,526 | ||||||
| Dow Chemical Co. | 14,049 | 682,641 | ||||||
| Mosaic Co. | 12,400 | 620,000 | ||||||
| International Paper Co. | 12,000 | 550,560 | ||||||
| Bemis Company, Inc. | 13,600 | 533,664 | ||||||
| Freeport-McMoRan Copper & Gold, Inc. | 13,420 | 443,799 | ||||||
| Avery Dennison Corp. | 8,410 | 426,135 | ||||||
| Nucor Corp. | 7,700 | 389,158 | ||||||
| Total Materials | 7,412,299 | |||||||
| INFORMATION TECHNOLOGY - 5.8% | ||||||||
| Hewlett-Packard Co. | 55,000 | 1,779,799 | ||||||
| Xerox Corp. | 147,472 | 1,666,434 | ||||||
| Jabil Circuit, Inc. | 89,146 | 1,604,628 | ||||||
| Computer Sciences Corp. | 20,700 | 1,258,974 | ||||||
| Corning, Inc. | 43,319 | 901,902 | ||||||
| Total Information Technology | 7,211,737 | |||||||
| INDUSTRIALS - 5.0% | ||||||||
| L-3 Communications Holdings, Inc. | 11,124 | 1,314,301 | ||||||
| Ryder System, Inc. | 15,543 | 1,242,197 | ||||||
| Jacobs Engineering Group, Inc.* | 16,275 | 1,033,462 | ||||||
| Fluor Corp. | 12,610 | 980,175 | ||||||
| Joy Global, Inc. | 11,200 | 649,600 | ||||||
| Deere & Co. | 5,800 | 526,640 | ||||||
| Stanley Black & Decker, Inc. | 5,300 | 430,572 | ||||||
| Total Industrials | 6,176,947 | |||||||
| TELECOMMUNICATION SERVICES - 1.5% | ||||||||
| Frontier Communications Corp.1 | 183,071 | 1,043,505 | ||||||
| CenturyLink, Inc. | 24,400 | 801,296 | ||||||
| Total Telecommunication Services | 1,844,801 | |||||||
| Total Common Stocks | ||||||||
| (Cost $107,714,232) | 123,656,920 | |||||||
| Face Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 0.6% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 393,176 | 393,176 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 165,906 | 165,906 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 112,192 | 112,192 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 52,272 | 52,272 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $723,546) | 723,546 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 1.0% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 590,032 | 590,032 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 526,490 | 526,490 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 99,253 | 99,253 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,215,775) | 1,215,775 | |||||||
| Total Investments - 100.9% | ||||||||
| (Cost $109,653,553) | $ | 125,596,241 | ||||||
| Other Assets & Liabilities, net - (0.9)% | (1,086,843 | ) | ||||||
| Total Net Assets - 100.0% | $ | 124,509,398 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. plc — Public Limited Company |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 21 |
| S&P 500® PURE VALUE FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
Assets: | ||||
| Investments, at value - including $1,187,934 of | ||||
| securities loaned | ||||
| (cost $107,714,232) | $ | 123,656,920 | ||
| Repurchase agreements, at value | ||||
| (cost $1,939,321) | 1,939,321 | |||
| Total investments | ||||
| (cost $109,653,553) | 125,596,241 | |||
| Receivables: | ||||
| Fund shares sold | 1,833,157 | |||
| Dividends | 118,225 | |||
| Securities lending income | 382 | |||
| Total assets | 127,548,005 | |||
Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,356,808 | |||
| Upon return of securities loaned | 1,215,775 | |||
| Fund shares redeemed | 299,856 | |||
| Management fees | 59,248 | |||
| Distribution and service fees | 22,502 | |||
| Transfer agent and administrative fees | 19,750 | |||
| Portfolio accounting fees | 7,900 | |||
| Miscellaneous | 56,768 | |||
| Total liabilities | 3,038,607 | |||
Net assets | $ | 124,509,398 | ||
Net assets consist of: | ||||
| Paid in capital | $ | 108,073,830 | ||
| Undistributed net investment income | 130,844 | |||
| Accumulated net realized gain on investments | 362,036 | |||
| Net unrealized appreciation on investments | 15,942,688 | |||
| Net assets | $ | 124,509,398 | ||
A-Class: | ||||
| Net assets | $ | 4,434,941 | ||
| Capital shares outstanding | 31,367 | |||
| Net asset value per share | $ | 141.39 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 148.44 | ||
C-Class: | ||||
| Net assets | $ | 5,090,304 | ||
| Capital shares outstanding | 39,708 | |||
| Net asset value per share | $ | 128.19 | ||
H-Class: | ||||
| Net assets | $ | 114,984,153 | ||
| Capital shares outstanding | 810,396 | |||
| Net asset value per share | $ | 141.89 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $323) | $ | 1,555,832 | ||
| Income from securities lending, net | 15,366 | |||
| Interest | 149 | |||
| Total investment income | 1,571,347 | |||
| Expenses: | ||||
| Management fees | 609,767 | |||
| Transfer agent and administrative fees | 203,256 | |||
| Distribution and service fees: | ||||
| A-Class | 5,125 | |||
| C-Class | 44,318 | |||
| H-Class | 187,051 | |||
| Portfolio accounting fees | 81,302 | |||
| Custodian fees | 8,894 | |||
| Trustees’ fees* | 7,104 | |||
| Line of credit interest expense | 245 | |||
| Miscellaneous | 125,519 | |||
| Total expenses | 1,272,581 | |||
| Net investment income | 298,766 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 17,670,652 | |||
| Net realized gain | 17,670,652 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 1,013,121 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 1,013,121 | |||
| Net realized and unrealized gain | 18,683,773 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 18,982,539 |
* Relates to Trustees not deemed "interested persons" within the meaning of Section 2(a)(19) of the 1940 Act.
| 22 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P 500® PURE VALUE FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 298,766 | $ | 279,740 | ||||
| Net realized gain on investments | 17,670,652 | 1,028,278 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 1,013,121 | 11,830,369 | ||||||
| Net increase in net assets resulting from operations | 18,982,539 | 13,138,387 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | (4,543 | ) | (1,693 | ) | ||||
| C-Class | (9,295 | ) | (4,761 | ) | ||||
| H-Class | (154,084 | ) | (75,280 | ) | ||||
| Net realized gains | ||||||||
| A-Class | (112,508 | ) | — | |||||
| C-Class | (230,200 | ) | — | |||||
| H-Class | (3,815,942 | ) | — | |||||
| Total distributions to shareholders | (4,326,572 | ) | (81,734 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 5,628,794 | 2,083,800 | ||||||
| C-Class | 5,902,053 | 6,944,252 | ||||||
| H-Class | 369,062,897 | 361,945,129 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 106,616 | 1,115 | ||||||
| C-Class | 225,859 | 4,685 | ||||||
| H-Class | 3,914,756 | 74,022 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (3,047,246 | ) | (2,824,534 | ) | ||||
| C-Class | (5,327,015 | ) | (6,186,034 | ) | ||||
| H-Class | (349,827,346 | ) | (364,745,391 | ) | ||||
| Net increase (decrease) from capital share transactions | 26,639,368 | (2,702,956 | ) | |||||
| Net increase in net assets | 41,295,335 | 10,353,697 | ||||||
| Net assets: | ||||||||
| Beginning of year | 83,214,063 | 72,860,366 | ||||||
| End of year | $ | 124,509,398 | $ | 83,214,063 | ||||
| Undistributed net investment income at end of year | $ | 130,844 | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 42,301 | 20,237 | ||||||
| C-Class | 50,818 | 77,396 | ||||||
| H-Class | 2,933,227 | 3,748,552 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 798 | 12 | ||||||
| C-Class | 1,860 | 54 | ||||||
| H-Class | 29,199 | 781 | ||||||
| Shares redeemed | ||||||||
| A-Class | (23,402 | ) | (28,327 | ) | ||||
| C-Class | (46,452 | ) | (68,596 | ) | ||||
| H-Class | (2,852,369 | ) | (3,783,354 | ) | ||||
| Net increase (decrease) in shares | 135,980 | (33,245 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 23 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 111.68 | $ | 93.49 | $ | 90.21 | $ | 79.66 | $ | 35.58 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .61 | .58 | .30 | .01 | .26 | |||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 35.01 | 17.75 | 2.98 | 11.87 | 44.60 | |||||||||||||||
| Total from investment operations | 35.62 | 18.33 | 3.28 | 11.88 | 44.86 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.23 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net realized gains | (5.68 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (5.91 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net asset value, end of period | $ | 141.39 | $ | 111.68 | $ | 93.49 | $ | 90.21 | $ | 79.66 | ||||||||||
| Total Returnb | 32.21 | % | 19.63 | % | 3.64 | % | 15.14 | % | 126.37 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,435 | $ | 1,303 | $ | 1,846 | $ | 2,329 | $ | 8,156 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.47 | % | 0.61 | % | 0.34 | % | 0.01 | % | 0.39 | % | ||||||||||
| Total expenses | 1.52 | % | 1.51 | % | 1.51 | % | 1.54 | % | 1.52 | % | ||||||||||
| Portfolio turnover rate | 410 | % | 669 | % | 762 | % | 820 | % | 673 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 102.46 | $ | 86.42 | $ | 83.99 | $ | 74.81 | $ | 33.66 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.30 | ) | (.19 | ) | (.36 | ) | (.51 | ) | (.02 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 31.94 | 16.37 | 2.79 | 11.02 | 41.95 | |||||||||||||||
| Total from investment operations | 31.64 | 16.18 | 2.43 | 10.51 | 41.93 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.23 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net realized gains | (5.68 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (5.91 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net asset value, end of period | $ | 128.19 | $ | 102.46 | $ | 86.42 | $ | 83.99 | $ | 74.81 | ||||||||||
| Total Returnb | 31.21 | % | 18.76 | % | 2.88 | % | 14.28 | % | 124.86 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,090 | $ | 3,430 | $ | 2,128 | $ | 5,690 | $ | 4,876 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.26 | %) | (0.22 | %) | (0.45 | %) | (0.68 | %) | (0.03 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.26 | % | 2.27 | % | 2.29 | % | 2.27 | % | ||||||||||
| Portfolio turnover rate | 410 | % | 669 | % | 762 | % | 820 | % | 673 | % | ||||||||||
| 24 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P 500® PURE VALUE FUND |
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 112.06 | $ | 93.80 | $ | 90.50 | $ | 79.91 | $ | 35.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .51 | .57 | .33 | (.02 | ) | .32 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 35.23 | 17.83 | 2.97 | 11.94 | 44.70 | |||||||||||||||
| Total from investment operations | 35.74 | 18.40 | 3.30 | 11.92 | 45.02 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.23 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net realized gains | (5.68 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (5.91 | ) | (.14 | ) | — | (1.33 | ) | (.78 | ) | |||||||||||
| Net asset value, end of period | $ | 141.89 | $ | 112.06 | $ | 93.80 | $ | 90.50 | $ | 79.91 | ||||||||||
| Total Returnb | 32.21 | % | 19.64 | % | 3.65 | % | 15.14 | % | 126.50 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 114,984 | $ | 78,480 | $ | 68,886 | $ | 26,852 | $ | 148,578 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.40 | % | 0.58 | % | 0.38 | % | (0.03 | %) | 0.47 | % | ||||||||||
| Total expenses | 1.52 | % | 1.52 | % | 1.51 | % | 1.54 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 410 | % | 669 | % | 762 | % | 820 | % | 673 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the period presented through April 19, 2009 have been restated to reflect a 1:5 reverse share split effective April 20, 2009. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 25 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P MidCap 400® Pure Growth Fund H-Class returned 21.91%, compared with a gain of 23.36% for the S&P MidCap 400 Pure Growth Index. The Fund maintained a daily correlation of over 99% to its benchmark.
The Consumer Discretionary and Financials sectors contributed most to return. No sector detracted, but the Energy sector contributed least to return, followed by the Telecommunications Services sector.
3D Systems Corp., Under Armour, Inc. — Class A and SVB Financial Group added the most to performance of the underlying index for the period. Semtech Corp., SolarWinds, Inc. and InterDigital, Inc. detracted the most from performance of the underlying index 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 Dates: | |
| A-Class | September 1, 2004 |
| C-Class | February 20, 2004 |
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Salix Pharmaceuticals Ltd. | 2.6 | % | ||
| Trinity Industries, Inc. | 2.5 | % | ||
| Synovus Financial Corp. | 2.3 | % | ||
| Patterson-UTI Energy, Inc. | 2.3 | % | ||
| SVB Financial Group | 2.2 | % | ||
| BancorpSouth, Inc. | 2.0 | % | ||
| Endo International plc | 1.9 | % | ||
| Under Armour, Inc. — Class A | 1.8 | % | ||
| Tempur Sealy International, Inc. | 1.8 | % | ||
| United Therapeutics Corp. | 1.8 | % | ||
| Top Ten Total | 21.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 26 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 20.98% | 26.28% | 9.86% | |||||||||
| C-Class Shares with CDSC‡ | 19.98% | 26.28% | 9.86% | |||||||||
| H-Class Shares | 21.91% | 27.23% | 10.68% | |||||||||
| S&P MidCap 400 Pure | ||||||||||||
| Growth Index | 23.36% | 29.21% | 12.46% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 21.90% | 27.24% | 11.77% | |||||||||
| A-Class Shares with sales charge† | 16.12% | 26.00% | 11.20% | |||||||||
| S&P MidCap 400 Pure | ||||||||||||
| Growth Index | 23.36% | 29.21% | 13.71% | |||||||||
| * | 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 27 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.5% | ||||||||
| INDUSTRIALS - 22.5% | ||||||||
| Trinity Industries, Inc. | 95,100 | $ | 6,853,856 | |||||
| United Rentals, Inc.* | 49,200 | 4,671,048 | ||||||
| AO Smith Corp. | 101,300 | 4,661,826 | ||||||
| Kirby Corp.* | 44,000 | 4,455,000 | ||||||
| Corporate Executive Board Co. | 59,000 | 4,379,570 | ||||||
| B/E Aerospace, Inc.* | 49,300 | 4,278,747 | ||||||
| Wabtec Corp. | 49,160 | 3,809,900 | ||||||
| Terex Corp. | 79,900 | 3,539,570 | ||||||
| Alaska Air Group, Inc. | 35,965 | 3,355,894 | ||||||
| Old Dominion Freight Line, Inc.* | 54,800 | 3,109,352 | ||||||
| Towers Watson & Co. — Class A | 23,700 | 2,702,985 | ||||||
| Graco, Inc. | 31,800 | 2,376,732 | ||||||
| Genesee & Wyoming, Inc. — Class A* | 21,900 | 2,131,308 | ||||||
| Fortune Brands Home & Security, Inc. | 48,500 | 2,040,880 | ||||||
| HNI Corp. | 54,700 | 1,999,832 | ||||||
| Lincoln Electric Holdings, Inc. | 26,700 | 1,922,667 | ||||||
| Copart, Inc.* | 47,674 | 1,734,857 | ||||||
| IDEX Corp. | 20,000 | 1,457,800 | ||||||
| Deluxe Corp. | 25,900 | 1,358,973 | ||||||
| J.B. Hunt Transport Services, Inc. | 16,800 | 1,208,256 | ||||||
| Total Industrials | 62,049,053 | |||||||
| FINANCIALS - 19.5% | ||||||||
| Synovus Financial Corp. | 1,868,400 | 6,333,876 | ||||||
| SVB Financial Group* | 46,300 | 5,962,514 | ||||||
| BancorpSouth, Inc. | 217,000 | 5,416,320 | ||||||
| Cathay General Bancorp | 184,807 | 4,655,288 | ||||||
| Old Republic International Corp. | 277,900 | 4,557,560 | ||||||
| Associated Banc-Corp. | 230,500 | 4,162,830 | ||||||
| Waddell & Reed Financial, Inc. — Class A | 48,800 | 3,592,656 | ||||||
| Signature Bank* | 24,201 | 3,039,404 | ||||||
| CBOE Holdings, Inc. | 48,000 | 2,716,800 | ||||||
| Washington Federal, Inc. | 114,897 | 2,677,100 | ||||||
| Affiliated Managers Group, Inc.* | 10,500 | 2,100,525 | ||||||
| City National Corp. | 25,208 | 1,984,374 | ||||||
| MSCI, Inc. — Class A* | 44,400 | 1,910,088 | ||||||
| East West Bancorp, Inc. | 47,600 | 1,737,400 | ||||||
| Alexander & Baldwin, Inc. | 34,600 | 1,472,576 | ||||||
| Omega Healthcare Investors, Inc. | 39,200 | 1,313,984 | ||||||
| Total Financials | 53,633,295 | |||||||
| CONSUMER DISCRETIONARY - 19.2% | ||||||||
| Under Armour, Inc. — Class A* | 44,220 | 5,069,381 | ||||||
| Tempur Sealy International, Inc.* | 99,900 | 5,061,933 | ||||||
| Wendy’s Co.1 | 536,600 | 4,893,792 | ||||||
| Deckers Outdoor Corp.* | 57,900 | 4,616,367 | ||||||
| Toll Brothers, Inc.* | 121,400 | 4,358,260 | ||||||
| Polaris Industries, Inc. | 27,333 | 3,818,693 | ||||||
| Bally Technologies, Inc.* | 52,600 | 3,485,802 | ||||||
| LKQ Corp.* | 108,570 | 2,860,820 | ||||||
| Jarden Corp.* | 46,800 | 2,800,044 | ||||||
| Brinker International, Inc. | 48,700 | 2,554,315 | ||||||
| Gentex Corp. | 76,066 | 2,398,361 | ||||||
| Hanesbrands, Inc. | 29,300 | 2,240,864 | ||||||
| Brunswick Corp. | 44,400 | 2,010,876 | ||||||
| Scientific Games Corp. — Class A* | 125,900 | 1,728,607 | ||||||
| Domino’s Pizza, Inc. | 19,100 | 1,470,127 | ||||||
| Carter’s, Inc. | 16,500 | 1,281,225 | ||||||
| Sotheby’s | 29,200 | 1,271,660 | ||||||
| DreamWorks Animation | ||||||||
| SKG, Inc. — Class A* | 36,100 | 958,455 | ||||||
| Total Consumer Discretionary | 52,879,582 | |||||||
| INFORMATION TECHNOLOGY - 14.0% | ||||||||
| 3D Systems Corp.*,1 | 72,900 | 4,312,035 | ||||||
| PTC, Inc.* | 91,600 | 3,245,388 | ||||||
| Mentor Graphics Corp. | 132,200 | 2,911,044 | ||||||
| WEX, Inc.* | 29,669 | 2,820,038 | ||||||
| ACI Worldwide, Inc.* | 46,379 | 2,745,173 | ||||||
| Conversant, Inc.* | 84,000 | 2,364,600 | ||||||
| Concur Technologies, Inc.* | 22,670 | 2,245,917 | ||||||
| Cree, Inc.* | 36,500 | 2,064,440 | ||||||
| Ciena Corp.* | 82,700 | 1,880,598 | ||||||
| CoreLogic, Inc.* | 60,300 | 1,811,412 | ||||||
| Trimble Navigation Ltd.* | 43,394 | 1,686,725 | ||||||
| Global Payments, Inc. | 23,000 | 1,635,530 | ||||||
| Fair Isaac Corp. | 28,400 | 1,571,088 | ||||||
| Acxiom Corp.* | 45,400 | 1,561,533 | ||||||
| Advent Software, Inc. | 52,000 | 1,526,720 | ||||||
| NeuStar, Inc. — Class A* | 45,076 | 1,465,421 | ||||||
| CommVault Systems, Inc.* | 20,400 | 1,324,980 | ||||||
| Broadridge Financial Solutions, Inc. | 34,100 | 1,266,474 | ||||||
| Total Information Technology | 38,439,116 | |||||||
| HEALTH CARE - 10.9% | ||||||||
| Salix Pharmaceuticals Ltd.* | 69,500 | 7,200,895 | ||||||
| Endo International plc* | 76,200 | 5,231,130 | ||||||
| United Therapeutics Corp.* | 52,352 | 4,922,659 | ||||||
| Universal Health Services, Inc. — Class B | 41,200 | 3,381,284 | ||||||
| Align Technology, Inc.* | 56,800 | 2,941,672 | ||||||
| Cubist Pharmaceuticals, Inc.* | 31,700 | 2,318,855 | ||||||
| Covance, Inc.* | 18,400 | 1,911,760 | ||||||
| Charles River Laboratories | ||||||||
| International, Inc.* | 31,500 | 1,900,710 | ||||||
| Total Health Care | 29,808,965 | |||||||
| ENERGY - 8.9% | ||||||||
| Patterson-UTI Energy, Inc. | 198,900 | 6,301,152 | ||||||
| SM Energy Co. | 54,700 | 3,899,563 | ||||||
| Rosetta Resources, Inc.* | 61,600 | 2,869,328 | ||||||
| Oil States International, Inc.* | 28,900 | 2,849,540 | ||||||
| CARBO Ceramics, Inc.1 | 17,800 | 2,456,222 | ||||||
| Oceaneering International, Inc. | 34,000 | 2,443,240 | ||||||
| Gulfport Energy Corp.* | 26,100 | 1,857,798 | ||||||
| Dril-Quip, Inc.* | 15,900 | 1,782,390 | ||||||
| Total Energy | 24,459,233 | |||||||
| MATERIALS - 2.9% | ||||||||
| Worthington Industries, Inc. | 68,549 | 2,621,999 | ||||||
| Packaging Corporation of America | 37,200 | 2,617,764 | ||||||
| Eagle Materials, Inc. | 29,400 | 2,606,604 | ||||||
| Total Materials | 7,846,367 | |||||||
| 28 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P MIDCAP 400® PURE GROWTH FUND |
| Shares | Value | |||||||
| CONSUMER STAPLES - 1.6% | ||||||||
| Hain Celestial Group, Inc.* | 25,000 | $ | 2,286,750 | |||||
| SUPERVALU, Inc.* | 295,400 | 2,020,536 | ||||||
| Total Consumer Staples | 4,307,286 | |||||||
| Total Common Stocks | ||||||||
| (Cost $223,319,186) | 273,422,897 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 586,705 | 586,705 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 247,569 | 247,569 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 167,415 | 167,415 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 78,001 | 78,001 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $1,079,690) | 1,079,690 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 2.2% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 2,965,485 | 2,965,485 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 2,646,125 | 2,646,125 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 498,840 | 498,840 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $6,110,450) | 6,110,450 | |||||||
| Total Investments - 102.1% | ||||||||
| (Cost $230,509,326) | $ | 280,613,037 | ||||||
| Other Assets & Liabilities, net - (2.1)% | (5,889,368 | ) | ||||||
| Total Net Assets - 100.0% | $ | 274,723,669 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. | |
| plc — Public Limited Company |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 29 |
| S&P MIDCAP 400® PURE GROWTH FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value – including $6,008,926 of | ||||
| securities loaned | ||||
| (cost $223,319,186) | $ | 273,422,897 | ||
| Repurchase agreements, at value | ||||
| (cost $7,190,140) | 7,190,140 | |||
| Total investments | ||||
| (cost $230,509,326) | 280,613,037 | |||
| Receivables: | ||||
| Securities sold | 1,476,028 | |||
| Fund shares sold | 762,580 | |||
| Dividends | 59,669 | |||
| Securities lending income | 10,799 | |||
| Interest | 1 | |||
| Total assets | 282,922,114 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 6,110,450 | |||
| Fund shares redeemed | 1,576,618 | |||
| Management fees | 165,677 | |||
| Distribution and service fees | 72,125 | |||
| Transfer agent and administrative fees | 55,226 | |||
| Portfolio accounting fees | 21,533 | |||
| Miscellaneous | 196,816 | |||
| Total liabilities | 8,198,445 | |||
| Net assets | $ | 274,723,669 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 194,831,822 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized gain on investments | 29,788,136 | |||
| Net unrealized appreciation on investments | 50,103,711 | |||
| Net assets | $ | 274,723,669 | ||
| A-Class: | ||||
| Net assets | $ | 59,293,277 | ||
| Capital shares outstanding | 1,010,755 | |||
| Net asset value per share | $ | 58.66 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 61.59 | ||
| C-Class: | ||||
| Net assets | $ | 28,567,242 | ||
| Capital shares outstanding | 527,720 | |||
| Net asset value per share | $ | 54.13 | ||
| H-Class: | ||||
| Net assets | $ | 186,863,150 | ||
| Capital shares outstanding | 3,182,578 | |||
| Net asset value per share | $ | 58.71 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends | $ | 3,066,220 | ||
| Income from securities lending, net | 274,591 | |||
| Interest | 455 | |||
| Total investment income | 3,341,266 | |||
| Expenses: | ||||
| Management fees | 2,143,613 | |||
| Transfer agent and administrative fees | 714,538 | |||
| Distribution and service fees: | ||||
| A-Class | 137,596 | |||
| C-Class | 237,870 | |||
| H-Class | 517,475 | |||
| Portfolio accounting fees | 276,808 | |||
| Custodian fees | 32,437 | |||
| Trustees’ fees* | 28,427 | |||
| Line of credit interest expense | 515 | |||
| Miscellaneous | 437,510 | |||
| Total expenses | 4,526,789 | |||
| Net investment loss | (1,185,523 | ) | ||
| Net Realized And Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 55,085,731 | |||
| Net realized gain | 55,085,731 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (4,970,041 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (4,970,041 | ) | ||
| Net realized and unrealized gain | 50,115,690 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 48,930,167 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 30 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P MIDCAP 400® PURE GROWTH FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (1,185,523 | ) | $ | (1,391,814 | ) | ||
| Net realized gain on investments | 55,085,731 | 43,157,278 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (4,970,041 | ) | (15,645,534 | ) | ||||
| Net increase in net assets resulting from operations | 48,930,167 | 26,119,930 | ||||||
| Distributions to shareholders From: | ||||||||
| Net realized gains | ||||||||
| A-Class | (1,952,757 | ) | — | |||||
| C-Class | (948,399 | ) | — | |||||
| H-Class | (6,562,447 | ) | — | |||||
| Total distributions to shareholders | (9,463,603 | ) | — | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 36,744,483 | 41,130,201 | ||||||
| C-Class | 12,268,993 | 8,791,379 | ||||||
| H-Class | 228,779,489 | 400,202,090 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 1,901,016 | — | ||||||
| C-Class | 922,659 | — | ||||||
| H-Class | 6,298,116 | — | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (33,701,785 | ) | (36,479,630 | ) | ||||
| C-Class | (6,985,331 | ) | (8,135,216 | ) | ||||
| H-Class | (317,602,501 | ) | (489,786,477 | ) | ||||
| Net decrease from capital share transactions | (71,374,861 | ) | (84,277,653 | ) | ||||
| Net decrease in net assets | (31,908,297 | ) | (58,157,723 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 306,631,966 | 364,789,689 | ||||||
| End of year | $ | 274,723,669 | $ | 306,631,966 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (669,216 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 700,297 | 928,330 | ||||||
| C-Class | 242,805 | 212,846 | ||||||
| H-Class | 4,249,934 | 9,129,844 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 33,658 | — | ||||||
| C-Class | 17,659 | — | ||||||
| H-Class | 111,412 | — | ||||||
| Shares redeemed | ||||||||
| A-Class | (640,363 | ) | (828,529 | ) | ||||
| C-Class | (138,844 | ) | (198,463 | ) | ||||
| H-Class | (6,041,405 | ) | (11,346,472 | ) | ||||
| Net decrease in shares | (1,464,847 | ) | (2,102,444 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 31 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.76 | $ | 44.11 | $ | 42.76 | $ | 32.21 | $ | 18.19 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.22 | ) | (.19 | ) | (.45 | ) | (.38 | ) | (.28 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.05 | 5.84 | 1.80 | 10.93 | 14.30 | |||||||||||||||
| Total from investment operations | 10.83 | 5.65 | 1.35 | 10.55 | 14.02 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.93 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.93 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 58.66 | $ | 49.76 | $ | 44.11 | $ | 42.76 | $ | 32.21 | ||||||||||
| Total Returnb | 21.90 | % | 12.81 | % | 3.16 | % | 32.75 | % | 77.08 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 59,293 | $ | 45,638 | $ | 36,052 | $ | 25,237 | $ | 2,242 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.40 | %) | (0.43 | %) | (1.09 | %) | (1.04 | %) | (1.03 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.50 | % | 1.54 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 131 | % | 188 | % | 226 | % | 448 | % | 626 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 46.39 | $ | 41.43 | $ | 40.47 | $ | 30.71 | $ | 17.48 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.58 | ) | (.49 | ) | (.71 | ) | (.63 | ) | (.44 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 10.25 | 5.45 | 1.67 | 10.39 | 13.67 | |||||||||||||||
| Total from investment operations | 9.67 | 4.96 | .96 | 9.76 | 13.23 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.93 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.93 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 54.13 | $ | 46.39 | $ | 41.43 | $ | 40.47 | $ | 30.71 | ||||||||||
| Total Returnb | 20.98 | % | 12.00 | % | 2.35 | % | 31.78 | % | 75.69 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 28,567 | $ | 18,837 | $ | 16,228 | $ | 10,102 | $ | 3,780 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.15 | %) | (1.19 | %) | (1.83 | %) | (1.83 | %) | (1.77 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.25 | % | 2.25 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 131 | % | 188 | % | 226 | % | 448 | % | 626 | % | ||||||||||
| 32 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P MIDCAP 400® PURE GROWTH FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 49.80 | $ | 44.14 | $ | 42.81 | $ | 32.25 | $ | 18.21 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.18 | ) | (.20 | ) | (.44 | ) | (.38 | ) | (.26 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.02 | 5.86 | 1.77 | 10.94 | 14.30 | |||||||||||||||
| Total from investment operations | 10.84 | 5.66 | 1.33 | 10.56 | 14.04 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (1.93 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (1.93 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 58.71 | $ | 49.80 | $ | 44.14 | $ | 42.81 | $ | 32.25 | ||||||||||
| Total Returnb | 21.91 | % | 12.82 | % | 3.11 | % | 32.74 | % | 77.10 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 186,863 | $ | 242,157 | $ | 312,510 | $ | 212,654 | $ | 64,449 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.33 | %) | (0.45 | %) | (1.08 | %) | (1.02 | %) | (0.99 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.50 | % | 1.55 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 131 | % | 188 | % | 226 | % | 448 | % | 626 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 33 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P MidCap 400® Pure Value Fund H-Class returned 19.39%, compared with a return of 21.98% for the S&P MidCap 400 Pure Value Index. The Fund maintained a daily correlation of over 99% to its benchmark.
The sectors contributing most to performance were Financials and Industrials. No sector detracted from return, but Consumer Discretionary contributed least, followed by the Telecommunications Services sector.
Ingram Micro, Inc. — Class A, StanCorp Financial Group, Inc. and ManpowerGroup, Inc. contributed the most to performance of the underlying index for the period. Community Health Systems, Inc., Alpha Natural Resources, Inc. and General Cable Corp. detracted the most from performance of the underlying index 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 Dates: | ||||
| A-Class | September 1, 2004 | |||
| C-Class | February 20, 2004 | |||
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Ingram Micro, Inc. — Class A | 2.8 | % | ||
| Tech Data Corp. | 2.6 | % | ||
| ManTech International Corp. — Class A | 2.2 | % | ||
| Avnet, Inc. | 2.1 | % | ||
| Arrow Electronics, Inc. | 2.1 | % | ||
| Reinsurance Group of America, | ||||
| Inc. — Class A | 2.1 | % | ||
| URS Corp. | 2.0 | % | ||
| AECOM Technology Corp. | 2.0 | % | ||
| Universal Corp. | 2.0 | % | ||
| Health Net, Inc. | 1.8 | % | ||
| Top Ten Total | 21.7 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 34 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 18.57% | 27.24% | 6.17% | |||||||||
| C-Class Shares with CDSC‡ | 17.57% | 27.24% | 6.17% | |||||||||
| H-Class Shares | 19.39% | 28.21% | 7.00% | |||||||||
| S&P MidCap 400 Pure Value Index | 21.98% | 32.08% | 10.15% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 19.49% | 28.23% | 7.58% | |||||||||
| A-Class Shares with sales charge† | 13.83% | 26.99% | 7.04% | |||||||||
| S&P MidCap 400 Pure Value Index | 21.98% | 32.08% | 10.60% | |||||||||
| * | 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 35 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.5% | ||||||||
| FINANCIALS - 19.6% | ||||||||
| Reinsurance Group of America, | ||||||||
| Inc. — Class A | 3,903 | $ | 310,795 | |||||
| Hanover Insurance Group, Inc. | 3,940 | 242,073 | ||||||
| First American Financial Corp. | 8,600 | 228,329 | ||||||
| Protective Life Corp. | 3,819 | 200,841 | ||||||
| Kemper Corp. | 4,741 | 185,706 | ||||||
| Aspen Insurance Holdings Ltd. | 4,576 | 181,667 | ||||||
| American Financial Group, Inc. | 2,757 | 159,106 | ||||||
| Fidelity National Financial, | ||||||||
| Inc. — Class A | 5,020 | 157,829 | ||||||
| Alleghany Corp.* | 370 | 150,731 | ||||||
| Everest Re Group Ltd. | 917 | 140,347 | ||||||
| WR Berkley Corp. | 3,308 | 137,679 | ||||||
| StanCorp Financial Group, Inc. | 2,022 | 135,070 | ||||||
| First Niagara Financial Group, Inc. | 11,896 | 112,417 | ||||||
| HCC Insurance Holdings, Inc. | 2,280 | 103,717 | ||||||
| Astoria Financial Corp. | 6,412 | 88,614 | ||||||
| Mercury General Corp. | 1,870 | 84,300 | ||||||
| Hancock Holding Co. | 1,920 | 70,367 | ||||||
| International Bancshares Corp. | 2,497 | 62,625 | ||||||
| Fulton Financial Corp. | 4,970 | 62,523 | ||||||
| Janus Capital Group, Inc. | 5,261 | 57,187 | ||||||
| Valley National Bancorp | 5,450 | 56,735 | ||||||
| New York Community Bancorp, Inc. | 3,281 | 52,726 | ||||||
| Total Financials | 2,981,384 | |||||||
| INFORMATION TECHNOLOGY - 18.7% | ||||||||
| Ingram Micro, Inc. — Class A* | 14,446 | 427,023 | ||||||
| Tech Data Corp.* | 6,511 | 396,911 | ||||||
| ManTech International Corp. — Class A | 11,567 | 340,186 | ||||||
| Avnet, Inc. | 6,904 | 321,243 | ||||||
| Arrow Electronics, Inc.* | 5,325 | 316,092 | ||||||
| Vishay Intertechnology, Inc. | 15,026 | 223,587 | ||||||
| Lexmark International, Inc. — Class A | 4,590 | 212,471 | ||||||
| Science Applications International Corp. | 5,060 | 189,193 | ||||||
| Leidos Holdings, Inc. | 4,900 | 173,313 | ||||||
| Convergys Corp. | 4,200 | 92,022 | ||||||
| Fairchild Semiconductor International, | ||||||||
| Inc. — Class A* | 5,850 | 80,672 | ||||||
| Itron, Inc.* | 1,680 | 59,707 | ||||||
| Total Information Technology | 2,832,420 | |||||||
| INDUSTRIALS - 15.0% | ||||||||
| URS Corp. | 6,557 | 308,573 | ||||||
| AECOM Technology Corp.* | 9,484 | 305,101 | ||||||
| JetBlue Airways Corp.* | 27,552 | 239,427 | ||||||
| AGCO Corp. | 3,475 | 191,681 | ||||||
| Oshkosh Corp. | 3,159 | 185,970 | ||||||
| Granite Construction, Inc. | 4,400 | 175,692 | ||||||
| Manpowergroup, Inc. | 2,075 | 163,572 | ||||||
| Brink’s Co. | 4,570 | 130,474 | ||||||
| Exelis, Inc. | 6,181 | 117,501 | ||||||
| KBR, Inc. | 3,518 | 93,860 | ||||||
| Esterline Technologies Corp.* | 850 | 90,559 | ||||||
| Regal-Beloit Corp. | 1,200 | 87,252 | ||||||
| Triumph Group, Inc. | 1,280 | 82,662 | ||||||
| Werner Enterprises, Inc. | 2,430 | 61,989 | ||||||
| UTI Worldwide, Inc. | 3,511 | 37,181 | ||||||
| Total Industrials | 2,271,494 | |||||||
| CONSUMER DISCRETIONARY - 10.4% | ||||||||
| Big Lots, Inc.* | 5,790 | 219,267 | ||||||
| Abercrombie & Fitch Co. — Class A | 4,520 | 174,020 | ||||||
| MDC Holdings, Inc. | 5,510 | 155,823 | ||||||
| Rent-A-Center, Inc. — Class A | 5,750 | 152,950 | ||||||
| Murphy USA, Inc.* | 3,680 | 149,371 | ||||||
| CST Brands, Inc. | 4,340 | 135,582 | ||||||
| Apollo Education Group, Inc. — Class A* | 3,140 | 107,514 | ||||||
| Aaron’s, Inc. | 3,000 | 90,720 | ||||||
| Foot Locker, Inc. | 1,760 | 82,685 | ||||||
| Ascena Retail Group, Inc.* | 4,530 | 78,278 | ||||||
| ANN, Inc.* | 1,850 | 76,738 | ||||||
| DeVry Education Group, Inc. | 1,780 | 75,454 | ||||||
| JC Penney Company, Inc.*,1 | 7,830 | 67,495 | ||||||
| Total Consumer Discretionary | 1,565,897 | |||||||
| MATERIALS - 8.4% | ||||||||
| Domtar Corp. | 2,440 | 273,817 | ||||||
| Commercial Metals Co. | 9,683 | 182,815 | ||||||
| Reliance Steel & Aluminum Co. | 2,199 | 155,381 | ||||||
| Steel Dynamics, Inc. | 8,540 | 151,927 | ||||||
| Greif, Inc. — Class A | 2,617 | 137,366 | ||||||
| Ashland, Inc. | 1,340 | 133,303 | ||||||
| Olin Corp. | 4,420 | 122,036 | ||||||
| Cabot Corp. | 1,931 | 114,045 | ||||||
| Total Materials | 1,270,690 | |||||||
| HEALTH CARE - 7.1% | ||||||||
| Health Net, Inc.* | 8,179 | 278,168 | ||||||
| Community Health Systems, Inc.* | 6,208 | 243,167 | ||||||
| LifePoint Hospitals, Inc.* | 3,950 | 215,473 | ||||||
| WellCare Health Plans, Inc.* | 2,690 | 170,869 | ||||||
| Owens & Minor, Inc. | 4,575 | 160,262 | ||||||
| Total Health Care | 1,067,939 | |||||||
| ENERGY - 7.1% | ||||||||
| Superior Energy Services, Inc. | 8,402 | 258,446 | ||||||
| World Fuel Services Corp. | 5,447 | 240,213 | ||||||
| HollyFrontier Corp. | 4,840 | 230,287 | ||||||
| Unit Corp.* | 1,774 | 115,984 | ||||||
| Tidewater, Inc. | 1,912 | 92,961 | ||||||
| Alpha Natural Resources, Inc.* | 16,340 | 69,445 | ||||||
| WPX Energy, Inc.* | 3,300 | 59,499 | ||||||
| Total Energy | 1,066,835 | |||||||
| UTILITIES - 6.7% | ||||||||
| Great Plains Energy, Inc. | 5,754 | 155,588 | ||||||
| UGI Corp. | 3,300 | 150,513 | ||||||
| PNM Resources, Inc. | 5,420 | 146,503 | ||||||
| Hawaiian Electric Industries, Inc. | 5,000 | 127,100 | ||||||
| Westar Energy, Inc. | 3,000 | 105,480 | ||||||
| Atmos Energy Corp. | 2,057 | 96,946 |
| 36 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P MIDCAP 400® PURE VALUE FUND |
| Shares | Value | |||||||
| WGL Holdings, Inc. | 2,410 | $ | 96,545 | |||||
| IDACORP, Inc. | 1,280 | 71,002 | ||||||
| ONE Gas, Inc.* | 1,640 | 58,925 | ||||||
| Total Utilities | 1,008,602 | |||||||
| CONSUMER STAPLES - 4.9% | ||||||||
| Universal Corp. | 5,324 | 297,559 | ||||||
| Dean Foods Co. | 11,220 | 173,461 | ||||||
| United Natural Foods, Inc.* | 1,300 | 92,196 | ||||||
| Ingredion, Inc. | 1,350 | 91,908 | ||||||
| Post Holdings, Inc.* | 1,550 | 85,436 | ||||||
| Total Consumer Staples | 740,560 | |||||||
| TELECOMMUNICATION SERVICES - 1.6% | ||||||||
| Telephone & Data Systems, Inc. | 9,439 | 247,396 | ||||||
| Total Common Stocks | ||||||||
| (Cost $11,871,545) | 15,053,217 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 0.5% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 37,905 | 37,905 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 15,994 | 15,994 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 10,816 | 10,816 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 5,039 | 5,039 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $69,754) | 69,754 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 23,883 | 23,883 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 21,310 | 21,310 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 4,017 | 4,017 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $49,210) | 49,210 | |||||||
| Total Investments - 100.3% | ||||||||
| (Cost $11,990,509) | $ | 15,172,181 | ||||||
| Other Assets & Liabilities, net - (0.3)% | (45,292 | ) | ||||||
| Total Net Assets - 100.0% | $ | 15,126,889 |
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 37 |
| S&P MIDCAP 400® PURE VALUE FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value - including $45,858 of | ||||
| securities loaned | ||||
| (cost $11,871,545) | $ | 15,053,217 | ||
| Repurchase agreements, at value | �� | |||
| (cost $118,964) | 118,964 | |||
| Total investments | ||||
| (cost $11,990,509) | 15,172,181 | |||
| Receivables: | ||||
| Fund shares sold | 1,442,789 | |||
| Dividends | 13,978 | |||
| Securities lending income | 321 | |||
| Total assets | 16,629,269 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,414,153 | |||
| Upon return of securities loaned | 49,210 | |||
| Management fees | 9,683 | |||
| Distribution and service fees | 4,514 | |||
| Fund shares redeemed | 3,392 | |||
| Transfer agent and administrative fees | 3,228 | |||
| Portfolio accounting fees | 1,291 | |||
| Miscellaneous | 16,909 | |||
| Total liabilities | 1,502,380 | |||
| Net assets | $ | 15,126,889 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 16,515,659 | ||
| Undistributed net investment income | 18,945 | |||
| Accumulated net realized loss on investments | (4,589,387 | ) | ||
| Net unrealized appreciation on investments | 3,181,672 | |||
| Net assets | $ | 15,126,889 | ||
| A-Class: | ||||
| Net assets | $ | 2,356,748 | ||
| Capital shares outstanding | 54,763 | |||
| Net asset value per share | $ | 43.04 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 45.19 | ||
| C-Class: | ||||
| Net assets | $ | 2,206,830 | ||
| Capital shares outstanding | 55,895 | |||
| Net asset value per share | $ | 39.48 | ||
| H-Class: | ||||
| Net assets | $ | 10,563,311 | ||
| Capital shares outstanding | 245,786 | |||
| Net asset value per share | $ | 42.98 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends | $ | 470,576 | ||
| Income from securities lending, net | 5,422 | |||
| Interest | 65 | |||
| Total investment income | 476,063 | |||
| Expenses: | ||||
| Management fees | 215,470 | |||
| Transfer agent and administrative fees | 71,823 | |||
| Distribution and service fees: | ||||
| A-Class | 4,007 | |||
| C-Class | 25,521 | |||
| H-Class | 61,436 | |||
| Portfolio accounting fees | 28,729 | |||
| Trustees’ fees* | 3,360 | |||
| Custodian fees | 3,310 | |||
| Line of credit interest expense | 236 | |||
| Miscellaneous | 43,226 | |||
| Total expenses | 457,118 | |||
| Net investment income | 18,945 | |||
| Net Realized and Unrealized Gain (loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,292,740 | |||
| Net realized gain | 3,292,740 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (2,272,142 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (2,272,142 | ) | ||
| Net realized and unrealized gain | 1,020,598 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 1,039,543 | ||
| * | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| 38 | 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 | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 18,945 | $ | 52,110 | ||||
| Net realized gain on investments | 3,292,740 | 2,246,723 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (2,272,142 | ) | 2,605,745 | |||||
| Net increase in net assets resulting from operations | 1,039,543 | 4,904,578 | ||||||
Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | (6,418 | ) | — | |||||
| C-Class | (10,279 | ) | — | |||||
| H-Class | (35,413 | ) | — | |||||
| Total distributions to shareholders | (52,110 | ) | — | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 10,210,160 | 12,852,758 | ||||||
| C-Class | 2,956,353 | 4,206,889 | ||||||
| H-Class | 180,329,694 | 285,882,528 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 5,904 | — | ||||||
| C-Class | 10,187 | — | ||||||
| H-Class | 33,473 | — | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (9,772,932 | ) | (18,281,006 | ) | ||||
| C-Class | (4,562,781 | ) | (3,298,820 | ) | ||||
| H-Class | (248,292,026 | ) | (230,894,273 | ) | ||||
| Net increase (decrease) from capital share transactions | (69,081,968 | ) | 50,468,076 | |||||
| Net increase (decrease) in net assets | (68,094,535 | ) | 55,372,654 | |||||
| Net assets: | ||||||||
| Beginning of year | 83,221,424 | 27,848,770 | ||||||
| End of year | $ | 15,126,889 | $ | 83,221,424 | ||||
| Undistributed net investment income at end of year | $ | 18,945 | $ | 52,110 | ||||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 259,238 | 404,286 | ||||||
| C-Class | 81,786 | 142,762 | ||||||
| H-Class | 4,580,797 | 8,710,220 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 142 | — | ||||||
| C-Class | 266 | — | ||||||
| H-Class | 805 | — | ||||||
| Shares redeemed | ||||||||
| A-Class | (248,039 | ) | (581,601 | ) | ||||
| C-Class | (128,153 | ) | (116,987 | ) | ||||
| H-Class | (6,499,596 | ) | (7,156,790 | ) | ||||
| Net increase (decrease) in shares | (1,952,754 | ) | 1,401,890 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 39 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 36.18 | $ | 30.88 | $ | 31.43 | $ | 30.45 | $ | 13.68 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.03 | ) | .07 | .06 | .02 | .12 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 7.08 | 5.23 | (.61 | ) | 3.64 | 16.75 | ||||||||||||||
| Total from investment operations | 7.05 | 5.30 | (.55 | ) | 3.66 | 16.87 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.19 | ) | — | — | (.17 | ) | (.10 | ) | ||||||||||||
| Net realized gains | — | — | — | (2.51 | ) | — | ||||||||||||||
| Total distributions | (.19 | ) | — | — | (2.68 | ) | (.10 | ) | ||||||||||||
| Net asset value, end of period | $ | 43.04 | $ | 36.18 | $ | 30.88 | $ | 31.43 | $ | 30.45 | ||||||||||
| Total Returnb | 19.49 | % | 17.16 | % | (1.75 | %) | 12.81 | % | 123.41 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,357 | $ | 1,571 | $ | 6,817 | $ | 785 | $ | 10,888 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.06 | %) | 0.23 | % | 0.22 | % | 0.08 | % | 0.43 | % | ||||||||||
| Total expenses | 1.52 | % | 1.51 | % | 1.49 | % | 1.53 | % | 1.52 | % | ||||||||||
| Portfolio turnover rate | 506 | % | 757 | % | 619 | % | 407 | % | 443 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 33.46 | $ | 28.78 | $ | 29.53 | $ | 28.96 | $ | 13.12 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.25 | ) | (.13 | ) | (.16 | ) | (.23 | ) | (.06 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 6.46 | 4.81 | (.59 | ) | 3.48 | 16.00 | ||||||||||||||
| Total from investment operations | 6.21 | 4.68 | (.75 | ) | 3.25 | 15.94 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.19 | ) | — | — | (.17 | ) | (.10 | ) | ||||||||||||
| Net realized gains | — | — | — | (2.51 | ) | — | ||||||||||||||
| Total distributions | (.19 | ) | — | — | (2.68 | ) | (.10 | ) | ||||||||||||
| Net asset value, end of period | $ | 39.48 | $ | 33.46 | $ | 28.78 | $ | 29.53 | $ | 28.96 | ||||||||||
| Total Returnb | 18.57 | % | 16.26 | % | (2.54 | %) | 12.03 | % | 121.59 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,207 | $ | 3,413 | $ | 2,194 | $ | 2,311 | $ | 2,478 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.71 | %) | (0.45 | %) | (0.60 | %) | (0.83 | %) | (0.24 | %) | ||||||||||
| Total expenses | 2.28 | % | 2.26 | % | 2.26 | % | 2.30 | % | 2.29 | % | ||||||||||
| Portfolio turnover rate | 506 | % | 757 | % | 619 | % | 407 | % | 443 | % | ||||||||||
| 40 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P MIDCAP 400® PURE VALUE FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 36.16 | $ | 30.86 | $ | 31.42 | $ | 30.43 | $ | 13.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .06 | .08 | .01 | (.06 | ) | .10 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 6.95 | 5.22 | (.57 | ) | 3.73 | 16.76 | ||||||||||||||
| Total from investment operations | 7.01 | 5.30 | (.56 | ) | 3.67 | 16.86 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | (.19 | ) | — | — | (.17 | ) | (.10 | ) | ||||||||||||
| Net realized gains | — | — | — | (2.51 | ) | — | ||||||||||||||
| Total distributions | (.19 | ) | — | — | (2.68 | ) | (.10 | ) | ||||||||||||
| Net asset value, end of period | $ | 42.98 | $ | 36.16 | $ | 30.86 | $ | 31.42 | $ | 30.43 | ||||||||||
| Total Returnb | 19.39 | % | 17.17 | % | (1.78 | %) | 12.85 | % | 123.43 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 10,563 | $ | 78,237 | $ | 18,838 | $ | 54,206 | $ | 199,458 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.15 | % | 0.24 | % | 0.02 | % | (0.19 | %) | 0.37 | % | ||||||||||
| Total expenses | 1.52 | % | 1.52 | % | 1.51 | % | 1.54 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 506 | % | 757 | % | 619 | % | 407 | % | 443 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 41 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P SmallCap 600® Pure Growth Fund H-Class returned 26.35%, compared with a gain of 28.63% for the S&P SmallCap 600 Pure Growth Index. The Fund maintained a daily correlation of over 99% to its benchmark.
The Information Technology sector and the Financials sector added the most to performance for the period. Consumer Staples contributed the least. The Telecommunications Services sector was the only detractor from return.
The best-performing stocks in the S&P SmallCap 600 Pure Growth Index were Tuesday Morning Corp., Blucora, Inc. and Home BancShares, Inc. The weakest performers of the underlying index were Francesca’s Holdings Corp., Ixia and Geospace Technologies 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 Dates: | |||
| A-Class | September 1, 2004 | ||
| C-Class | February 20, 2004 | ||
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Matrix Service Co. | 1.9 | % | ||
| US Silica Holdings, Inc. | 1.9 | % | ||
| Questcor Pharmaceuticals, Inc. | 1.4 | % | ||
| Taser International, Inc. | 1.4 | % | ||
| On Assignment, Inc. | 1.3 | % | ||
| Carrizo Oil & Gas, Inc. | 1.3 | % | ||
| CalAmp Corp. | 1.3 | % | ||
| Electronics for Imaging, Inc. | 1.3 | % | ||
| Akorn, Inc. | 1.2 | % | ||
| MB Financial, Inc. | 1.2 | % | ||
| Top Ten Total | 14.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 42 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 25.41% | 24.70% | 7.71% | |||||||||
| C-Class Shares with CDSC‡ | 24.41% | 24.70% | 7.71% | |||||||||
| H-Class Shares | 26.35% | 25.62% | 8.49% | |||||||||
| S&P SmallCap 600 Pure Growth Index | 28.63% | 28.61% | 11.04% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 26.35% | 25.63% | 9.30% | |||||||||
| A-Class Shares with sales charge† | 20.35% | 24.42% | 8.74% | |||||||||
| S&P SmallCap 600 Pure Growth Index | 28.63% | 28.61% | 11.76% | |||||||||
| * | 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 43 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.8% | ||||||||
| FINANCIALS - 22.3% | ||||||||
| MB Financial, Inc. | 11,130 | $ | 344,586 | |||||
| United Community Banks, Inc.* | 16,898 | 327,990 | ||||||
| Umpqua Holdings Corp.1 | 15,675 | 292,182 | ||||||
| PrivateBancorp, Inc. — Class A | 9,006 | 274,773 | ||||||
| BBCN Bancorp, Inc. | 16,016 | 274,514 | ||||||
| HFF, Inc. — Class A | 8,109 | 272,543 | ||||||
| HCI Group, Inc. | 7,230 | 263,172 | ||||||
| Pinnacle Financial Partners, Inc. | 6,715 | 251,745 | ||||||
| Forestar Group, Inc.* | 13,928 | 247,918 | ||||||
| Portfolio Recovery Associates, Inc.* | 4,232 | 244,863 | ||||||
| Virtus Investment Partners, Inc.* | 1,345 | 232,914 | ||||||
| Home BancShares, Inc. | 6,630 | 228,205 | ||||||
| BofI Holding, Inc.* | 2,548 | 218,491 | ||||||
| PacWest Bancorp1 | 5,009 | 215,437 | ||||||
| First Midwest Bancorp, Inc. | 12,555 | 214,439 | ||||||
| Bank of the Ozarks, Inc. | 3,048 | 207,447 | ||||||
| Encore Capital Group, Inc.* | 4,535 | 207,250 | ||||||
| CoreSite Realty Corp. | 6,600 | 204,600 | ||||||
| Sabra Health Care REIT, Inc. | 7,250 | 202,203 | ||||||
| Oritani Financial Corp. | 12,631 | 199,696 | ||||||
| Wilshire Bancorp, Inc. | 16,549 | 183,694 | ||||||
| MarketAxess Holdings, Inc. | 2,990 | 177,068 | ||||||
| Boston Private Financial Holdings, Inc. | 13,010 | 176,025 | ||||||
| Employers Holdings, Inc. | 7,820 | 158,199 | ||||||
| Evercore Partners, Inc. — Class A | 2,715 | 150,004 | ||||||
| Glacier Bancorp, Inc. | 4,915 | 142,879 | ||||||
| Texas Capital Bancshares, Inc.* | 1,984 | 128,841 | ||||||
| eHealth, Inc.* | 2,213 | 112,420 | ||||||
| Financial Engines, Inc. | 1,680 | 85,310 | ||||||
| First Financial Bankshares, Inc. | 1,175 | 72,603 | ||||||
| First Cash Financial Services, Inc.* | 1,209 | 61,006 | ||||||
| Total Financials | 6,373,017 | |||||||
| INFORMATION TECHNOLOGY - 21.0% | ||||||||
| CalAmp Corp.* | 13,533 | 377,164 | ||||||
| Electronics for Imaging, Inc.* | 8,500 | 368,135 | ||||||
| Dealertrack Technologies, Inc.* | 5,285 | 259,969 | ||||||
| Interactive Intelligence Group, Inc.* | 3,568 | 258,681 | ||||||
| XO Group, Inc.* | 25,486 | 258,428 | ||||||
| Manhattan Associates, Inc.* | 6,840 | 239,605 | ||||||
| Virtusa Corp.* | 7,130 | 238,926 | ||||||
| iGATE Corp.* | 7,418 | 233,964 | ||||||
| OpenTable, Inc.* | 2,948 | 226,790 | ||||||
| Blucora, Inc.* | 11,028 | 217,141 | ||||||
| Methode Electronics, Inc. | 6,845 | 209,868 | ||||||
| Synchronoss Technologies, Inc.* | 5,793 | 198,642 | ||||||
| Harmonic, Inc.* | 27,747 | 198,114 | ||||||
| Monotype Imaging Holdings, Inc. | 6,494 | 195,729 | ||||||
| Perficient, Inc.* | 10,753 | 194,844 | ||||||
| j2 Global, Inc. | 3,890 | 194,695 | ||||||
| Synaptics, Inc.* | 3,106 | 186,422 | ||||||
| Daktronics, Inc. | 12,058 | 173,514 | ||||||
| Measurement Specialties, Inc.* | 2,413 | 163,722 | ||||||
| Tyler Technologies, Inc.* | 1,840 | 153,971 | ||||||
| LogMeIn, Inc.* | 3,238 | 145,354 | ||||||
| Advanced Energy Industries, Inc.* | 5,720 | 140,140 | ||||||
| Belden, Inc. | 1,958 | 136,277 | ||||||
| Stamps.com, Inc.* | 3,897 | 130,783 | ||||||
| Cardtronics, Inc.* | 3,108 | 120,746 | ||||||
| FEI Co. | 1,130 | 116,413 | ||||||
| NIC, Inc. | 5,662 | 109,333 | ||||||
| FARO Technologies, Inc.* | 1,978 | 104,834 | ||||||
| MTS Systems Corp. | 1,420 | 97,256 | ||||||
| Cognex Corp.* | 2,789 | 94,436 | ||||||
| MAXIMUS, Inc. | 2,104 | 94,385 | ||||||
| Blackbaud, Inc. | 2,438 | 76,309 | ||||||
| comScore, Inc.* | 2,263 | 74,204 | ||||||
| Total Information Technology | 5,988,794 | |||||||
| CONSUMER DISCRETIONARY - 15.7% | ||||||||
| Lithia Motors, Inc. — Class A | 4,945 | 328,645 | ||||||
| Multimedia Games Holding Company, Inc.* | 11,156 | 323,970 | ||||||
| Buffalo Wild Wings, Inc.* | 1,813 | 269,957 | ||||||
| MarineMax, Inc.* | 16,976 | 257,865 | ||||||
| Winnebago Industries, Inc.* | 7,655 | 209,670 | ||||||
| Arctic Cat, Inc. | 4,320 | 206,453 | ||||||
| Iconix Brand Group, Inc.* | 5,100 | 200,277 | ||||||
| Universal Electronics, Inc.* | 4,707 | 180,702 | ||||||
| Lumber Liquidators Holdings, Inc.* | 1,915 | 179,627 | ||||||
| Monarch Casino & Resort, Inc.* | 9,040 | 167,511 | ||||||
| Red Robin Gourmet Burgers, Inc.* | 2,305 | 165,222 | ||||||
| EW Scripps Co. — Class A* | 8,940 | 158,417 | ||||||
| Drew Industries, Inc. | 2,755 | 149,321 | ||||||
| Capella Education Co. | 2,320 | 146,508 | ||||||
| Ruth’s Hospitality Group, Inc. | 11,729 | 141,804 | ||||||
| Movado Group, Inc. | 3,051 | 138,973 | ||||||
| Wolverine World Wide, Inc. | 4,731 | 135,070 | ||||||
| Pinnacle Entertainment, Inc.* | 5,548 | 131,488 | ||||||
| Papa John’s International, Inc. | 2,445 | 127,409 | ||||||
| Sonic Corp.* | 5,360 | 122,154 | ||||||
| Steven Madden Ltd.* | 3,281 | 118,050 | ||||||
| La-Z-Boy, Inc. | 4,326 | 117,235 | ||||||
| Hillenbrand, Inc. | 3,576 | 115,612 | ||||||
| Sturm Ruger & Company, Inc.1 | 1,773 | 106,025 | ||||||
| Kirkland’s, Inc.* | 5,160 | 95,408 | ||||||
| Texas Roadhouse, Inc. — Class A | 3,454 | 90,080 | ||||||
| American Public Education, Inc.* | 2,495 | 87,525 | ||||||
| Total Consumer Discretionary | 4,470,978 | |||||||
| HEALTH CARE - 14.9% | ||||||||
| Questcor Pharmaceuticals, Inc.1 | 6,311 | 409,773 | ||||||
| Akorn, Inc.* | 16,190 | 356,180 | ||||||
| Anika Therapeutics, Inc.* | 6,413 | 263,574 | ||||||
| Acorda Therapeutics, Inc.* | 6,855 | 259,873 | ||||||
| ABIOMED, Inc.*,1 | 9,775 | 254,540 | ||||||
| Natus Medical, Inc.* | 9,701 | 250,285 | ||||||
| Cambrex Corp.* | 12,973 | 244,801 | ||||||
| Omnicell, Inc.* | 8,480 | 242,698 | ||||||
| Ligand Pharmaceuticals, Inc. — Class B* | 3,225 | 216,914 | ||||||
| Cantel Medical Corp. | 5,523 | 186,236 | ||||||
| Corvel Corp.* | 3,547 | 176,499 | ||||||
| Medidata Solutions, Inc.* | 3,153 | 171,334 | ||||||
| MWI Veterinary Supply, Inc.* | 1,022 | 159,044 | ||||||
| 4 4 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| S&P SMALLCAP 600® PURE GROWTH FUND |
| Shares | Value | |||||||
| CryoLife, Inc. | 15,960 | $ | 158,962 | |||||
| Prestige Brands Holdings, Inc.* | 5,566 | 151,674 | ||||||
| NuVasive, Inc.* | 3,535 | 135,779 | ||||||
| Medicines Co.* | 4,083 | 116,039 | ||||||
| IPC The Hospitalist Company, Inc.* | 2,293 | 112,540 | ||||||
| Air Methods Corp.* | 1,907 | 101,891 | ||||||
| SurModics, Inc.* | 4,500 | 101,700 | ||||||
| West Pharmaceutical Services, Inc. | 1,620 | 71,361 | ||||||
| Neogen Corp.* | 1,345 | 60,458 | ||||||
| HealthStream, Inc.* | 1,942 | 51,851 | ||||||
| Total Health Care | 4,254,006 | |||||||
| INDUSTRIALS - 10.6% | ||||||||
| Taser International, Inc.* | 21,998 | 402,343 | ||||||
| On Assignment, Inc.* | 9,963 | 384,472 | ||||||
| GenCorp, Inc.* | 18,267 | 333,738 | ||||||
| Saia, Inc.* | 8,508 | 325,091 | ||||||
| Dycom Industries, Inc.* | 9,315 | 294,447 | ||||||
| DXP Enterprises, Inc.* | 2,580 | 244,919 | ||||||
| Federal Signal Corp.* | 16,149 | 240,620 | ||||||
| AAON, Inc. | 6,278 | 174,968 | ||||||
| CIRCOR International, Inc. | 2,075 | 152,160 | ||||||
| EnerSys, Inc. | 2,095 | 145,163 | ||||||
| Allegiant Travel Co. — Class A | 856 | 95,812 | ||||||
| AZZ, Inc. | 1,835 | 81,988 | ||||||
| Mobile Mini, Inc. | 1,730 | 75,013 | ||||||
| Apogee Enterprises, Inc. | 2,178 | 72,375 | ||||||
| Total Industrials | 3,023,109 | |||||||
| ENERGY - 8.6% | ||||||||
| Matrix Service Co.* | 16,375 | 553,147 | ||||||
| Carrizo Oil & Gas, Inc.* | 7,140 | 381,705 | ||||||
| Stone Energy Corp.* | 7,290 | 305,961 | ||||||
| C&J Energy Services, Inc.* | 9,880 | 288,101 | ||||||
| Tesco Corp.* | 13,860 | 256,410 | ||||||
| Era Group, Inc.* | 7,590 | 222,463 | ||||||
| Newpark Resources, Inc.* | 17,623 | 201,783 | ||||||
| Northern Oil and Gas, Inc.* | 11,011 | 160,981 | ||||||
| Geospace Technologies Corp.* | 1,060 | 70,140 | ||||||
| Total Energy | 2,440,691 | |||||||
| MATERIALS - 4.6% | ||||||||
| US Silica Holdings, Inc.1 | 14,359 | 548,083 | ||||||
| KapStone Paper and Packaging Corp.* | 9,845 | 283,930 | ||||||
| Flotek Industries, Inc.* | 7,528 | 209,655 | ||||||
| American Vanguard Corp. | 5,593 | 121,088 | ||||||
| HB Fuller Co. | 2,013 | 97,188 | ||||||
| Balchem Corp. | 1,120 | 58,374 | ||||||
| Total Materials | 1,318,318 | |||||||
| CONSUMER STAPLES - 1.5% | ||||||||
| Boston Beer Company, Inc. — Class A* | 915 | 223,928 | ||||||
| Inter Parfums, Inc. | 5,305 | 192,094 | ||||||
| Total Consumer Staples | 416,022 | |||||||
| TELECOMMUNICATION SERVICES - 0.6% | ||||||||
| 8x8, Inc.* | 12,300 | 132,963 | ||||||
| Lumos Networks Corp. | 3,660 | 48,934 | ||||||
| Total Telecommunication Services | 181,897 | |||||||
| Total Common Stocks | ||||||||
| (Cost $23,306,490) | 28,466,832 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 0.4% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 62,466 | 62,466 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 26,359 | 26,359 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 17,824 | 17,824 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 8,305 | 8,305 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $114,954) | 114,954 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 4.3% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 600,509 | 600,509 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 535,839 | 535,839 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 101,015 | 101,015 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,237,363) | 1,237,363 | |||||||
| Total Investments - 104.5% | ||||||||
| (Cost $24,658,807) | $ | 29,819,149 | ||||||
| Other Assets & Liabilities, net - (4.5)% | (1,290,513 | ) | ||||||
| Total Net Assets - 100.0% | $ | 28,528,636 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. |
| REIT — Real Estate Investment Trust |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 45 |
| S&P SMALLCAP 600® PURE GROWTH FUND |
| STATEMENT OF ASSETS AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $1,242,645 of | ||||
| securities loaned | ||||
| (cost $23,306,490) | $ | 28,466,832 | ||
| Repurchase agreements, at value | ||||
| (cost $1,352,317) | 1,352,317 | |||
| Total investments | ||||
| (cost $24,658,807) | 29,819,149 | |||
| Receivables: | ||||
| Fund shares sold | 21,181 | |||
| Dividends | 12,629 | |||
| Securities lending income | 698 | |||
| Total assets | 29,853,657 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 1,237,363 | |||
| Fund shares redeemed | 22,731 | |||
| Management fees | 18,353 | |||
| Distribution and service fees | 8,455 | |||
| Transfer agent and administrative fees | 6,118 | |||
| Portfolio accounting fees | 2,447 | |||
| Miscellaneous | 29,554 | |||
| Total liabilities | 1,325,021 | |||
| Net assets | $ | 28,528,636 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 28,501,268 | ||
| Accumulated net investment loss | (95,970 | ) | ||
| Accumulated net realized loss on investments | (5,037,004 | ) | ||
| Net unrealized appreciation on investments | 5,160,342 | |||
| Net assets | $ | 28,528,636 | ||
| A-Class: | ||||
| Net assets | $ | 7,265,039 | ||
| Capital shares outstanding | 137,098 | |||
| Net asset value per share | $ | 52.99 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 55.63 | ||
| C-Class: | ||||
| Net assets | $ | 4,267,875 | ||
| Capital shares outstanding | 86,733 | |||
| Net asset value per share | $ | 49.21 | ||
| H-Class: | ||||
| Net assets | $ | 16,995,722 | ||
| Capital shares outstanding | 320,746 | |||
| Net asset value per share | $ | 52.99 |
| STATEMENT OF OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends | $ | 324,656 | ||
| Income from securities lending, net | 51,902 | |||
| Interest | 86 | |||
| Total investment income | 376,644 | |||
| Expenses: | ||||
| Management fees | 365,936 | |||
| Transfer agent and administrative fees | 121,979 | |||
| Distribution and service fees: | ||||
| A-Class | 9,254 | |||
| C-Class | 44,220 | |||
| H-Class | 101,669 | |||
| Portfolio accounting fees | 48,791 | |||
| Custodian fees | 5,808 | |||
| Trustees’ fees* | 2,582 | |||
| Line of credit interest expense | 916 | |||
| Miscellaneous | 75,466 | |||
| Total expenses | 776,621 | |||
| Net investment loss | (399,977 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 5,014,825 | |||
| Net realized gain | 5,014,825 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 3,155,012 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 3,155,012 | |||
| Net realized and unrealized gain | 8,169,837 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 7,769,860 |
* 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. |
| S&P SMALLCAP 600® PURE GROWTH FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (399,977 | ) | $ | (147,248 | ) | ||
| Net realized gain on investments | 5,014,825 | 3,739,856 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 3,155,012 | (3,270,046 | ) | |||||
| Net increase in net assets resulting from operations | 7,769,860 | 322,562 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 10,306,511 | 262,159 | ||||||
| C-Class | 6,653,049 | 3,152,967 | ||||||
| H-Class | 342,094,749 | 115,243,662 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (4,376,811 | ) | (376,615 | ) | ||||
| C-Class | (6,385,674 | ) | (2,707,371 | ) | ||||
| H-Class | (337,494,514 | ) | (138,735,744 | ) | ||||
| Net increase (decrease) from capital share transactions | 10,797,310 | (23,160,942 | ) | |||||
| Net increase (decrease) in net assets | 18,567,170 | (22,838,380 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 9,961,466 | 32,799,846 | ||||||
| End of year | $ | 28,528,636 | $ | 9,961,466 | ||||
| Accumulated net investment loss at end of year | $ | (95,970 | ) | $ | (58,810 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 199,801 | 6,970 | ||||||
| C-Class | 143,830 | 85,398 | ||||||
| H-Class | 7,053,262 | 3,009,338 | ||||||
| Shares redeemed | ||||||||
| A-Class | (86,422 | ) | (10,058 | ) | ||||
| C-Class | (136,657 | ) | (77,582 | ) | ||||
| H-Class | (6,871,867 | ) | (3,639,339 | ) | ||||
| Net increase (decrease) in shares | 301,947 | (625,273 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 47 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.94 | $ | 37.97 | $ | 36.06 | $ | 28.49 | $ | 16.93 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.31 | ) | (.12 | ) | (.35 | ) | (.34 | ) | (.28 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.36 | 4.09 | 2.26 | 7.91 | 11.84 | |||||||||||||||
| Total from investment operations | 11.05 | 3.97 | 1.91 | 7.57 | 11.56 | |||||||||||||||
| Net asset value, end of period | $ | 52.99 | $ | 41.94 | $ | 37.97 | $ | 36.06 | $ | 28.49 | ||||||||||
| Total Returnb | 26.35 | % | 10.46 | % | 5.30 | % | 26.57 | % | 68.28 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,265 | $ | 995 | $ | 1,018 | $ | 2,115 | $ | 750 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.60 | %) | (0.31 | %) | (1.00 | %) | (1.15 | %) | (1.15 | %) | ||||||||||
| Total expenses | 1.53 | % | 1.51 | % | 1.52 | % | 1.54 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 677 | % | 645 | % | 500 | % | 732 | % | 1,476 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 39.24 | $ | 35.79 | $ | 34.25 | $ | 27.25 | $ | 16.32 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.66 | ) | (.42 | ) | (.57 | ) | (.54 | ) | (.42 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 10.63 | 3.87 | 2.11 | 7.54 | 11.35 | |||||||||||||||
| Total from investment operations | 9.97 | 3.45 | 1.54 | 7.00 | 10.93 | |||||||||||||||
| Net asset value, end of period | $ | 49.21 | $ | 39.24 | $ | 35.79 | $ | 34.25 | $ | 27.25 | ||||||||||
| Total Returnb | 25.41 | % | 9.64 | % | 4.50 | % | 25.69 | % | 66.97 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,268 | $ | 3,122 | $ | 2,568 | $ | 3,072 | $ | 1,658 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.46 | %) | (1.17 | %) | (1.71 | %) | (1.80 | %) | (1.82 | %) | ||||||||||
| Total expenses | 2.28 | % | 2.26 | % | 2.26 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 677 | % | 645 | % | 500 | % | 732 | % | 1,476 | % | ||||||||||
| 48 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P SMALLCAP 600® PURE GROWTH FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.94 | $ | 37.97 | $ | 36.07 | $ | 28.48 | $ | 16.94 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.38 | ) | (.31 | ) | (.39 | ) | (.34 | ) | (.25 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 11.43 | 4.28 | 2.29 | 7.93 | 11.79 | |||||||||||||||
| Total from investment operations | 11.05 | 3.97 | 1.90 | 7.59 | 11.54 | |||||||||||||||
| Net asset value, end of period | $ | 52.99 | $ | 41.94 | $ | 37.97 | $ | 36.07 | $ | 28.48 | ||||||||||
| Total Returnb | 26.35 | % | 10.46 | % | 5.27 | % | 26.65 | % | 68.12 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 16,996 | $ | 5,844 | $ | 29,214 | $ | 92,084 | $ | 10,072 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.77 | %) | (0.81 | %) | (1.10 | %) | (1.07 | %) | (1.05 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.52 | % | 1.55 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 677 | % | 645 | % | 500 | % | 732 | % | 1,476 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 49 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 one-year period ended March 31, 2014, S&P SmallCap 600® Pure Value Fund H-Class returned 31.23%, compared with a return of 33.91% for the S&P SmallCap 600 Pure Value Index. The Fund maintained a daily correlation of over 99% to its benchmark.
The sectors contributing the most to return were the Information Technology sector and Consumer Discretionary sector. No sector detracted from return, but the Utilities sector contributed least, followed by the Telecommunications Services sector.
The stocks contributing the most to return in the S&P SmallCap 600 Pure Value Index were Arkansas Best Corp., United Online, Inc. and GT Advanced Technologies, Inc. Those detracting the most from return of the underlying index were Tower Group International Ltd., SkyWest, Inc. and Alliance One International, Inc.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | ||
| A-Class | September 1, 2004 | |
| C-Class | February 20, 2004 | |
| H-Class | February 20, 2004 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Green Plains Renewable Energy, Inc. | 2.2 | % | ||
| Engility Holdings, Inc. | 1.6 | % | ||
| Central Garden and Pet Co. — Class A | 1.5 | % | ||
| Stewart Information Services Corp. | 1.4 | % | ||
| Pioneer Energy Services Corp. | 1.4 | % | ||
| Seneca Foods Corp. — Class A | 1.4 | % | ||
| Sanmina Corp. | 1.3 | % | ||
| CDI Corp. | 1.3 | % | ||
| Kelly Services, Inc. — Class A | 1.2 | % | ||
| Perry Ellis International, Inc. | 1.2 | % | ||
| Top Ten Total | 14.5 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 50 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
| Periods Ended March 31, 2014 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| C-Class Shares | 30.27% | 30.52% | 5.25% | |||||||||
| C-Class Shares with CDSC‡ | 29.27% | 30.52% | 5.25% | |||||||||
| H-Class Shares | 31.23% | 31.49% | 6.05% | |||||||||
| S&P SmallCap 600 Pure Value Index | 33.91% | 36.02% | 10.13% | |||||||||
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (09/01/04) | ||||||||||
| A-Class Shares | 31.25% | 31.56% | 6.51% | |||||||||
| A-Class Shares with sales charge† | 25.05% | 30.29% | 5.97% | |||||||||
| S&P SmallCap 600 Pure Value Index | 33.91% | 36.02% | 10.78% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 51 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 | |
| S&P SMALLCAP 600® PURE VALUE FUND | ||
| Shares | Value | |||||||
| COMMON STOCKS† - 99.8% | ||||||||
| INDUSTRIALS - 20.1% | ||||||||
| Engility Holdings, Inc.* | 9,816 | $ | 442,210 | |||||
| CDI Corp. | 20,607 | 353,411 | ||||||
| Kelly Services, Inc. — Class A | 14,499 | 344,062 | ||||||
| SkyWest, Inc. | 25,209 | 321,667 | ||||||
| Titan International, Inc. | 16,469 | 312,747 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 8,330 | 293,799 | ||||||
| Griffon Corp. | 22,491 | 268,544 | ||||||
| EMCOR Group, Inc. | 5,518 | 258,186 | ||||||
| Universal Forest Products, Inc. | 4,609 | 255,062 | ||||||
| ABM Industries, Inc. | 8,760 | 251,762 | ||||||
| Aegion Corp. — Class A* | 9,250 | 234,118 | ||||||
| United Stationers, Inc. | 5,074 | 208,389 | ||||||
| Hub Group, Inc. — Class A* | 5,110 | 204,349 | ||||||
| AAR Corp. | 7,208 | 187,048 | ||||||
| Viad Corp. | 6,608 | 158,856 | ||||||
| Heidrick & Struggles International, Inc. | 7,588 | 152,291 | ||||||
| Gibraltar Industries, Inc.* | 7,874 | 148,582 | ||||||
| Astec Industries, Inc. | 3,195 | 140,292 | ||||||
| Insperity, Inc. | 4,481 | 138,821 | ||||||
| Briggs & Stratton Corp. | 6,153 | 136,904 | ||||||
| Kaman Corp. | 2,860 | 116,345 | ||||||
| Curtiss-Wright Corp. | 1,485 | 94,357 | ||||||
| Matson, Inc. | 3,720 | 91,847 | ||||||
| Mueller Industries, Inc. | 3,020 | 90,570 | ||||||
| Quanex Building Products Corp. | 4,258 | 88,055 | ||||||
| National Presto Industries, Inc. | 1,050 | 81,942 | ||||||
| Korn/Ferry International* | 2,700 | 80,379 | ||||||
| Resources Connection, Inc. | 5,420 | 76,368 | ||||||
| Orion Marine Group, Inc.* | 5,994 | 75,345 | ||||||
| Total Industrials | 5,606,308 | |||||||
| CONSUMER DISCRETIONARY - 18.5% | ||||||||
| Perry Ellis International, Inc.* | 24,457 | 336,039 | ||||||
| Scholastic Corp. | 8,220 | 283,426 | ||||||
| Fred’s, Inc. — Class A | 15,560 | 280,236 | ||||||
| Stage Stores, Inc. | 11,390 | 278,485 | ||||||
| VOXX International Corp. — Class A* | 20,156 | 275,734 | ||||||
| M/I Homes, Inc.* | 11,900 | 266,799 | ||||||
| Group 1 Automotive, Inc. | 3,872 | 254,236 | ||||||
| Pep Boys-Manny Moe & Jack* | 18,089 | 230,092 | ||||||
| Superior Industries International, Inc. | 10,740 | 220,062 | ||||||
| Sonic Automotive, Inc. — Class A | 9,280 | 208,614 | ||||||
| Regis Corp. | 15,140 | 207,418 | ||||||
| Career Education Corp.* | 26,869 | 200,443 | ||||||
| Big 5 Sporting Goods Corp. | 12,417 | 199,293 | ||||||
| Brown Shoe Company, Inc. | 7,340 | 194,803 | ||||||
| Marcus Corp. | 10,660 | 178,022 | ||||||
| Ruby Tuesday, Inc.* | 29,385 | 164,850 | ||||||
| Biglari Holdings, Inc.* | 329 | 160,384 | ||||||
| Stein Mart, Inc. | 10,887 | 152,527 | ||||||
| JAKKS Pacific, Inc. | 20,002 | 144,414 | ||||||
| Spartan Motors, Inc. | 25,698 | 132,088 | ||||||
| Genesco, Inc.* | 1,635 | 121,922 | ||||||
| Standard Pacific Corp.* | 13,510 | 112,268 | ||||||
| Christopher & Banks Corp.* | 15,780 | 104,306 | ||||||
| Crocs, Inc.* | 6,520 | 101,712 | ||||||
| Children’s Place Retail Stores, Inc. | 1,910 | 95,137 | ||||||
| Meritage Homes Corp.* | 2,230 | 93,392 | ||||||
| Sizmek, Inc.* | 6,590 | 70,052 | ||||||
| Finish Line, Inc. — Class A | 2,510 | 67,996 | ||||||
| Aeropostale, Inc.* | 7,310 | 36,696 | ||||||
| Total Consumer Discretionary | 5,171,446 | |||||||
| INFORMATION TECHNOLOGY - 16.0% | ||||||||
| Sanmina Corp.* | 20,400 | 355,980 | ||||||
| Black Box Corp. | 13,556 | 329,953 | ||||||
| CIBER, Inc.* | 70,303 | 321,988 | ||||||
| Monster Worldwide, Inc.* | 39,779 | 297,547 | ||||||
| Insight Enterprises, Inc.* | 11,796 | 296,198 | ||||||
| CACI International, Inc. — Class A* | 3,970 | 292,986 | ||||||
| Benchmark Electronics, Inc.* | 12,411 | 281,109 | ||||||
| SYNNEX Corp.* | 3,723 | 225,651 | ||||||
| ScanSource, Inc.* | 5,468 | 222,930 | ||||||
| TTM Technologies, Inc.* | 24,192 | 204,422 | ||||||
| Anixter International, Inc. | 1,859 | 188,726 | ||||||
| Bel Fuse, Inc. — Class B | 7,704 | 168,718 | ||||||
| Super Micro Computer, Inc.* | 9,515 | 165,276 | ||||||
| Plexus Corp.* | 3,519 | 141,006 | ||||||
| Oplink Communications, Inc.* | 6,690 | 120,152 | ||||||
| NETGEAR, Inc.* | 3,470 | 117,043 | ||||||
| Ebix, Inc.1 | 6,340 | 108,224 | ||||||
| Rudolph Technologies, Inc.* | 8,676 | 98,993 | ||||||
| Diodes, Inc.* | 3,650 | 95,338 | ||||||
| Rofin-Sinar Technologies, Inc.* | 3,750 | 89,850 | ||||||
| Digi International, Inc.* | 8,795 | 89,269 | ||||||
| Kulicke & Soffa Industries, Inc.* | 6,966 | 87,841 | ||||||
| Mercury Systems, Inc.* | 6,596 | 87,133 | ||||||
| Brooks Automation, Inc. | 7,960 | 87,003 | ||||||
| Total Information Technology | 4,473,336 | |||||||
| FINANCIALS - 12.7% | ||||||||
| Stewart Information Services Corp. | 11,499 | 403,960 | ||||||
| EZCORP, Inc. — Class A* | 29,850 | 322,081 | ||||||
| Cash America International, Inc. | 8,205 | 317,698 | ||||||
| Calamos Asset Management, | ||||||||
| Inc. — Class A | 18,381 | 237,666 | ||||||
| Piper Jaffray Cos.* | 5,150 | 235,870 | ||||||
| United Fire Group, Inc. | 7,714 | 234,120 | ||||||
| Infinity Property & Casualty Corp. | 2,984 | 201,808 | ||||||
| Navigators Group, Inc.* | 3,280 | 201,359 | ||||||
| Horace Mann Educators Corp. | 5,587 | 162,023 | ||||||
| Wintrust Financial Corp. | 2,960 | 144,034 | ||||||
| Safety Insurance Group, Inc. | 2,592 | 139,579 | ||||||
| Susquehanna Bancshares, Inc. | 12,128 | 138,138 | ||||||
| Capstead Mortgage Corp. | 9,884 | 125,131 | ||||||
| Selective Insurance Group, Inc. | 5,305 | 123,713 | ||||||
| Meadowbrook Insurance Group, Inc. | 20,850 | 121,556 | ||||||
| Brookline Bancorp, Inc. | 11,810 | 111,250 | ||||||
| Provident Financial Services, Inc. | 4,500 | 82,665 | ||||||
| SWS Group, Inc.* | 11,005 | 82,317 | ||||||
| FNB Corp. | 5,810 | 77,854 | ||||||
| ProAssurance Corp. | 1,666 | 74,187 | ||||||
| Total Financials | 3,537,009 | |||||||
| 52 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 | |
| S&P SMALLCAP 600® PURE VALUE FUND | ||
| Shares | Value | |||||||
| MATERIALS - 8.4% | ||||||||
| Olympic Steel, Inc. | 10,575 | $ | 303,503 | |||||
| Materion Corp. | 8,637 | 293,053 | ||||||
| Century Aluminum Co.* | 21,520 | 284,279 | ||||||
| AM Castle & Co.* | 15,473 | 227,298 | ||||||
| Boise Cascade Co.* | 7,580 | 217,091 | ||||||
| A. Schulman, Inc. | 5,223 | 189,385 | ||||||
| Kaiser Aluminum Corp. | 2,600 | 185,692 | ||||||
| Clearwater Paper Corp.* | 1,860 | 116,566 | ||||||
| PH Glatfelter Co. | 3,845 | 104,661 | ||||||
| Kraton Performance Polymers, Inc.* | 3,890 | 101,685 | ||||||
| Zep, Inc. | 5,563 | 98,465 | ||||||
| Neenah Paper, Inc. | 1,630 | 84,304 | ||||||
| OM Group, Inc. | 2,057 | 68,334 | ||||||
| Stepan Co. | 1,030 | 66,497 | ||||||
| Total Materials | 2,340,813 | |||||||
| HEALTH CARE - 7.9% | ||||||||
| PharMerica Corp.* | 11,905 | 333,102 | ||||||
| Kindred Healthcare, Inc. | 12,388 | 290,127 | ||||||
| Molina Healthcare, Inc.* | 7,265 | 272,873 | ||||||
| Magellan Health Services, Inc.* | 4,230 | 251,051 | ||||||
| Cross Country Healthcare, Inc.* | 27,156 | 219,149 | ||||||
| Centene Corp.* | 2,996 | 186,501 | ||||||
| LHC Group, Inc.* | 8,060 | 177,804 | ||||||
| Invacare Corp. | 8,034 | 153,208 | ||||||
| Almost Family, Inc.* | 6,107 | 141,072 | ||||||
| Healthways, Inc.* | 5,900 | 101,126 | ||||||
| AMN Healthcare Services, Inc.* | 6,160 | 84,638 | ||||||
| Total Health Care | 2,210,651 | |||||||
| ENERGY - 7.4% | ||||||||
| Green Plains Renewable Energy, Inc. | 20,300 | 608,187 | ||||||
| Pioneer Energy Services Corp.* | 30,840 | 399,378 | ||||||
| Cloud Peak Energy, Inc.* | 13,547 | 286,384 | ||||||
| Exterran Holdings, Inc. | 5,290 | 232,126 | ||||||
| Swift Energy Co.*,1 | 17,901 | 192,615 | ||||||
| Gulf Island Fabrication, Inc. | 6,430 | 138,952 | ||||||
| Arch Coal, Inc. | 28,678 | 138,228 | ||||||
| SEACOR Holdings, Inc.* | 765 | 66,111 | ||||||
| Total Energy | 2,061,981 | |||||||
| CONSUMER STAPLES - 4.8% | ||||||||
| Central Garden and Pet Co. — Class A* | 50,215 | 415,278 | ||||||
| Seneca Foods Corp. — Class A* | 12,478 | 392,807 | ||||||
| Spartan Stores, Inc. | 11,530 | 267,611 | ||||||
| Sanderson Farms, Inc. | 1,830 | 143,637 | ||||||
| Alliance One International, Inc.* | 40,652 | 118,704 | ||||||
| Total Consumer Staples | 1,338,037 | |||||||
| UTILITIES - 2.0% | ||||||||
| Avista Corp. | 5,419 | 166,093 | ||||||
| New Jersey Resources Corp. | 3,140 | 156,371 | ||||||
| Laclede Group, Inc. | 1,950 | 91,943 | ||||||
| NorthWestern Corp. | 1,710 | 81,105 | ||||||
| UIL Holdings Corp. | 1,860 | 68,467 | ||||||
| Total Utilities | 563,979 | |||||||
| TELECOMMUNICATION SERVICES - 2.0% | ||||||||
| Cbeyond, Inc.* | 34,744 | 251,894 | ||||||
| USA Mobility, Inc. | 9,524 | 173,051 | ||||||
| Atlantic Tele-Network, Inc. | 1,910 | 125,907 | ||||||
| Total Telecommunication Services | 550,852 | |||||||
| Total Common Stocks | ||||||||
| (Cost $23,031,972) | 27,854,412 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 0.1% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 19,001 | 19,001 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 8,018 | 8,018 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 5,422 | 5,422 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,526 | 2,526 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $34,967) | 34,967 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.6% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 79,749 | 79,749 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 71,161 | 71,161 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 13,415 | 13,415 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $164,325) | 164,325 | |||||||
| Total Investments - 100.5% | ||||||||
| (Cost $23,231,264) | $ | 28,053,704 | ||||||
| Other Assets & Liabilities, net - (0.5)% | (143,037 | ) | ||||||
| Total Net Assets - 100.0% | $ | 27,910,667 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 53 |
| S&P SMALLCAP 600® PURE VALUE FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Investments, at value - including $159,853 of | ||||
| securities loaned | ||||
| (cost $23,031,972) | $ | 27,854,412 | ||
| Repurchase agreements, at value | ||||
| (cost $199,292) | 199,292 | |||
| Total investments | ||||
| (cost $23,231,264) | 28,053,704 | |||
| Receivables: | ||||
| Fund shares sold | 67,227 | |||
| Dividends | 13,261 | |||
| Securities lending income | 956 | |||
| Total assets | 28,135,148 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Upon return of securities loaned | 164,325 | |||
| Management fees | 15,641 | |||
| Fund shares redeemed | 10,199 | |||
| Distribution and service fees | 7,875 | |||
| Transfer agent and administrative fees | 5,214 | |||
| Portfolio accounting fees | 2,085 | |||
| Miscellaneous | 19,142 | |||
| Total liabilities | 224,481 | |||
| Net assets | $ | 27,910,667 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 53,567,589 | ||
| Accumulated net investment loss | (40,344 | ) | ||
| Accumulated net realized loss on investments | (30,439,018 | ) | ||
| Net unrealized appreciation on investments | 4,822,440 | |||
| Net assets | $ | 27,910,667 | ||
| A-Class: | ||||
| Net assets | $ | 1,016,490 | ||
| Capital shares outstanding | 39,617 | |||
| Net asset value per share | $ | 25.66 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 26.94 | ||
| C-Class: | ||||
| Net assets | $ | 4,514,327 | ||
| Capital shares outstanding | 197,881 | |||
| Net asset value per share | $ | 22.81 | ||
| H-Class: | ||||
| Net assets | $ | 22,379,850 | ||
| Capital shares outstanding | 875,854 | |||
| Net asset value per share | $ | 25.55 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends | $ | 411,348 | ||
| Income from securities lending, net | 18,937 | |||
| Interest | 57 | |||
| Total investment income | 430,342 | |||
| Expenses: | ||||
| Management fees | 256,420 | |||
| Transfer agent and administrative fees | 85,474 | |||
| Distribution and service fees: | ||||
| A-Class | 3,421 | |||
| C-Class | 47,633 | |||
| H-Class | 70,144 | |||
| Portfolio accounting fees | 34,189 | |||
| Custodian fees | 4,023 | |||
| Trustees’ fees* | 2,647 | |||
| Line of credit interest expense | 274 | |||
| Miscellaneous | 53,247 | |||
| Total expenses | 557,472 | |||
| Net investment loss | (127,130 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 4,060,418 | |||
| Net realized gain | 4,060,418 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 346,408 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 346,408 | |||
| Net realized and unrealized gain | 4,406,826 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 4,279,696 |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 54 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P SMALLCAP 600® PURE VALUE FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (127,130 | ) | $ | (80,501 | ) | ||
| Net realized gain on investments | 4,060,418 | 1,767,052 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 346,408 | (1,845,358 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 4,279,696 | (158,807 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 1,058,772 | 1,084,422 | ||||||
| C-Class | 4,733,420 | 3,744,708 | ||||||
| H-Class | 217,271,980 | 180,897,767 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (1,936,024 | ) | (622,298 | ) | ||||
| C-Class | (5,294,994 | ) | (2,186,008 | ) | ||||
| H-Class | (228,428,263 | ) | (173,747,207 | ) | ||||
| Net increase (decrease) from capital share transactions | (12,595,109 | ) | 9,171,384 | |||||
| Net increase (decrease) in net assets | (8,315,413 | ) | 9,012,577 | |||||
| Net assets: | ||||||||
| Beginning of year | 36,226,080 | 27,213,503 | ||||||
| End of year | $ | 27,910,667 | $ | 36,226,080 | ||||
| Accumulated net investment loss at end of year | $ | (40,344 | ) | $ | (59,464 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 47,370 | 61,434 | ||||||
| C-Class | 232,036 | 239,487 | ||||||
| H-Class | 9,393,903 | 10,656,634 | ||||||
| Shares redeemed | ||||||||
| A-Class | (87,067 | ) | (38,446 | ) | ||||
| C-Class | (258,641 | ) | (141,911 | ) | ||||
| H-Class | (10,096,699 | ) | (10,507,170 | ) | ||||
| Net increase (decrease) in shares | (769,098 | ) | 270,028 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 55 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.55 | $ | 17.07 | $ | 17.42 | $ | 19.60 | $ | 11.08 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.09 | ) | (.01 | ) | (.12 | ) | (.13 | ) | (.13 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 6.20 | 2.49 | (.23 | ) | 1.20 | 15.44 | ||||||||||||||
| Total from investment operations | 6.11 | 2.48 | (.35 | ) | 1.07 | 15.31 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.03 | ) | ||||||||||||||
| Net realized gains | — | — | — | (3.25 | ) | (6.76 | ) | |||||||||||||
| Total distributions | — | — | — | (3.25 | ) | (6.79 | ) | |||||||||||||
| Net asset value, end of period | $ | 25.66 | $ | 19.55 | $ | 17.07 | $ | 17.42 | $ | 19.60 | ||||||||||
| Total Returnb | 31.25 | % | 14.53 | % | (2.01 | %) | 6.98 | % | 150.09 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,016 | $ | 1,551 | $ | 961 | $ | 8,845 | $ | 5,529 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.39 | %) | (0.08 | %) | (0.71 | %) | (0.73 | %) | (0.62 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.51 | % | 1.53 | % | 1.53 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | 658 | % | 655 | % | 744 | % | 692 | % | 443 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.51 | $ | 15.40 | $ | 15.85 | $ | 18.27 | $ | 10.62 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.22 | ) | (.13 | ) | (.20 | ) | (.23 | ) | (.27 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 5.52 | 2.24 | (.25 | ) | 1.06 | 14.71 | ||||||||||||||
| Total from investment operations | 5.30 | 2.11 | (.45 | ) | .83 | 14.44 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.03 | ) | ||||||||||||||
| Net realized gains | — | — | — | (3.25 | ) | (6.76 | ) | |||||||||||||
| Total distributions | — | — | — | (3.25 | ) | (6.79 | ) | |||||||||||||
| Net asset value, end of period | $ | 22.81 | $ | 17.51 | $ | 15.40 | $ | 15.85 | $ | 18.27 | ||||||||||
| Total Returnb | 30.27 | % | 13.70 | % | (2.84 | %) | 6.12 | % | 148.23 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,514 | $ | 3,932 | $ | 1,955 | $ | 2,243 | $ | 8,999 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.10 | %) | (0.84 | %) | (1.39 | %) | (1.37 | %) | (1.39 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.26 | % | 2.26 | % | 2.28 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | 658 | % | 655 | % | 744 | % | 692 | % | 443 | % | ||||||||||
| 56 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| S&P SMALLCAP 600® PURE VALUE FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 19.47 | $ | 17.00 | $ | 17.38 | $ | 19.57 | $ | 11.07 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.06 | ) | (.06 | ) | (.11 | ) | (.11 | ) | (.12 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 6.14 | 2.53 | (.27 | ) | 1.17 | 15.41 | ||||||||||||||
| Total from investment operations | 6.08 | 2.47 | (.38 | ) | 1.06 | 15.29 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | — | — | (.03 | ) | ||||||||||||||
| Net realized gains | — | — | — | (3.25 | ) | (6.76 | ) | |||||||||||||
| Total distributions | — | — | — | (3.25 | ) | (6.79 | ) | |||||||||||||
| Net asset value, end of period | $ | 25.55 | $ | 19.47 | $ | 17.00 | $ | 17.38 | $ | 19.57 | ||||||||||
| Total Returnb | 31.23 | % | 14.53 | % | (2.19 | %) | 6.94 | % | 150.07 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 22,380 | $ | 30,743 | $ | 24,298 | $ | 15,980 | $ | 216,500 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.25 | %) | (0.32 | %) | (0.69 | %) | (0.56 | %) | (0.62 | %) | ||||||||||
| Total expenses | 1.53 | % | 1.51 | % | 1.49 | % | 1.54 | % | 1.54 | % | ||||||||||
| Portfolio turnover rate | 658 | % | 655 | % | 744 | % | 692 | % | 443 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 57 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 Europe STOXX 50® Index (the “underlying index”).
For the one-year period ended March 31, 2014, Europe 1.25x Strategy Fund maintained a daily correlation of over 95% to its benchmark of 125% of the daily price movement of the Europe STOXX 50 Index. Europe 1.25x Strategy Fund H-Class returned 21.55% while the Europe STOXX 50 Index returned 19.87% over the same period.
The sectors contributing the most to return of the underlying index were Financials and Health Care. No sector detracted from return, but Information Technology and Utilities contributed least.
The stocks contributing most to performance of the underlying index were Roche Holding Ltd. AG, Total S.A. and Vodaphone Group plc. Those detracting most from performance of the underlying index were Anglo American plc, Standard Chartered plc and Tesco plc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | |
| A-Class | March 31, 2004 |
| C-Class | May 10, 2001 |
| H-Class | May 8, 2000 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Nestle S.A. ADR | 3.6 | % | ||
| Novartis AG ADR | 3.4 | % | ||
| Roche Holding AG ADR | 3.0 | % | ||
| HSBC Holdings plc ADR | 2.8 | % | ||
| Total S.A. ADR | 2.4 | % | ||
| BP plc ADR | 2.2 | % | ||
| Royal Dutch Shell plc ADR | 2.1 | % | ||
| GlaxoSmithKline plc ADR | 2.0 | % | ||
| Sanofi ADR | 1.9 | % | ||
| Banco Santander S.A. ADR | 1.8 | % | ||
| Top Ten Total | 25.2 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
58 | THE RYDEX FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*,††
Average Annual Returns*,††
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | |
| A-Class Shares | 22.88% | 15.87% | 2.39% |
| A-Class Shares with sales charge† | 17.01% | 14.74% | 1.89% |
| C-Class Shares | 20.40% | 14.78% | 1.51% |
| C-Class Shares with CDSC‡ | 19.40% | 14.78% | 1.51% |
| H-Class Shares | 21.55% | 15.69% | 2.30% |
| Europe STOXX 50 Index | 19.87% | 14.66% | 5.46% |
INVESTMENT CONCENTRATION
At March 31, 2014, the investment diversification of the Fund by country was as follows:
| Country | % of Common Stocks | Value | ||||||
| Britain | 31.9 | % | $ | 3,046,129 | ||||
| Switzerland | 22.2 | % | 2,125,507 | |||||
| Germany | 16.3 | % | 1,552,828 | |||||
| France | 10.9 | % | 1,044,167 | |||||
| Netherlands | 6.4 | % | 614,911 | |||||
| Spain | 6.1 | % | 587,211 | |||||
| Belgium | 1.8 | % | 173,429 | |||||
| Australia | 1.7 | % | 164,139 | |||||
| Italy | 1.7 | % | 163,002 | |||||
| Sweden | 1.0 | % | 92,950 | |||||
| Total Common Stocks | 100.0 | % | $ | 9,564,273 | ||||
| * | 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 Europe STOXX 50 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| †† | The effects of compounding and currency exchange rates may cause the longer-term correlation of the Fund to its benchmark to diminish. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE RYDEX FUNDS ANNUAL REPORT | 59
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| EUROPE 1.25x STRATEGY FUND | |
| Shares | Value | |||||||
| COMMON STOCKS† - 65.4% | ||||||||
| FINANCIALS - 14.9% | ||||||||
| HSBC Holdings plc ADR | 7,991 | $ | 406,183 | |||||
| Banco Santander S.A. ADR1 | 27,786 | 266,190 | ||||||
| BNP Paribas S.A. ADR | 5,129 | 198,595 | ||||||
| Allianz SE ADR | 10,411 | 175,425 | ||||||
| UBS AG | 8,255 | 171,044 | ||||||
| Banco Bilbao Vizcaya Argentaria S.A. ADR1 | 14,204 | 170,590 | ||||||
| ING Groep N.V. ADR* | 11,592 | 165,186 | ||||||
| Lloyds Banking Group plc ADR*,1 | 31,893 | 162,335 | ||||||
| Barclays plc ADR | 8,018 | 125,883 | ||||||
| Credit Suisse Group AG ADR | 3,832 | 124,080 | ||||||
| Zurich Insurance Group AG ADR | 3,444 | 105,869 | ||||||
| Deutsche Bank AG | 2,291 | 102,706 | ||||||
| Total Financials | 2,174,086 | |||||||
| HEALTH CARE - 13.7% | ||||||||
| Novartis AG ADR | 5,929 | 504,084 | ||||||
| Roche Holding AG ADR | 11,780 | 444,342 | ||||||
| GlaxoSmithKline plc ADR | 5,419 | 289,537 | ||||||
| Sanofi ADR | 5,319 | 278,077 | ||||||
| Bayer AG ADR | 1,871 | 253,071 | ||||||
| AstraZeneca plc ADR | 3,639 | 236,098 | ||||||
| Total Health Care | 2,005,209 | |||||||
| CONSUMER STAPLES - 11.3% | ||||||||
| Nestle S.A. ADR | 7,097 | 533,835 | ||||||
| British American Tobacco plc ADR | 2,281 | 254,172 | ||||||
| Diageo plc ADR | 1,534 | 191,121 | ||||||
| Anheuser-Busch InBev N.V. ADR | 1,647 | 173,429 | ||||||
| Unilever N.V. — Class Y | 3,455 | 142,070 | ||||||
| Reckitt Benckiser Group plc ADR | 7,999 | 131,824 | ||||||
| Unilever plc ADR | 2,952 | 126,287 | ||||||
| Tesco plc ADR | 6,688 | 99,852 | ||||||
| Total Consumer Staples | 1,652,590 | |||||||
| ENERGY - 8.8% | ||||||||
| Total S.A. ADR1 | 5,360 | 351,615 | ||||||
| BP plc ADR | 6,826 | 328,331 | ||||||
| Royal Dutch Shell plc ADR | 4,211 | 307,656 | ||||||
| Eni SpA ADR | 3,249 | 163,002 | ||||||
| BG Group plc ADR | 7,483 | 138,361 | ||||||
| Total Energy | 1,288,965 | |||||||
| MATERIALS - 4.8% | ||||||||
| BASF SE ADR | 2,071 | 230,668 | ||||||
| Rio Tinto plc ADR1 | 3,817 | 213,103 | ||||||
| BHP Billiton Ltd. ADR | 2,422 | 164,139 | ||||||
| Air Liquide S.A. ADR | 3,658 | 98,912 | ||||||
| Total Materials | 706,822 | |||||||
| INDUSTRIALS - 3.5% | ||||||||
| Siemens AG ADR | 1,920 | 259,488 | ||||||
| ABB Ltd. ADR | 4,990 | 128,692 | ||||||
| Schneider Electric S.A. ADR | 6,612 | 116,966 | ||||||
| Total Industrials | 505,146 | |||||||
| TELECOMMUNICATION SERVICES - 3.4% | ||||||||
| Vodafone Group plc ADR | 6,126 | 225,498 | ||||||
| Telefonica S.A. ADR | 9,527 | 150,432 | ||||||
| Deutsche Telekom AG ADR | 7,728 | 125,348 | ||||||
| Total Telecommunication Services | 501,278 | |||||||
| CONSUMER DISCRETIONARY - 2.4% | ||||||||
| Daimler AG ADR | 2,514 | 238,704 | ||||||
| Cie Financiere Richemont S.A. ADR | 11,979 | 113,561 | ||||||
| Total Consumer Discretionary | 352,265 | |||||||
| INFORMATION TECHNOLOGY - 1.8% | ||||||||
| SAP AG ADR | 2,059 | 167,417 | ||||||
| Telefonaktiebolaget LM Ericsson — | ||||||||
| Class B ADR | 6,973 | 92,950 | ||||||
| Total Information Technology | 260,367 | |||||||
| UTILITIES - 0.8% | ||||||||
| National Grid plc ADR | 1,710 | 117,545 | ||||||
| Total Common Stocks | ||||||||
| (Cost $8,236,405) | 9,564,273 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 30.5% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 2,428,530 | 2,428,530 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,024,755 | 1,024,755 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 692,975 | 692,975 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 322,868 | 322,868 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $4,469,128) | 4,469,128 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 3.8% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 269,548 | 269,548 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 240,520 | 240,520 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 45,342 | 45,342 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $555,410) | 555,410 | |||||||
| Total Investments - 99.7% | ||||||||
| (Cost $13,260,943) | $ | 14,588,811 | ||||||
| Other Assets & Liabilities, net - 0.3% | 50,503 | |||||||
| Total Net Assets - 100.0% | $ | 14,639,314 | ||||||
| 60 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| EUROPE 1.25x STRATEGY FUND | |
| Unrealized | ||||||||
| Contracts | Gain (Loss) | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED†† | ||||||||
| June 2014 STOXX 50 Index | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $8,604,064) | 217 | $ | 211,251 | |||||
| CURRENCY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Euro FX | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $8,781,563) | 51 | $ | (46,973 | ) | ||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. ADR — American Depositary Receipt |
| ADR — American Depositary Receipt |
| plc — Public Limited Company |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 61 |
| EUROPE 1.25x STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $541,722 of | ||||
| securities loaned | ||||
| (cost $8,236,405) | $ | 9,564,273 | ||
| Repurchase agreements, at value | ||||
| (cost $5,024,538) | 5,024,538 | |||
| Total investments | ||||
| (cost $13,260,943) | 14,588,811 | |||
| Foreign currency, at value | ||||
| (cost $210) | 305 | |||
| Segregated cash with broker | 821,931 | |||
| Receivables: | ||||
| Fund shares sold | 596,382 | |||
| Dividends | 60,423 | |||
| Variation margin | 33,778 | |||
| Foreign taxes reclaim | 8,955 | |||
| Securities lending income | 407 | |||
| Interest | 3 | |||
| Swap settlement | 24,916 | |||
| Total assets | 16,135,911 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 699,637 | |||
| Upon return of securities loaned | 555,410 | |||
| Fund shares redeemed | 203,446 | |||
| Management fees | 11,970 | |||
| Distribution and service fees | 3,653 | |||
| Transfer agent and administrative fees | 3,325 | |||
| Portfolio accounting fees | 1,330 | |||
| Miscellaneous | 17,826 | |||
| Total liabilities | 1,496,597 | |||
| Net assets | $ | 14,639,314 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 25,124,751 | ||
| Undistributed net investment income | 26,435 | |||
| Accumulated net realized loss on investments and | ||||
| foreign currency | (12,004,113 | ) | ||
| Net unrealized appreciation on investments and | ||||
| foreign currency | 1,492,241 | |||
| Net assets | $ | 14,639,314 | ||
| A-Class: | ||||
| Net assets | $ | 2,551,455 | ||
| Capital shares outstanding | 146,639 | |||
| Net asset value per share | $ | 17.40 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 18.27 | ||
| C-Class: | ||||
| Net assets | $ | 535,146 | ||
| Capital shares outstanding | 34,470 | |||
| Net asset value per share | $ | 15.52 | ||
| H-Class: | ||||
| Net assets | $ | 11,552,713 | ||
| Capital shares outstanding | 669,325 | |||
| Net asset value per share | $ | 17.26 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $13,418) | $ | 415,668 | ||
| Interest | 1,890 | |||
| Income from securities lending, net | 1,311 | |||
| Total investment income | 418,869 | |||
| Expenses: | ||||
| Management fees | 184,985 | |||
| Transfer agent and administrative fees | 51,383 | |||
| Distribution and service fees: | ||||
| A-Class | 8,564 | |||
| C-Class | 6,230 | |||
| H-Class | 41,263 | |||
| Portfolio accounting fees | 20,553 | |||
| Trustees’ fees* | 2,575 | |||
| Custodian fees | 2,076 | |||
| Line of credit interest expense | 7 | |||
| Miscellaneous | 38,381 | |||
| Total expenses | 356,017 | |||
| Net investment income | 62,852 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (163,424 | ) | ||
| Futures contracts | 1,471,649 | |||
| Swap agreements | 30,528 | |||
| Foreign currency | 19,732 | |||
| Net realized gain | 1,358,485 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 1,145,190 | |||
| Futures contracts | 219,640 | |||
| Foreign currency | 102 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | 1,364,932 | |||
| Net realized and unrealized gain | 2,723,417 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 2,786,269 |
* 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. |
| EUROPE 1.25x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | 62,852 | $ | (52,462 | ) | |||
| Net realized gain on investments and foreign currency | 1,358,485 | 3,559,313 | ||||||
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | 1,364,932 | 178,740 | ||||||
| Net increase in net assets resulting from operations | 2,786,269 | 3,685,591 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | — | (60,314 | ) | |||||
| C-Class | — | (2,197 | ) | |||||
| H-Class | — | (58,838 | ) | |||||
| Total distributions to shareholders | — | (121,349 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 52,743,507 | 90,816,378 | ||||||
| C-Class | 7,218,044 | 5,587,424 | ||||||
| H-Class | 207,864,838 | 241,512,218 | ||||||
| Distributions reinvested | ||||||||
| A-Class | — | 59,279 | ||||||
| C-Class | — | 2,187 | ||||||
| H-Class | — | 58,304 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (54,374,701 | ) | (90,230,686 | ) | ||||
| C-Class | (7,224,756 | ) | (5,730,709 | ) | ||||
| H-Class | (209,443,547 | ) | (239,461,432 | ) | ||||
| Net increase (decrease) from capital share transactions | (3,216,615 | ) | 2,612,963 | |||||
| Net increase (decrease) in net assets | (430,346 | ) | 6,177,205 | |||||
| Net assets: | ||||||||
| Beginning of year | 15,069,660 | 8,892,455 | ||||||
| End of year | $ | 14,639,314 | $ | 15,069,660 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | 26,435 | $ | (56,149 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 3,372,060 | 7,021,653 | ||||||
| C-Class | 497,359 | 486,881 | ||||||
| H-Class | 13,214,764 | 18,478,661 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | — | 4,388 | ||||||
| C-Class | — | 177 | ||||||
| H-Class | — | 4,309 | ||||||
| Shares redeemed | ||||||||
| A-Class | (3,501,903 | ) | (6,804,798 | ) | ||||
| C-Class | (494,056 | ) | (493,981 | ) | ||||
| H-Class | (13,302,797 | ) | (18,342,051 | ) | ||||
| Net increase (decrease) in shares | (214,573 | ) | 355,239 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 63 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 14.16 | $ | 12.57 | $ | 14.06 | $ | 14.18 | $ | 8.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .16 | (.03 | ) | .10 | .08 | .04 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.08 | 1.65 | (1.59 | ) | (.20 | ) | 5.78 | |||||||||||||
| Total from investment operations | 3.24 | 1.62 | (1.49 | ) | (.12 | ) | 5.82 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.03 | ) | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 17.40 | $ | 14.16 | $ | 12.57 | $ | 14.06 | $ | 14.18 | ||||||||||
| Total Returnb | 22.88 | % | 12.92 | % | (10.60 | %) | (0.85 | %) | 69.62 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,551 | $ | 3,916 | $ | 694 | $ | 455 | $ | 463 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 1.00 | % | (0.23 | %) | 0.77 | % | 0.66 | % | 0.33 | % | ||||||||||
| Total expenses | 1.72 | % | 1.67 | % | 1.67 | % | 1.69 | % | 1.66 | % | ||||||||||
| Portfolio turnover rate | 654 | % | 903 | % | 318 | % | 515 | % | 1,353 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 12.89 | $ | 11.53 | $ | 12.97 | $ | 13.17 | $ | 7.83 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.07 | ) | (.10 | ) | —c | .03 | (.04 | ) | ||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.70 | 1.49 | (1.44 | ) | (.23 | ) | 5.38 | |||||||||||||
| Total from investment operations | 2.63 | 1.39 | (1.44 | ) | (.20 | ) | 5.34 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.03 | ) | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 15.52 | $ | 12.89 | $ | 11.53 | $ | 12.97 | $ | 13.17 | ||||||||||
| Total Returnb | 20.40 | % | 12.09 | % | (11.10 | %) | (1.52 | %) | 68.20 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 535 | $ | 402 | $ | 439 | $ | 638 | $ | 2,111 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.48 | %) | (0.83 | %) | 0.03 | % | 0.22 | % | (0.36 | %) | ||||||||||
| Total expenses | 2.47 | % | 2.42 | % | 2.43 | % | 2.43 | % | 2.42 | % | ||||||||||
| Portfolio turnover rate | 654 | % | 903 | % | 318 | % | 515 | % | 1,353 | % | ||||||||||
| 64 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EUROPE 1.25x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 14.20 | $ | 12.59 | $ | 14.06 | $ | 14.20 | $ | 8.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .03 | (.02 | ) | .16 | .09 | .03 | ||||||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 3.03 | 1.66 | (1.63 | ) | (.23 | ) | 5.81 | |||||||||||||
| Total from investment operations | 3.06 | 1.64 | (1.47 | ) | (.14 | ) | 5.84 | |||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.03 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.03 | ) | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 17.26 | $ | 14.20 | $ | 12.59 | $ | 14.06 | $ | 14.20 | ||||||||||
| Total Returnb | 21.55 | % | 13.06 | % | (10.46 | %) | (0.99 | %) | 69.86 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 11,553 | $ | 10,752 | $ | 7,759 | $ | 23,238 | $ | 6,989 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.19 | % | (0.18 | %) | 1.22 | % | 0.70 | % | 0.21 | % | ||||||||||
| Total expenses | 1.71 | % | 1.67 | % | 1.68 | % | 1.69 | % | 1.70 | % | ||||||||||
| Portfolio turnover rate | 654 | % | 903 | % | 318 | % | 515 | % | 1,353 | % | ||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
c Net investment income (loss) is less than $0.01 per share.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 65 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, 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 Nikkei-225 Stock Average Index. Japan 2x Strategy Fund H-Class returned 11.12%, while the Nikkei-225 Stock Average Index returned 9.33% over the same time period.
The sectors contributing most to performance of the underlying index were Industrials and Consumer Discretionary. Materials and Utilities detracted most from performance.
Stocks contributing most to return of the underlying index were SoftBank Corp., Fast Retailing Co. Ltd. and KDDI Corp. Those detracting most from performance of the underlying index were Nitto Denko Corp., Nikon Corp. and Canon, Inc.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and to provide leverage, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | ||
| A-Class | February 22, 2008 | |
| C-Class | February 22, 2008 | |
| H-Class | February 22, 2008 |
The Fund invests principally in derivative investments such as futures contracts.
| 66 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) | March 31, 2014 |
Cumulative Fund Performance*,††
Average Annual Returns*,††
Periods Ended March 31, 2014
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (02/22/08) | ||||||||||
| A-Class Shares | 11.04% | 16.47% | -4.13% | |||||||||
| A-Class Shares with sales charge† | 5.75% | 15.34% | -4.89% | |||||||||
| C-Class Shares | 10.32% | 15.64% | -4.81% | |||||||||
| C-Class Shares with CDSC‡ | 9.32% | 15.64% | -4.81% | |||||||||
| H-Class Shares | 11.12% | 16.55% | -4.07% | |||||||||
| Nikkei-225 Stock Average Index | 9.33% | 12.00% | 2.15% | |||||||||
| * | 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. 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. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| †† | The effects of compounding and currency exchange rates may cause the longer-term correlation of the Fund to its benchmark to diminish. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 67 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 | |
| JAPAN 2x STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 85.5% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 1,780,017 | $ | 1,780,017 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 751,105 | 751,105 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 507,923 | 507,923 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 236,650 | 236,650 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $3,275,695) | 3,275,695 | |||||||
| Total Investments - 85.5% | ||||||||
| (Cost $3,275,695) | $ | 3,275,695 | ||||||
| Other Assets & Liabilities, net - 14.5% | 556,663 | |||||||
| Total Net Assets - 100.0% | $ | 3,832,358 | ||||||
Unrealized | ||||||||
Contracts | Gain (Loss) | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Nikkei-225 (CME) Index | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $7,722,000) | 104 | $ | 309,594 | |||||
| CURRENCY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Japanese Yen | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $7,632,450) | 63 | (43,792 | ) | |||||
† 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 5.
| 68 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| JAPAN 2x STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 | ||||
| Assets: | ||||
| Repurchase agreements, at value (cost $3,275,695) | $ | 3,275,695 | ||
| Segregated cash with broker | 562,450 | |||
| Receivables: | ||||
| Fund shares sold | 9,760 | |||
| Interest | 2 | |||
| Swap settlement | 30,247 | |||
| Total assets | 3,878,154 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Variation margin | 25,513 | |||
| Fund shares redeemed | 11,089 | |||
| Management fees | 2,596 | |||
| Distribution and service fees | 947 | |||
| Transfer agent and administrative fees | 865 | |||
| Portfolio accounting fees | 346 | |||
| Miscellaneous | 4,440 | |||
| Total liabilities | 45,796 | |||
| Net assets | $ | 3,832,358 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 5,263,663 | ||
| Accumulated net investment loss | (21,490 | ) | ||
| Accumulated net realized loss on investments | (1,675,617 | ) | ||
| Net unrealized appreciation on investments | 265,802 | |||
| Net assets | $ | 3,832,358 | ||
| A-Class: | ||||
| Net assets | $ | 624,381 | ||
| Capital shares outstanding | 32,341 | |||
| Net asset value per share | $ | 19.31 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 20.27 | ||
| C-Class: | ||||
| Net assets | $ | 103,539 | ||
| Capital shares outstanding | 5,599 | |||
| Net asset value per share | $ | 18.49 | ||
| H-Class: | ||||
| Net assets | $ | 3,104,438 | ||
| Capital shares outstanding | 160,188 | |||
| Net asset value per share | $ | 19.38 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Interest | $ | 2,128 | ||
| Total investment income | 2,128 | |||
| Expenses: | ||||
| Management fees | 66,950 | |||
| Transfer agent and administrative fees | 22,317 | |||
| Distribution and service fees: | ||||
| A-Class | 4,745 | |||
| C-Class | 5,130 | |||
| H-Class | 16,289 | |||
| Portfolio accounting fees | 8,926 | |||
| Custodian fees | 1,047 | |||
| Trustees’ fees* | 740 | |||
| Miscellaneous | 13,784 | |||
| Total expenses | 139,928 | |||
| Net investment loss | (137,800 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | 37,063 | |||
| Futures contracts | 1,254,952 | |||
| Net realized gain | 1,292,015 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Futures contracts | (1,252,929 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (1,252,929 | ) | ||
| Net realized and unrealized gain | 39,086 | |||
| Net decrease in net assets resulting | ||||
| from operations | $ | (98,714 | ) | |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 69 |
| JAPAN 2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (137,800 | ) | $ | (66,743 | ) | ||
| Net realized gain (loss) on investments | 1,292,015 | (139,216 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | (1,252,929 | ) | 826,029 | |||||
| Net increase (decrease) in net assets resulting from operations | (98,714 | ) | 620,070 | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 8,428,575 | 4,927,467 | ||||||
| C-Class | 9,557,083 | 742,044 | ||||||
| H-Class | 130,777,601 | 47,073,229 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (10,200,315 | ) | (4,579,922 | ) | ||||
| C-Class | (9,548,823 | ) | (627,063 | ) | ||||
| H-Class | (136,373,860 | ) | (43,007,680 | ) | ||||
| Net increase (decrease) from capital share transactions | (7,359,739 | ) | 4,528,075 | |||||
| Net increase (decrease) in net assets | (7,458,453 | ) | 5,148,145 | |||||
| Net assets: | ||||||||
| Beginning of year | 11,290,811 | 6,142,666 | ||||||
| End of year | $ | 3,832,358 | $ | 11,290,811 | ||||
| Accumulated net investment loss at end of year | $ | (21,490 | ) | $ | (27,700 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 414,164 | 342,232 | ||||||
| C-Class | 492,346 | 55,951 | ||||||
| H-Class | 6,516,305 | 3,436,691 | ||||||
| Shares redeemed | ||||||||
| A-Class | (498,277 | ) | (318,220 | ) | ||||
| C-Class | (501,406 | ) | (50,642 | ) | ||||
| H-Class | (6,873,237 | ) | (3,214,905 | ) | ||||
| Net increase (decrease) in shares | (450,105 | ) | 251,107 | |||||
| 70 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.39 | $ | 15.45 | $ | 14.95 | $ | 16.49 | $ | 9.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.31 | ) | (.20 | ) | (.22 | ) | (.24 | ) | (.19 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.23 | 2.14 | .72 | (1.30 | ) | 7.67 | ||||||||||||||
| Total from investment operations | 1.92 | 1.94 | .50 | (1.54 | ) | 7.48 | ||||||||||||||
| Net asset value, end of period | $ | 19.31 | $ | 17.39 | $ | 15.45 | $ | 14.95 | $ | 16.49 | ||||||||||
| Total Returnb | 11.04 | % | 12.56 | % | 3.34 | % | (9.34 | %) | 83.02 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 624 | $ | 2,025 | $ | 1,428 | $ | 5,931 | $ | 2,234 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.50 | %) | (1.40 | %) | (1.49 | %) | (1.45 | %) | (1.42 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.51 | % | 1.51 | % | 1.55 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 16.76 | $ | 14.99 | $ | 14.60 | $ | 16.23 | $ | 8.94 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.43 | ) | (.29 | ) | (.31 | ) | (.31 | ) | (.31 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.16 | 2.06 | .70 | (1.32 | ) | 7.60 | ||||||||||||||
| Total from investment operations | 1.73 | 1.77 | .39 | (1.63 | ) | 7.29 | ||||||||||||||
| Net asset value, end of period | $ | 18.49 | $ | 16.76 | $ | 14.99 | $ | 14.60 | $ | 16.23 | ||||||||||
| Total Returnb | 10.32 | % | 11.81 | % | 2.67 | % | (10.04 | %) | 81.54 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 104 | $ | 246 | $ | 140 | $ | 189 | $ | 432 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.25 | %) | (2.15 | %) | (2.23 | %) | (2.18 | %) | (2.20 | %) | ||||||||||
| Total expenses | 2.27 | % | 2.25 | % | 2.26 | % | 2.29 | % | 2.28 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 71 |
| JAPAN 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.44 | $ | 15.49 | $ | 14.98 | $ | 16.48 | $ | 9.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.30 | ) | (.20 | ) | (.22 | ) | (.23 | ) | (.21 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 2.24 | 2.15 | .73 | (1.27 | ) | 7.68 | ||||||||||||||
| Total from investment operations | 1.94 | 1.95 | .51 | (1.50 | ) | 7.47 | ||||||||||||||
| Net asset value, end of period | $ | 19.38 | $ | 17.44 | $ | 15.49 | $ | 14.98 | $ | 16.48 | ||||||||||
| Total Returnb | 11.12 | % | 12.59 | % | 3.40 | % | (9.10 | %) | 82.91 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,104 | $ | 9,020 | $ | 4,574 | $ | 5,356 | $ | 5,414 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.50 | %) | (1.40 | %) | (1.48 | %) | (1.44 | %) | (1.44 | %) | ||||||||||
| Total expenses | 1.52 | % | 1.50 | % | 1.51 | % | 1.54 | % | 1.53 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 72 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 73 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
STRENGTHENING DOLLAR 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that match the performance of a specific benchmark, before fees and expenses, 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 March 31, 2014, Strengthening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the U.S. Dollar Index. Strengthening Dollar 2x Strategy Fund H-Class returned -10.31%, compared with a return of -3.47% for its benchmark, the U.S. Dollar Index.
Contributing most to performance of the underlying index for the year were the British pound, the euro and the Swiss franc. The pound had the best performance of all the currencies in the index, but the euro provided the largest contribution to return given its large weight. The Japanese yen and the Canadian dollar were the currencies detracting 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, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | |
| A-Class | May 25, 2005 |
| C-Class | May 25, 2005 |
| H-Class | May 25, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 74 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (05/25/05) | ||||||||||
| A-Class Shares | -10.27% | -8.23% | -4.29% | |||||||||
| A-Class Shares with sales charge† | -14.53% | -9.11% | -4.82% | |||||||||
| C-Class Shares | -10.96% | -8.92% | -4.96% | |||||||||
| C-Class Shares with CDSC‡ | -11.85% | -8.92% | -4.96% | |||||||||
| H-Class Shares | -10.31% | -8.21% | -4.33% | |||||||||
| U.S. Dollar Index | -3.47% | -1.28% | -0.85% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 75 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| STRENGTHENING DOLLAR 2x STRATEGY FUND | |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 98.4% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 8,237,994 | $ | 8,237,994 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 3,476,148 | 3,476,148 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 2,350,690 | 2,350,690 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,095,225 | 1,095,225 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $15,160,057) | 15,160,057 | |||||||
| Total Investments - 98.4% | ||||||||
| (Cost $15,160,057) | $ | 15,160,057 | ||||||
| Other Assets & Liabilities, net - 1.6% | 249,401 | |||||||
| Total Net Assets - 100.0% | $ | 15,409,458 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (loss) | |||||||
| CURRENCY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 U.S. Dollar Index Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $25,761,855) | 321 | $ | 173,325 | |||||
| Units | ||||||||
| OTC CURRENCY INDEX SWAP AGREEMENTS†† | ||||||||
| Goldman Sachs International | ||||||||
| May 2014 U.S. Dollar Index Swap, | ||||||||
| Terminating 05/23/142 | ||||||||
| (Notional Value $5,157,110) | 64,335 | $ | (17,549 | ) | ||||
| † | 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 5. |
| 2 | Total Return based on U.S. Dollar Index +/- financing at a variable rate. |
| 76 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| STRENGTHENING DOLLAR 2x STRATEGY FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $15,160,057) | $ | 15,160,057 | ||
| Segregated cash with broker | 684,202 | |||
| Receivables: | ||||
| Fund shares sold | 93,235 | |||
| Interest | 10 | |||
| Total assets | 15,937,504 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 17,549 | |||
| Payable for: | ||||
| Fund shares redeemed | 413,706 | |||
| Variation margin | 25,944 | |||
| Swap settlement | 16,356 | |||
| Management fees | 11,992 | |||
| Distribution and service fees | 4,641 | |||
| Transfer agent and administrative fees | 3,331 | |||
| Portfolio accounting fees | 1,332 | |||
| Miscellaneous | 33,195 | |||
| Total liabilities | 528,046 | |||
| Net assets | $ | 15,409,458 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 38,838,460 | ||
| Accumulated net investment loss | (99,577 | ) | ||
| Accumulated net realized loss on investments | (23,485,201 | ) | ||
| Net unrealized appreciation on investments | 155,776 | |||
| Net assets | $ | 15,409,458 | ||
| A-Class: | ||||
| Net assets | $ | 3,546,896 | ||
| Capital shares outstanding | 92,467 | |||
| Net asset value per share | $ | 38.36 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 40.27 | ||
| C-Class: | ||||
| Net assets | $ | 2,098,530 | ||
| Capital shares outstanding | 58,721 | |||
| Net asset value per share | $ | 35.74 | ||
| H-Class: | ||||
| Net assets | $ | 9,764,032 | ||
| Capital shares outstanding | 255,552 | |||
| Net asset value per share | $ | 38.21 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Interest | $ | 5,193 | ||
| Total investment income | 5,193 | |||
| Expenses: | ||||
| Management fees | 192,199 | |||
| Transfer agent and administrative fees | 53,389 | |||
| Distribution and service fees: | ||||
| A-Class | 13,840 | |||
| C-Class | 26,718 | |||
| H-Class | 32,869 | |||
| Portfolio accounting fees | 21,355 | |||
| Custodian fees | 2,698 | |||
| Trustees’ fees* | 2,519 | |||
| Miscellaneous | 46,927 | |||
| Total expenses | 392,514 | |||
| Net investment loss | (387,321 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | 43,544 | |||
| Futures contracts | (3,301,957 | ) | ||
| Net realized loss | (3,258,413 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Swap agreements | (174,551 | ) | ||
| Futures contracts | 41,044 | |||
| Net change in unrealized appreciation (depreciation) | (133,507 | ) | ||
| Net realized and unrealized loss | (3,391,920 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (3,779,241 | ) | |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 77 |
| STRENGTHENING DOLLAR 2x STRATEGY FUND |
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (387,321 | ) | $ | (570,602 | ) | ||
| Net realized gain (loss) on investments | (3,258,413 | ) | 2,848,327 | |||||
| Net change in unrealized appreciation (depreciation) on investments | (133,507 | ) | 1,035,107 | |||||
| Net increase (decrease) in net assets resulting from operations | (3,779,241 | ) | 3,312,832 | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 32,997,383 | 48,521,608 | ||||||
| C-Class | 13,018,069 | 34,253,394 | ||||||
| H-Class | 97,506,138 | 176,827,477 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (38,741,873 | ) | (45,619,434 | ) | ||||
| C-Class | (14,153,109 | ) | (34,994,261 | ) | ||||
| H-Class | (97,374,129 | ) | (189,312,228 | ) | ||||
| Net decrease from capital share transactions | (6,747,521 | ) | (10,323,444 | ) | ||||
| Net decrease in net assets | (10,526,762 | ) | (7,010,612 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 25,936,220 | 32,946,832 | ||||||
| End of year | $ | 15,409,458 | $ | 25,936,220 | ||||
| Accumulated net investment loss at end of year | $ | (99,577 | ) | $ | (93,368 | ) | ||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| A-Class | 815,939 | 1,171,753 | ||||||
| C-Class | 341,309 | 872,834 | ||||||
| H-Class | 2,436,518 | 4,245,241 | ||||||
| Shares redeemed | ||||||||
| A-Class | (967,356 | ) | (1,098,242 | ) | ||||
| C-Class | (370,508 | ) | (892,176 | ) | ||||
| H-Class | (2,462,181 | ) | (4,511,207 | ) | ||||
| Net decrease in shares | (206,279 | ) | (211,797 | ) | ||||
| * | Capital share activity for the periods presented through February 7, 2014 has been restated to reflect a 1:3 reverse share split effective February 7, 2014. See Note 11 in Notes to Financial Statements. |
| 78 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| STRENGTHENING DOLLAR 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 42.75 | $ | 40.35 | $ | 40.39 | $ | 49.15 | $ | 58.93 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.69 | ) | (.63 | ) | (.66 | ) | (.75 | ) | (.75 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (3.70 | ) | 3.03 | .62 | (8.01 | ) | (9.03 | ) | ||||||||||||
| Total from investment operations | (4.39 | ) | 2.40 | (.04 | ) | (8.76 | ) | (9.78 | ) | |||||||||||
| Net asset value, end of period | $ | 38.36 | $ | 42.75 | $ | 40.35 | $ | 40.39 | $ | 49.15 | ||||||||||
| Total Returnb | (10.27 | %) | 5.95 | % | (0.07 | %) | (17.83 | %) | (16.60 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 3,547 | $ | 10,427 | $ | 6,875 | $ | 6,115 | $ | 16,833 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.72 | %) | (1.53 | %) | (1.62 | %) | (1.55 | %) | (1.57 | %) | ||||||||||
| Total expenses | 1.74 | % | 1.66 | % | 1.68 | % | 1.71 | % | 1.67 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 40.15 | $ | 38.14 | $ | 38.48 | $ | 47.21 | $ | 57.02 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.94 | ) | (.90 | ) | (.90 | ) | (1.05 | ) | (1.08 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (3.47 | ) | 2.91 | .56 | (7.68 | ) | (8.73 | ) | ||||||||||||
| Total from investment operations | (4.41 | ) | 2.01 | (.34 | ) | (8.73 | ) | (9.81 | ) | |||||||||||
| Net asset value, end of period | $ | 35.74 | $ | 40.15 | $ | 38.14 | $ | 38.48 | $ | 47.21 | ||||||||||
| Total Returnb | (10.96 | %) | 5.27 | % | (0.94 | %) | (18.49 | %) | (17.20 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 2,099 | $ | 3,530 | $ | 4,091 | $ | 4,028 | $ | 10,594 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.48 | %) | (2.29 | %) | (2.36 | %) | (2.29 | %) | (2.31 | %) | ||||||||||
| Total expenses | 2.50 | % | 2.42 | % | 2.44 | % | 2.46 | % | 2.42 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 79 |
| STRENGTHENING DOLLAR 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 42.60 | $ | 40.17 | $ | 40.20 | $ | 48.92 | $ | 58.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.69 | ) | (.63 | ) | (.66 | ) | (.75 | ) | (.75 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | (3.70 | ) | 3.06 | .63 | (7.97 | ) | (9.00 | ) | ||||||||||||
| Total from investment operations | (4.39 | ) | 2.43 | (.03 | ) | (8.72 | ) | (9.75 | ) | |||||||||||
| Net asset value, end of period | $ | 38.21 | $ | 42.60 | $ | 40.17 | $ | 40.20 | $ | 48.92 | ||||||||||
| Total Returnb | (10.31 | %) | 6.05 | % | (0.07 | %) | (17.84 | %) | (16.62 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 9,764 | $ | 11,979 | $ | 21,982 | $ | 20,733 | $ | 60,944 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.72 | %) | (1.53 | %) | (1.62 | %) | (1.55 | %) | (1.57 | %) | ||||||||||
| Total expenses | 1.74 | % | 1.66 | % | 1.69 | % | 1.72 | % | 1.67 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 7, 2014 have been restated to reflect a 1:3 reverse share split effective February 7, 2014. |
| 80 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| This page intentionally left blank. |
| THE RYDEX FUNDS ANNUAL REPORT | 81 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, Weakening Dollar 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the U.S. Dollar Index. Weakening Dollar 2x Strategy Fund H-Class returned 5.32%, compared with a return of -3.47% for its benchmark, the U.S. Dollar Index.
Contributing most to performance of the underlying index for the year were the British pound, the euro and the Swiss franc. The pound had the best performance of all the currencies in the index, but the euro provided the largest contribution to return given its large weight. The Japanese yen and the Canadian dollar were the currencies detracting 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, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s 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.
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 Dates: | ||||
| A-Class | May 25, 2005 | |||
| C-Class | May 25, 2005 | |||
| H-Class | May 25, 2005 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
82 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||||||
| Inception | ||||||||||||
| 1 Year | 5 Year | (05/25/05) | ||||||||||
| A-Class Shares | 5.37% | 1.75% | 0.74% | |||||||||
| A-Class Shares with sales charge† | 0.34% | 0.76% | 0.19% | |||||||||
| C-Class Shares | 4.56% | 0.97% | -0.02% | |||||||||
| C-Class Shares with CDSC‡ | 3.56% | 0.97% | -0.02% | |||||||||
| H-Class Shares | 5.32% | 1.72% | 0.72% | |||||||||
| U.S. Dollar Index | -3.47% | -1.28% | -0.85% | |||||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The U.S. Dollar Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 83 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 | |
| WEAKENING DOLLAR 2x STRATEGY FUND | ||
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 95.2% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 3,826,571 | $ | 3,826,571 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,614,680 | 1,614,680 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,091,902 | 1,091,902 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 508,735 | 508,735 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $7,041,888) | 7,041,888 | |||||||
| Total Investments - 95.2% | ||||||||
| (Cost $7,041,888) | $ | 7,041,888 | ||||||
| Other Assets & Liabilities, net - 4.8% | 357,000 | |||||||
| Total Net Assets - 100.0% | $ | 7,398,888 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (Loss) | |||||||
| CURRENCY FUTURES CONTRACTS SOLD SHORT† | ||||||||
| June 2014 U.S. Dollar Index | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $10,272,640) | 128 | $ | (66,313 | ) | ||||
| Units | ||||||||
| OTC CURRENCY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Goldman Sachs International | ||||||||
| May 2014 U.S. Dollar Index Swap, | ||||||||
| Terminating 05/23/142 | ||||||||
| (Notional Value $4,805,492) | 59,948 | $ | 15,829 | |||||
| † | 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 5. |
| 2 | Total Return based on U.S. Dollar Index +/- financing at a variable rate. |
84 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| WEAKENING DOLLAR 2x STRATEGY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $7,041,888) | $ | 7,041,888 | ||
| Segregated cash with broker | 505,792 | |||
| Unrealized appreciation on swap agreements | 15,829 | |||
| Receivable for swap settlement | 244 | |||
| Receivables: | ||||
| Fund shares sold | 23,486 | |||
| Variation margin | 10,240 | |||
| Interest | 5 | |||
| Total assets | 7,597,484 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 170,172 | |||
| Management fees | 6,260 | |||
| Distribution and service fees | 2,215 | |||
| Transfer agent and administrative fees | 1,739 | |||
| Portfolio accounting fees | 696 | |||
| Miscellaneous | 17,514 | |||
| Total liabilities | 198,596 | |||
| Net assets | $ | 7,398,888 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 22,671,382 | ||
| Accumulated net investment loss | (44,928 | ) | ||
| Accumulated net realized loss on investments | (15,177,082 | ) | ||
| Net unrealized depreciation on investments | (50,484 | ) | ||
| Net assets | $ | 7,398,888 | ||
| A-Class: | ||||
| Net assets | $ | 1,129,400 | ||
| Capital shares outstanding | 63,232 | |||
| Net asset value per share | $ | 17.86 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 18.75 | ||
| C-Class: | ||||
| Net assets | $ | 820,764 | ||
| Capital shares outstanding | 49,704 | |||
| Net asset value per share | $ | 16.51 | ||
| H-Class: | ||||
| Net assets | $ | 5,448,724 | ||
| Capital shares outstanding | 305,570 | |||
| Net asset value per share | $ | 17.83 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Interest | $ | 2,615 | ||
| Total investment income | 2,615 | |||
| Expenses: | ||||
| Management fees | 92,167 | |||
| Transfer agent and administrative fees | 25,602 | |||
| Distribution and service fees: | ||||
| A-Class | 4,685 | |||
| C-Class | 14,553 | |||
| H-Class | 17,279 | |||
| Portfolio accounting fees | 10,241 | |||
| Licensing fees | 9,687 | |||
| Trustees’ fees* | 1,430 | |||
| Custodian fees | 1,140 | |||
| Miscellaneous | 14,687 | |||
| Total expenses | 191,471 | |||
| Net investment loss | (188,856 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | (42,774 | ) | ||
| Futures contracts | 218,164 | |||
| Net realized gain | 175,390 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Swap agreements | 78,055 | |||
| Futures contracts | (13,316 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | 64,739 | |||
| Net realized and unrealized gain | 240,129 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 51,273 | ||
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 85 |
| WEAKENING DOLLAR 2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (188,856 | ) | $ | (280,568 | ) | ||
| Net realized gain (loss) on investments | 175,390 | (1,135,991 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 64,739 | (591,726 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 51,273 | (2,008,285 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 24,041,632 | 26,292,609 | ||||||
| C-Class | 6,428,661 | 5,700,939 | ||||||
| H-Class | 31,158,919 | 77,055,138 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (24,071,521 | ) | (27,378,877 | ) | ||||
| C-Class | (7,316,759 | ) | (6,540,815 | ) | ||||
| H-Class | (35,984,350 | ) | (79,287,767 | ) | ||||
| Net decrease from capital share transactions | (5,743,418 | ) | (4,158,773 | ) | ||||
| Net decrease in net assets | (5,692,145 | ) | (6,167,058 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 13,091,033 | 19,258,091 | ||||||
| End of year | $ | 7,398,888 | $ | 13,091,033 | ||||
| Accumulated net investment loss at end of year | $ | (44,928 | ) | $ | (68,289 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 1,367,080 | 1,439,290 | ||||||
| C-Class | 398,681 | 336,378 | ||||||
| H-Class | 1,777,634 | 4,279,770 | ||||||
| Shares redeemed | ||||||||
| A-Class | (1,383,231 | ) | (1,511,880 | ) | ||||
| C-Class | (455,811 | ) | (388,412 | ) | ||||
| H-Class | (2,066,133 | ) | (4,401,489 | ) | ||||
| Net decrease in shares | (361,780 | ) | (246,343 | ) | ||||
| 86 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 16.95 | $ | 18.95 | $ | 20.34 | $ | 17.98 | $ | 16.38 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.30 | ) | (.28 | ) | (.33 | ) | (.28 | ) | (.30 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.21 | (1.72 | ) | (1.06 | ) | 2.64 | 1.90 | |||||||||||||
| Total from investment operations | .91 | (2.00 | ) | (1.39 | ) | 2.36 | 1.60 | |||||||||||||
| Net asset value, end of period | $ | 17.86 | $ | 16.95 | $ | 18.95 | $ | 20.34 | $ | 17.98 | ||||||||||
| Total Returnb | 5.37 | % | (10.55 | %) | (6.83 | %) | 13.13 | % | 9.77 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,129 | $ | 1,346 | $ | 2,881 | $ | 5,576 | $ | 6,753 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.73 | %) | (1.53 | %) | (1.62 | %) | (1.54 | %) | (1.57 | %) | ||||||||||
| Total expenses | 1.75 | % | 1.65 | % | 1.70 | % | 1.71 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 15.79 | $ | 17.79 | $ | 19.23 | $ | 17.12 | $ | 15.73 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.40 | ) | (.38 | ) | (.44 | ) | (.39 | ) | (.43 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.12 | (1.62 | ) | (1.00 | ) | 2.50 | 1.82 | |||||||||||||
| Total from investment operations | .72 | (2.00 | ) | (1.44 | ) | 2.11 | 1.39 | |||||||||||||
| Net asset value, end of period | $ | 16.51 | $ | 15.79 | $ | 17.79 | $ | 19.23 | $ | 17.12 | ||||||||||
| Total Returnb | 4.56 | % | (11.24 | %) | (7.49 | %) | 12.32 | % | 8.84 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 821 | $ | 1,687 | $ | 2,826 | $ | 3,963 | $ | 5,314 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (2.49 | %) | (2.27 | %) | (2.36 | %) | (2.29 | %) | (2.32 | %) | ||||||||||
| Total expenses | 2.52 | % | 2.39 | % | 2.44 | % | 2.46 | % | 2.43 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 87 |
| WEAKENING DOLLAR 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 16.93 | $ | 18.93 | $ | 20.32 | $ | 17.96 | $ | 16.37 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.30 | ) | (.27 | ) | (.32 | ) | (.28 | ) | (.30 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.20 | (1.73 | ) | (1.07 | ) | 2.64 | 1.89 | |||||||||||||
| Total from investment operations | .90 | (2.00 | ) | (1.39 | ) | 2.36 | 1.59 | |||||||||||||
| Net asset value, end of period | $ | 17.83 | $ | 16.93 | $ | 18.93 | $ | 20.32 | $ | 17.96 | ||||||||||
| Total Returnb | 5.32 | % | (10.57 | %) | (6.84 | %) | 13.14 | % | 9.71 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,449 | $ | 10,058 | $ | 13,551 | $ | 23,432 | $ | 30,036 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.74 | %) | (1.52 | %) | (1.61 | %) | (1.54 | %) | (1.57 | %) | ||||||||||
| Total expenses | 1.76 | % | 1.64 | % | 1.69 | % | 1.71 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
| 88 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers certain Target Beta Funds (the “Funds”), while the other funds are contained in separate reports. Only A-Class, C-Class and H-Class shares had been issued by the Funds.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
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.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Funds’ securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Funds and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date.
Repurchase agreements are valued at amortized cost, which approximates market value.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m.
| THE RYDEX FUNDS ANNUAL REPORT | 89 |
NOTES TO FINANCIAL STATEMENTS (continued)
to determine if fair valuation would provide a more accurate valuation.
The value of swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s market value is then adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreements.
The value of currency index swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the broker quote.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts and options thereupon, and other derivative investments, 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; and (iii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer.
C. Distributions of net investment income and distributions of net realized gains, if any, are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
D. Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
E. Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses.
F. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain and loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
G. The Funds may leave cash overnight in their cash account with the custodian, U.S. Bank. 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.
90 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
Segregated cash with the broker is held as collateral for investments in derivative instruments such as futures contracts or swap agreements.
H. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution fees relating to A-Class shares and service and distribution fees related to C-Class shares, are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.
I. 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.
2. Financial Instruments
As part of their investment strategy, the Funds utilize a variety of derivative instruments including futures and swap agreements. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities.
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 and related options, 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 the 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 restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund 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. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
The Europe 1.25x Strategy Fund, Japan 2x Strategy Fund, Strengthening Dollar 2x Strategy Fund and Weakening Dollar 2x Strategy Fund use derivative instruments to achieve leveraged exposure to their respective underlying indices. Since these Funds’ investment strategy involves consistently applied leverage, the value of the Funds’ shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index. In addition, as investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, this creates an opportunity for increased net income but, at the same time, additional leverage risk. The Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile and riskier than if they had not been leveraged.
In conjunction with the use of futures and swap agreements, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or the repurchase agreements allocated to each Fund.
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.
THE RYDEX FUNDS ANNUAL REPORT | 91
| NOTES TO FINANCIAL STATEMENTS (continued) |
3. Fees and Other Transactions with Affiliates
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.
| Management Fees | ||||
| Fund | (as a % of Net Assets) | |||
| S&P 500® Pure Growth Fund | 0.75 | % | ||
| S&P 500® Pure Value Fund | 0.75 | % | ||
| S&P MidCap 400® Pure Growth Fund | 0.75 | % | ||
| S&P MidCap 400® Pure Value Fund | 0.75 | % | ||
| S&P SmallCap 600® Pure Growth Fund | 0.75 | % | ||
| S&P SmallCap 600® Pure Value Fund | 0.75 | % | ||
| Europe 1.25x Strategy Fund | 0.90 | % | ||
| Japan 2x Strategy Fund | 0.75 | % | ||
| Strengthening Dollar 2x Strategy Fund | 0.90 | % | ||
| Weakening Dollar 2x Strategy Fund | 0.90 | % | ||
RFS provides transfer agent and administrative services to the Funds calculated at an annual percentage rate of 0.25% of the average daily net assets of each Fund.
RFS also provides accounting services to the Funds for fees calculated at annualized rates below, based on the average daily net assets of each Fund.
| Fund Accounting Fees | (as a % of net assets) | �� | ||
| On the fi rst $250 million | 0.10 | % | ||
| On the next $250 million | 0.075 | % | ||
| On the next $250 million | 0.05 | % | ||
| Over $750 million | 0.03 | % | ||
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Funds will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its CClass shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2014, GFD retained sales charges of $333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
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.
| 92 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The following table summarizes the inputs used to value the Funds’ net assets at March 31, 2014:
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| S&P 500® Pure Growth Fund | $ | 139,732,350 | $ | — | $ | 1,114,689 | $ | — | $ | — | $ | 140,847,039 | ||||||||||||
| S&P 500® Pure Value Fund | 123,656,920 | — | 1,939,321 | — | — | 125,596,241 | ||||||||||||||||||
| S&P MidCap 400® Pure Growth Fund | 273,422,897 | — | 7,190,140 | — | — | 280,613,037 | ||||||||||||||||||
| S&P MidCap 400® Pure Value Fund | 15,053,217 | — | 118,964 | — | — | 15,172,181 | ||||||||||||||||||
| S&P SmallCap 600® Pure Growth Fund | 28,466,832 | — | 1,352,317 | — | — | 29,819,149 | ||||||||||||||||||
| S&P SmallCap 600® Pure Value Fund | 27,854,412 | — | 199,292 | — | — | 28,053,704 | ||||||||||||||||||
| Europe 1.25x Strategy Fund | 9,564,273 | — | 5,024,538 | 211,251 | — | 14,800,062 | ||||||||||||||||||
| Japan 2x Strategy Fund | — | 309,594 | 3,275,695 | — | — | 3,585,289 | ||||||||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | 173,325 | 15,160,057 | — | — | 15,333,382 | ||||||||||||||||||
| Weakening Dollar 2x Strategy Fund | — | — | 7,041,888 | 15,829 | — | 7,057,717 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Europe 1.25x Strategy Fund | $ | — | $ | 46,973 | $ | — | $ | — | $ | — | $ | 46,973 | ||||||||||||
| Japan 2x Strategy Fund | — | 43,792 | — | — | — | 43,792 | ||||||||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | — | 17,549 | — | 17,549 | ||||||||||||||||||
| Weakening Dollar 2x Strategy Fund | — | 66,313 | — | — | — | 66,313 | ||||||||||||||||||
* Other financial instruments may include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end.
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.
For the year ended March 31, 2014, there were no transfers between levels.
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 U.S. Government Agencies. 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 March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| HSBC Group | U.S. Treasury Strips | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 519,000,000 | $ | 519,000,144 | 11/15/39 - 05/15/40 | $ | 1,347,115,400 | $ | 529,380,006 | |||||||||
| RBC Capital Markets | U.S. TIP Notes | |||||||||||||||||
| 0.02% | 0.13% - 2.50% | |||||||||||||||||
| Due 04/01/14 | 219,000,000 | 219,000,091 | 07/15/16 - 07/15/22 | 156,009,700 | 175,640,035 | |||||||||||||
| U.S. Treasury Strips | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 11/15/26 - 02/15/36 | 81,000,000 | 47,740,000 | ||||||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Notes | |||||||||||||||||
| 0.01% | 1.25% - 7.88% | |||||||||||||||||
| Due 04/01/14 | 148,095,295 | 148,095,336 | 08/15/15 - 02/15/21 | 137,725,900 | 151,057,202 | |||||||||||||
| Deutsche Bank | U.S. Treasury Note | |||||||||||||||||
| 0.02% | 0.88% | |||||||||||||||||
| Due 04/01/14 | 69,000,000 | 69,000,038 | 09/15/16 | 70,039,600 | 70,380,047 | |||||||||||||
| THE RYDEX FUNDS ANNUAL REPORT | 93 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations.
The following Funds utilized derivatives for the following purposes:
| Fund | Index Exposure | Liquidity | Leverage |
| Europe 1.25x Strategy Fund | x | x | x |
| Japan 2x Strategy Fund | x | x | x |
| Strengthening Dollar 2x Strategy Fund | x | x | x |
| Weakening Dollar 2x Strategy Fund | x | x | x |
The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Funds’ net assets on a daily basis.
| Approximate percentage of Fund’s | ||||||||
| net assets on a daily basis | ||||||||
| Fund | Long | Short | ||||||
| Europe 1.25x Strategy Fund* | 60 | % | — | |||||
| Japan 2x Strategy Fund* | 200 | % | — | |||||
| Strengthening Dollar 2x Strategy Fund | 200 | % | — | |||||
| Weakening Dollar 2x Strategy Fund | — | 200 | % | |||||
* These funds utilize a combination of currency and/or financial-linked derivatives to obtain exposure to their benchmark. The gross derivative instrument exposure is 120% and 400% for the Europe 1.25x Strategy Fund and the Japan 2x Strategy Fund, respectively.
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2014:
| Derivative Investment Type | Asset Derivatives | Liability Derivatives |
| Equity/Currency contracts | Variation margin | Variation margin |
| Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
| 94 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31, 2014:
| Asset Derivative Investments Value | ||||||||||||||||
| Futures | Futures | Swaps | ||||||||||||||
| Equity | Currency | Currency | Total Value at | |||||||||||||
| Fund | Contracts* | Contracts* | Contracts | March 31, 2014 | ||||||||||||
| Europe 1.25x Strategy Fund | $ | 211,251 | $ | — | $ | — | $ | 211,251 | ||||||||
| Japan 2x Strategy Fund | 309,594 | — | — | 309,594 | ||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | 173,325 | — | 173,325 | ||||||||||||
| Weakening Dollar 2x Strategy Fund | — | — | 15,829 | 15,829 | ||||||||||||
| Liability Derivative Investments Value | ||||||||||||||||
| Futures | Futures | Swaps | ||||||||||||||
| Equity | Currency | Currency | Total Value at | |||||||||||||
| Fund | Contracts* | Contracts* | Contracts | March 31, 2014 | ||||||||||||
| Europe 1.25x Strategy Fund | $ | — | $ | 46,973 | $ | — | $ | 46,973 | ||||||||
| Japan 2x Strategy Fund | — | 43,792 | — | 43,792 | ||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | 17,549 | 17,549 | ||||||||||||
| Weakening Dollar 2x Strategy Fund | — | 66,313 | — | 66,313 | ||||||||||||
* Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current days 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 March 31, 2014:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives |
| Equity/Currency contracts | Net realized gain (loss) on swap agreements |
| Net realized gain (loss) on futures contracts | |
| Net change in unrealized appreciation (depreciation) on swap agreements | |
| Net change in unrealized appreciation (depreciation) on futures contracts |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended March 31, 2014:
| Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Currency | Currency | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Europe 1.25x Strategy Fund | $ | 570,221 | $ | 30,528 | $ | 901,428 | $ | — | $ | 1,502,177 | ||||||||||
| Japan 2x Strategy Fund | 2,625,557 | 37,063 | (1,370,605 | ) | — | 1,292,015 | ||||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | (3,301,957 | ) | 43,544 | (3,258,413 | ) | |||||||||||||
| Weakening Dollar 2x Strategy Fund | — | — | 218,164 | (42,774 | ) | 175,390 | ||||||||||||||
| Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Currency | Currency | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Europe 1.25x Strategy Fund | $ | 209,944 | $ | — | $ | 9,696 | $ | — | $ | 219,640 | ||||||||||
| Japan 2x Strategy Fund | (749,340 | ) | — | (503,589 | ) | — | (1,252,929 | ) | ||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | 41,044 | (174,551 | ) | (133,507 | ) | |||||||||||||
| Weakening Dollar 2x Strategy Fund | — | — | (13,316 | ) | 78,055 | 64,739 | ||||||||||||||
| THE RYDEX FUNDS ANNUAL REPORT | 95 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
7. 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 distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| S&P 500® Pure Growth Fund | $ | 425,719 | ||
| S&P 500® Pure Value Fund | 168,978 | |||
| S&P MidCap 400® Pure Value Fund | 897,830 | |||
| S&P SmallCap 600® Pure Growth Fund | 6,038,669 | |||
| S&P SmallCap 600® Pure Value Fund | 4,054,075 | |||
| Europe 1.25x Strategy Fund | 1,838,291 | |||
| Japan 2x Strategy Fund | 39,086 | |||
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| S&P 500® Pure Growth Fund | $ | — | $ | — | $ | — | ||||||
| S&P 500® Pure Value Fund | 4,326,572 | — | 4,326,572 | |||||||||
| S&P MidCap 400® Pure Growth Fund | 3,996,960 | 5,466,643 | 9,463,603 | |||||||||
| S&P MidCap 400® Pure Value Fund | 52,110 | — | 52,110 | |||||||||
| 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 | — | — | — | |||||||||
| Weakening Dollar 2x Strategy Fund | — | — | — | |||||||||
| 96 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| S&P 500® Pure Growth Fund | $ | — | $ | — | $ | — | ||||||
| S&P 500® Pure Value Fund | 81,734 | — | 81,734 | |||||||||
| 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 | 121,349 | — | 121,349 | |||||||||
| Japan 2x Strategy Fund | — | — | — | |||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | — | |||||||||
| Weakening Dollar 2x Strategy Fund | — | — | — | |||||||||
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | (Depreciation) | Carryforward1 | ||||||||||||
| S&P 500® Pure Growth Fund | $ | 4,463,896 | $ | — | $ | 17,869,747 | $ | — | ||||||||
| S&P 500® Pure Value Fund | 2,272,512 | 1,746,579 | 12,416,477 | — | ||||||||||||
| S&P MidCap 400® Pure Growth Fund | 15,520,167 | 17,684,250 | 46,687,430 | — | ||||||||||||
| S&P MidCap 400® Pure Value Fund | 18,945 | — | 1,845,642 | (3,253,357 | ) | |||||||||||
| S&P SmallCap 600® Pure Growth Fund | — | — | 3,759,004 | (3,635,666 | ) | |||||||||||
| S&P SmallCap 600® Pure Value Fund | — | — | 2,219,740 | (27,836,318 | ) | |||||||||||
| Europe 1.25x Strategy Fund | 26,435 | — | 588,985 | (10,924,545 | ) | |||||||||||
| Japan 2x Strategy Fund | — | — | — | (1,409,815 | ) | |||||||||||
| Strengthening Dollar 2x Strategy Fund | — | — | — | (23,329,425 | ) | |||||||||||
| Weakening Dollar 2x Strategy Fund | — | — | — | (15,227,566 | ) | |||||||||||
Capital Loss Carryforward amounts may be limited due to Federal income tax regulations.
1A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Total | ||||||||||||||||||||||||
| Expires in | Expires in | Expires in | Unlimited | Unlimited | Capital Loss | |||||||||||||||||||
| Fund | 2017 | 2018 | 2019 | Short-Term | Long-Term | Carryforward | ||||||||||||||||||
| S&P MidCap 400® Pure Value Fund | $ | — | $ | — | $ | (1,769,395 | ) | $ | (1,483,962 | ) | $ | — | (3,253,357 | ) | ||||||||||
| S&P SmallCap 600® Pure Growth Fund | (3,579,142 | ) | (56,524 | ) | — | — | — | (3,635,666 | ) | |||||||||||||||
| S&P SmallCap 600® Pure Value Fund | — | — | (27,836,318 | ) | — | — | (27,836,318 | ) | ||||||||||||||||
| Europe 1.25x Strategy Fund | (8,826,483 | ) | — | (2,098,062 | ) | — | — | (10,924,545 | ) | |||||||||||||||
| Japan 2x Strategy Fund | (973,570 | ) | — | — | (152,259 | ) | (283,986 | ) | (1,409,815 | ) | ||||||||||||||
| Strengthening Dollar 2x Strategy Fund | — | (15,541,911 | ) | (4,395,594 | ) | (1,356,768 | ) | (2,035,152 | ) | (23,329,425 | ) | |||||||||||||
| Weakening Dollar 2x Strategy Fund | (6,635,880 | ) | — | (3,988,430 | ) | (1,841,301 | ) | (2,761,955 | ) | (15,227,566 | ) | |||||||||||||
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 typically due to late year loss deferrals, losses deferred due to wash sales, utilization of earnings and profits on shareholder redemptions, foreign currency gains and losses, and the “mark-to-market” of futures contracts for tax purposes. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
| THE RYDEX FUNDS ANNUAL REPORT | 97 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
On the Statements of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| S&P 500® Pure Growth Fund | $ | 9,281,400 | $ | 802,159 | $ | (10,083,559 | ) | |||||
| S&P 500® Pure Value Fund | 8,256,734 | — | (8,256,734 | ) | ||||||||
| S&P MidCap 400® Pure Growth Fund | 14,597,552 | 1,854,739 | (16,452,291 | ) | ||||||||
| S&P MidCap 400® Pure Value Fund | — | — | — | |||||||||
| S&P SmallCap 600® Pure Growth Fund | (362,817 | ) | 362,817 | — | ||||||||
| S&P SmallCap 600® Pure Value Fund | (146,250 | ) | 146,250 | — | ||||||||
| Europe 1.25x Strategy Fund | — | 19,732 | (19,732 | ) | ||||||||
| Japan 2x Strategy Fund | (144,010 | ) | 144,010 | — | ||||||||
| Strengthening Dollar 2x Strategy Fund | (381,112 | ) | 381,112 | — | ||||||||
| Weakening Dollar 2x Strategy Fund | (212,217 | ) | 212,217 | — | ||||||||
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| S&P 500® Pure Growth Fund | $ | 122,977,292 | $ | 18,899,877 | $ | (1,030,130 | ) | $ | 17,869,747 | |||||||
| S&P 500® Pure Value Fund | 113,179,764 | 13,362,599 | (946,122 | ) | 12,416,477 | |||||||||||
| S&P MidCap 400® Pure Growth Fund | 233,925,607 | 52,203,385 | (5,515,955 | ) | 46,687,430 | |||||||||||
| S&P MidCap 400® Pure Value Fund | 13,326,539 | 1,925,908 | (80,266 | ) | 1,845,642 | |||||||||||
| S&P SmallCap 600® Pure Growth Fund | 26,060,145 | 4,391,829 | (632,825 | ) | 3,759,004 | |||||||||||
| S&P SmallCap 600® Pure Value Fund | 25,833,964 | 2,684,481 | (464,741 | ) | 2,219,740 | |||||||||||
| Europe 1.25x Strategy Fund | 13,999,921 | 604,842 | (15,952 | ) | 588,890 | |||||||||||
| Japan 2x Strategy Fund | 3,275,695 | — | — | — | ||||||||||||
| Strengthening Dollar 2x Strategy Fund | 15,160,057 | — | — | — | ||||||||||||
| Weakening Dollar 2x Strategy Fund | 7,041,888 | — | — | — | ||||||||||||
Pursuant to Federal income tax regulations applicable to investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2014:
| Fund | Ordinary | Capital | ||||||
| S&P SmallCap 600® Pure Growth Fund | $ | (95,970 | ) | $ | — | |||
| S&P SmallCap 600® Pure Value Fund | (40,344 | ) | — | |||||
| Europe 1.25x Strategy Fund | — | (176,312 | ) | |||||
| Japan 2x Strategy Fund | (21,490 | ) | — | |||||
| Strengthening Dollar 2x Strategy Fund | (99,577 | ) | — | |||||
| Weakening Dollar 2x Strategy Fund | (44,928 | ) | — | |||||
8. Securities Transactions
For the year ended March 31, 2014, 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 | $ | 668,873,542 | $ | 623,981,384 | ||||
| S&P 500® Pure Value Fund | 366,924,763 | 344,536,460 | ||||||
| S&P MidCap 400® Pure Growth Fund | 368,768,122 | 450,691,082 | ||||||
| S&P MidCap 400® Pure Value Fund | 155,185,355 | 223,985,346 | ||||||
| S&P SmallCap 600® Pure Growth Fund | 341,259,326 | 330,872,783 | ||||||
| S&P SmallCap 600® Pure Value Fund | 204,160,838 | 216,714,249 | ||||||
| Europe 1.25x Strategy Fund | 83,903,239 | 82,722,311 | ||||||
| Japan 2x Strategy Fund | — | — | ||||||
| Strengthening Dollar 2x Strategy Fund | — | — | ||||||
| Weakening Dollar 2x Strategy Fund | — | — | ||||||
| 98 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
9. 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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Funds did not have any other borrowings under this agreement at March 31, 2014.
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Amount | |||
| S&P 500® Pure Growth Fund | $ | 58,041 | ||
| S&P 500® Pure Value Fund | 19,310 | |||
| S&P MidCap 400® Pure Growth Fund | 40,633 | |||
| S&P MidCap 400® Pure Value Fund | 18,644 | |||
| S&P SmallCap 600® Pure Growth Fund | 72,296 | |||
| S&P SmallCap 600® Pure Value Fund | 21,608 | |||
| Europe 1.25x Strategy Fund | 545 | |||
10. 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, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies and cash. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
At March 31, 2014, the Funds participated in securities lending as follows:
| Cash | ||||||||
| Value of | Collateral | |||||||
| Fund | Securities Loaned | Received | ||||||
| S&P 500® Pure Value Fund | $ | 1,187,934 | $ | 1,215,775 | ||||
| S&P MidCap 400® Pure Growth Fund | 6,008,926 | 6,110,450 | ||||||
| S&P MidCap 400® Pure Value Fund | 45,858 | 49,210 | ||||||
| S&P SmallCap 600® Pure Growth Fund | 1,242,645 | 1,237,363 | * | |||||
| S&P SmallCap 600® Pure Value Fund | 159,853 | 164,325 | ||||||
| Europe 1.25x Strategy Fund | 541,722 | 555,410 | ||||||
* Subsequent to March 31, 2014, additional collateral was received.
| THE RYDEX FUNDS ANNUAL REPORT | 99 |
| NOTES TO FINANCIAL STATEMENTS (continued) |
Cash collateral received was invested in the following joint repurchase agreements at March 31, 2014:
| Counterparty and | ||||||||||||||||||
| Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| BNP Paribas Securities Corp. | U.S. TIP Bond | |||||||||||||||||
| 0.05% | 0.75% | |||||||||||||||||
| Due 04/01/14 | $ | 4,529,206 | $ | 4,529,213 | 02/15/42 | $ | 5,097,197 | $ | 4,619,664 | |||||||||
| HSBC Securities, Inc. | Fannie Mae Strips | |||||||||||||||||
| 0.05% | 0.00% | |||||||||||||||||
| Due 04/01/14 | 4,041,445 | 4,041,451 | 07/15/14 - 01/15/30 | 5,099,323 | 4,122,163 | |||||||||||||
| Deutsche Bank Securities, Inc. | U.S. Treasury Note/Bond | |||||||||||||||||
| 0.05% - 0.08% | 1.75% - 8.75% | |||||||||||||||||
| Due 04/01/14 | 761,882 | 761,883 | 05/15/17 - 05/15/23 | 735,151 | 706,034 | |||||||||||||
| Fannie Mae Strip | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 05/15/30 | 136,949 | 71,099 | ||||||||||||||||
11. Reverse Share Splits
A reverse share split occurred for the following funds at the close of business:
| Fund | Effective Date | Split Type | |
| Strengthening Dollar 2x Strategy Fund | February 7, 2014 | One-for-Three Reverse Split |
The effect of this transaction was to divide the number of outstanding shares of the Fund by the split ratio, resulting in a corresponding increase in net asset value per share. The share transactions presented in the statement of changes in net assets and the per share data in the financial highlights for each of the periods presented prior to the effective date have been restated to reflect this reverse share split. There were no changes in net assets, results of operations or total return as a result of this transaction.
12. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds 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 the Tribune Company 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 Series Funds, 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 Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
| 100 | THE RYDEX FUNDS ANNUAL REPORT |
| NOTES TO FINANCIAL STATEMENTS (continued) |
On April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168; U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
13. 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 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
| THE RYDEX FUNDS ANNUAL REPORT | 101 |
| NOTES TO FINANCIAL STATEMENTS (concluded) |
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, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP.
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of Assets | ||||||||||||||||||||||||||
| Gross Amounts | Gross Amounts Offset | Presented on the | Cash | |||||||||||||||||||||||
| of Recognized | in the Statements of | Statements of Assets | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Assets1 | Assets and Liabilities | and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| Weakening Dollar 2x Strategy Fund | Swap currency contracts | $ | 15,829 | $ | — | $ | 15,829 | $ | — | $ | — | $ | 15,829 | |||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of | ||||||||||||||||||||||||||
| Gross Amounts | Gross Amounts Offset | Liabilities Presented | Cash | |||||||||||||||||||||||
| of Recognized | in the Statements of | on the Statements of | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Liabilities1 | Assets and Liabilities | Assets and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| Strengthening Dollar 2x Strategy Fund | Swap currency contracts | $ | 17,549 | $ | — | $ | 17,549 | $ | — | $ | — | $ | 17,549 | |||||||||||||
| 1 | Exchange traded futures are excluded from these reported amounts. |
| 2 | Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as Segregated cash with broker on the Statements of Assets and Liabilities. |
| 102 | THE RYDEX FUNDS ANNUAL REPORT |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, 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 (ten of the series constituting the Rydex Series Funds) (the “Funds”) as of March 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at March 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
May 22, 2014
| THE RYDEX FUNDS ANNUAL REPORT | 103 |
| OTHER INFORMATION (Unaudited) |
Tax Information
This information is being provided as required by the Internal Revenue Code (IRC). Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
| Fund | % Qualifying | |||
| S&P 500® Pure Value Fund | 13.82 | % | ||
| S&P MidCap 400® Pure Growth Fund | 16.98 | % | ||
| S&P MidCap 400® Pure Value Fund | 100.00 | % | ||
The following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:
| Fund | % Qualifying | |||
| S&P 500® Pure Value Fund | 12.86 | % | ||
| S&P MidCap 400® Pure Growth Fund | 15.15 | % | ||
| S&P MidCap 400® Pure Value Fund | 100.00 | % | ||
Additionally, of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:
| Fund | % Qualifying | %STCG Qualifying | ||||||
| S&P 500® Pure Value Fund | 0.00 | % | 100.00 | % | ||||
| S&P MidCap 400® Pure Growth Fund | 0.00 | % | 100.00 | % | ||||
With respect to the taxable year ended March 31, 2014, 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:
| S&P 500® | S&P 500® | S&P MidCap 400® | ||||||||||
| Pure Growth Fund | Pure Value Fund | Pure Growth Fund | ||||||||||
| From long-term capital gains, subject to the 15% rate gains category: | $ | — | $ | — | $ | 5,466,643 | ||||||
| From long-term capital gains, using proceeds from shareholder redemptions: | 5,901,846 | 5,340,068 | 14,599,666 | |||||||||
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.
| 104 | THE RYDEX FUNDS ANNUAL REPORT |
| OTHER INFORMATION (Unaudited) (concluded) |
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
| THE RYDEX FUNDS ANNUAL REPORT | 105 |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEE
| Name and Year of Birth of Trustee | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee | |||||
| Donald C. Cacciapaglia* (1951) | Trustee from 2012 to present. | Current:President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). | 214 | Delaware Life (2013–present); Guggenheim Life and Annuity Company (2011–present); | |||||
Former: Chairman and Chief Executive Officer, Channel Capital Group, Inc. (2002–2010). | Paragon Life Insurance Company of Indiana (2011–present). |
INDEPENDENT TRUSTEES
| Corey A. Colehour (1945) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Retired. | 131 | None. | |||||
| J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Governance and Nominating Committees from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | Trustee of Epiphany Funds (4) (2009–present). | |||||
| John O. Demaret (1940) | Trustee from 1998 to present and Chairman of the Board from 2006 to present; Member and Chairman of the Audit Committee from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | None. | |||||
| Werner E. Keller (1940) | Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present. | Current: Founder and President, Keller Partners, LLC (investment research 3 rm) (2005–present). | 131 | None. |
| 106 | THE RYDEX FUNDS ANNUAL REPORT |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (continued) |
INDEPENDENT TRUSTEES - concluded
| Name and Year of Birth of Trustee | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee** | Other Directorships Held by Trustee | |||||
| Thomas F. Lydon, Jr. (1960) | Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present. | Current: President, Global Trends Investments (registered investment adviser) (1996–present). | 131 | Board of Directors of US Global Investors (GROW) (1995–present). | |||||
| Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Chairman and Member of the Governance and Nominating Committees from 1998 to present. | Retired. Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977–2010). | 131 | None. | |||||
| Roger Somers (1944) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Current: Founder and Chief Executive Officer, Arrow Limousine (1962–present). | 131 | None. |
| Name, Address and Year of Birth of Officer | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | |||
| Donald C. Cacciapaglia (1951) | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. (200232010). | |||
| Michael P. Byrum (1970) | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010–present); President and Chief Investment Officer, Rydex Holdings, LLC (2008– present); Director and Chairman, Advisory Research Center, Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC (2005–present). | |||
| Former: Vice President, Guggenheim Distributors, LLC (2009); Director (200932010) and Secretary (200232010), Rydex Fund Services, LLC; Director (200832010), Chief Investment Officer (200632010), President (200432010) and Secretary (200232010), Rydex Advisors, LLC; Director (200832010), Chief Investment Officer (200632010), President (200432010) and Secretary (200232010), Rydex Advisors II, LLC. | |||||
| Nikolaos Bonos (1963) | Vice President and Treasurer (2003–present). | Current: Treasurer and Vice President, certain other funds in the Fund Complex (2003–present); Senior Vice President, Security Investors, LLC (2010–present); Chief Executive Officer, Guggenheim Specialized Products, LLC (2009–present); President and Chief Executive Officer, Rydex Fund Services, LLC (2009–present); Vice President, Rydex Holdings, LLC (2008–present). | |||
| Former: Senior Vice President, Security Global Investors, LLC (201032011); Senior Vice President, Rydex Advisors, LLC (200632011); Senior Vice President, Rydex Advisors II, LLC (200632011). |
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
| THE RYDEX FUNDS ANNUAL REPORT | 107 |
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded) |
| OFFICERS - concluded | |||||
| Position(s) Held with | |||||
| Name, Address | the Trust, Term of | ||||
| and Year of Birth of | Office and Length of | Principal Occupation(s) | |||
| Officer | Time Served | During Past 5 Years | |||
| Elisabeth Miller (1968) | Chief Compliance Officer (2012–present). | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012–present); Chief Compliance Officer, Security Investors, LLC (2012–present); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012–present); Vice President, Guggenheim Funds Distributors, LLC (2014–present). | |||
| Former: Chief Compliance Officer, Guggenheim Distributors, LLC (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); Senior Manager, Guggenheim Distributors, LLC (2004–2009). | |||||
| Joseph M. Arruda (1966) | Assistant Treasurer (2006–present). | Current: Assistant Treasurer, certain other funds in the Fund Complex (2006–present); Vice President, Security Investors, LLC (2010–present); Chief Financial Officer and Manager, Guggenheim Specialized Products, LLC (2009–present). | |||
| Former: Vice President, Security Global Investors, LLC (2010–2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010). | |||||
| Amy J. Lee (1961) | Vice President (2009–present) and Secretary (2012–present). | Current: Chief Legal Officer, certain other funds in the Fund Complex (2013–present); Senior Managing Director, Guggenheim Investments (2012–present). | |||
| Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004–2012). |
| 108 | THE RYDEX FUNDS ANNUAL REPORT |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
| THE RYDEX FUNDS ANNUAL REPORT | 109 |
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded) |
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| 110 | THE RYDEX FUNDS ANNUAL REPORT |
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3.31.2014
Rydex Funds Annual Report
| Domestic Equity Fund |
| NASDAQ-100® Fund |
| ROTC-ANN-2-0314x0315 | guggenheiminvestments.com |
Go Green! Eliminate Mailbox Clutter
Go paperless with Guggenheim Investments eDelivery—a service giving you full online access to account information and documents. Save time, cut down on mailbox clutter and be a friend to the environment with eDelivery.
With Guggenheim Investments eDelivery you can:
| ■ | View online confirmations and statements at your convenience. |
| ■ | Receive email notifications when your most recent confirmations, statements and other account documents are available for review. |
| ■ | Access prospectuses, annual reports and semiannual reports online. |
If you have questions about the Guggenheim Investments eDelivery service, contact one of our Shareholder Service Representatives at 800.820.0888.
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Funds Distributors, LLC. GI-G0GREEN-0414 x0415 #12604
| TABLE OF CONTENTS |
THE RYDEX FUNDS ANNUAL REPORT | 1
March 31, 2014
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for one of our Rydex Funds (the “Fund”). This report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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 the Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Donald C. Cacciapaglia
President
April 30, 2014
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.
There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market risks. The investment return and principal value of any investment product will fluctuate with changes in market conditions. The Fund is subject to the risk that large-capitalization stocks may under perform other segments of the equity market or the equity markets as a whole. • Please read the prospectus for more detailed information regarding these and other risks.
2 | THE RYDEX FUNDS ANNUAL REPORT
| ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
THE RYDEX FUNDS ANNUAL REPORT | 3
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
NASDAQ-100® Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
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, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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 FUNDS ANNUAL REPORT | 5
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded)
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| NASDAQ-100® Fund | ||||||||||||||||||||
| Investor Class | 1.29 | % | 11.75 | % | $1,000.00 | $1,117.50 | $ 6.81 | |||||||||||||
| Advisor Class | 1.78 | % | 11.45 | % | 1,000.00 | 1,114.50 | 9.38 | |||||||||||||
| A-Class | 1.54 | % | 11.60 | % | 1,000.00 | 1,116.00 | 8.12 | |||||||||||||
| C-Class | 2.29 | % | 11.17 | % | 1,000.00 | 1,111.70 | 12.06 | |||||||||||||
Table 2. Based on hypothetical 5% return (before expenses)
| NASDAQ-100® Fund | ||||||||||||||||||||
| Investor Class | 1.29 | % | 5.00 | % | $1,000.00 | $1,018.50 | $ 6.49 | |||||||||||||
| Advisor Class | 1.78 | % | 5.00 | % | 1,000.00 | 1,016.06 | 8.95 | |||||||||||||
| A-Class | 1.54 | % | 5.00 | % | 1,000.00 | 1,017.25 | 7.75 | |||||||||||||
| C-Class | 2.29 | % | 5.00 | % | 1,000.00 | 1,013.51 | 11.50 |
| 1 | Annualized. |
| 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 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
6 | THE RYDEX FUNDS ANNUAL REPORT
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THE RYDEX FUNDS ANNUAL REPORT | 7
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, 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 NASDAQ-100® Fund Investor Class rose 27.74%, while the NASDAQ-100 Index returned 29.40% over the same period.
The Information Technology sector contributed most to performance of the underlying index, followed by the Consumer Discretionary sector. No sector detracted from performance. The Materials sector contributed least, followed by the Industrials sector.
Microsoft Corp., Google, Inc. — Class A and Apple, Inc. were the holdings contributing most to performance of the underlying index for the year. VimpelCom Ltd. ADR, Citrix Systems, Inc. and Intuitive Surgical, Inc. detracted most from performance of the underlying index for the year.
Derivatives in the Fund were used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates:
| Investor Class | February 14, 1994 |
| Advisor Class | September 22, 1998 |
| A-Class | March 31, 2004 |
| C-Class | March 26, 2001 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 10.9 | % | ||
| Microsoft Corp. | 7.7 | % | ||
| Google, Inc. — Class A | 7.1 | % | ||
| Amazon.com, Inc. | 3.5 | % | ||
| QUALCOMM, Inc. | 3.0 | % | ||
| Intel Corp. | 2.9 | % | ||
| Facebook, Inc. — Class A | 2.7 | % | ||
| Cisco Systems, Inc. | 2.6 | % | ||
| Gilead Sciences, Inc. | 2.5 | % | ||
| Comcast Corp. — Class A | 2.4 | % | ||
| Top Ten Total | 45.3 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
8 | THE RYDEX FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 27.74 | % | 23.57 | % | 9.24 | % | ||||||
| Advisor Class Shares | 27.02 | % | 22.90 | % | 8.66 | % | ||||||
| A-Class Shares | 27.42 | % | 23.20 | % | 8.94 | % | ||||||
| A-Class Shares with sales charge† | 21.36 | % | 22.01 | % | 8.41 | % | ||||||
| C-Class Shares | 26.46 | % | 22.32 | % | 8.14 | % | ||||||
| C-Class Shares with CDSC‡ | 25.46 | % | 22.32 | % | 8.14 | % | ||||||
| NASDAQ-100 Index | 29.40 | % | 25.09 | % | 10.42 | % | ||||||
| * | 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. The graphs are based on the Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE RYDEX FUNDS ANNUAL REPORT | 9
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
NASDAQ-100® FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 91.3% | ||||||||
| INFORMATION TECHNOLOGY - 53.2% | ||||||||
| Apple, Inc. | 143,944 | $ | 77,260,502 | |||||
| Microsoft Corp. | 1,339,531 | 54,907,376 | ||||||
| Google, Inc. — Class A* | 45,163 | 50,334,615 | ||||||
| QUALCOMM, Inc. | 272,898 | 21,520,736 | ||||||
| Intel Corp. | 802,361 | 20,708,937 | ||||||
| Facebook, Inc. — Class A* | 318,835 | 19,206,620 | ||||||
| Cisco Systems, Inc. | 831,290 | 18,629,209 | ||||||
| eBay, Inc.* | 208,930 | 11,541,293 | ||||||
| Texas Instruments, Inc. | 174,965 | 8,249,600 | ||||||
| Baidu, Inc. ADR* | 44,513 | 6,782,891 | ||||||
| Automatic Data Processing, Inc. | 77,755 | 6,007,351 | ||||||
| Yahoo!, Inc.* | 162,891 | 5,847,787 | ||||||
| Adobe Systems, Inc.* | 80,605 | 5,298,972 | ||||||
| Cognizant Technology Solutions | ||||||||
| Corp. — Class A* | 98,026 | 4,961,096 | ||||||
| Micron Technology, Inc.* | 171,199 | 4,050,568 | ||||||
| Applied Materials, Inc. | 195,440 | 3,990,885 | ||||||
| Intuit, Inc. | 45,724 | 3,554,127 | ||||||
| Western Digital Corp. | 38,127 | 3,500,821 | ||||||
| Seagate Technology plc | 53,054 | 2,979,513 | ||||||
| SanDisk Corp. | 36,392 | 2,954,666 | ||||||
| Broadcom Corp. — Class A | 85,687 | 2,697,427 | ||||||
| Analog Devices, Inc. | 50,437 | 2,680,222 | ||||||
| Avago Technologies Ltd. | 40,298 | 2,595,594 | ||||||
| Paychex, Inc. | 58,778 | 2,503,943 | ||||||
| NXP Semiconductor N.V.* | 40,628 | 2,389,333 | ||||||
| Xilinx, Inc. | 43,066 | 2,337,192 | ||||||
| Fiserv, Inc.* | 41,065 | 2,327,975 | ||||||
| Activision Blizzard, Inc. | 112,224 | 2,293,859 | ||||||
| CA, Inc. | 72,258 | 2,237,830 | ||||||
| Symantec Corp. | 111,596 | 2,228,572 | ||||||
| Check Point Software Technologies Ltd.* | 31,033 | 2,098,762 | ||||||
| NetApp, Inc. | 53,460 | 1,972,674 | ||||||
| KLA-Tencor Corp. | 26,880 | 1,858,483 | ||||||
| Altera Corp. | 51,243 | 1,857,046 | ||||||
| Linear Technology Corp. | 38,070 | 1,853,628 | ||||||
| Autodesk, Inc.* | 36,587 | 1,799,349 | ||||||
| Citrix Systems, Inc.* | 29,656 | 1,703,144 | ||||||
| Akamai Technologies, Inc.* | 28,887 | 1,681,512 | ||||||
| NVIDIA Corp. | 91,749 | 1,643,225 | ||||||
| Maxim Integrated Products, Inc. | 45,523 | 1,507,722 | ||||||
| Equinix, Inc.* | 7,976 | 1,474,284 | ||||||
| F5 Networks, Inc.* | 12,179 | 1,298,647 | ||||||
| Total Information Technology | 377,327,988 | |||||||
| CONSUMER DISCRETIONARY - 18.1% | ||||||||
| Amazon.com, Inc.* | 74,115 | 24,941,181 | ||||||
| Comcast Corp. — Class A | 345,229 | 17,268,356 | ||||||
| Priceline Group, Inc.* | 8,415 | 10,029,754 | ||||||
| Starbucks Corp. | 121,982 | 8,951,039 | ||||||
| Twenty-First Century Fox, Inc. — Class A | 235,323 | 7,523,276 | ||||||
| DIRECTV* | 82,216 | 6,282,947 | ||||||
| Viacom, Inc. — Class B | 62,433 | 5,306,181 | ||||||
| Tesla Motors, Inc.*,1 | 19,878 | 4,143,569 | ||||||
| Wynn Resorts Ltd. | 16,329 | 3,627,487 | ||||||
| Netflix, Inc.* | 9,649 | 3,396,737 | ||||||
| Sirius XM Holdings, Inc.* | 983,961 | 3,148,675 | ||||||
| Marriott International, Inc. — Class A | 47,574 | 2,665,095 | ||||||
| O’Reilly Automotive, Inc.* | 17,169 | 2,547,708 | ||||||
| Ross Stores, Inc. | 34,682 | 2,481,497 | ||||||
| Bed Bath & Beyond, Inc.* | 34,358 | 2,363,830 | ||||||
| DISH Network Corp. — Class A* | 35,484 | 2,207,460 | ||||||
| Mattel, Inc. | 54,928 | 2,203,162 | ||||||
| Liberty Media Corp. — Class A* | 16,851 | 2,202,931 | ||||||
| Liberty Interactive Corp. — Class A* | 75,702 | 2,185,517 | ||||||
| Charter Communications, Inc. — Class A* | 17,132 | 2,110,662 | ||||||
| Discovery Communications, | ||||||||
| Inc. — Class A* | 23,714 | 1,961,148 | ||||||
| TripAdvisor, Inc.* | 20,890 | 1,892,425 | ||||||
| Dollar Tree, Inc.* | 33,585 | 1,752,465 | ||||||
| Garmin Ltd.1 | 31,489 | 1,740,082 | ||||||
| Tractor Supply Co. | 22,524 | 1,590,870 | ||||||
| Liberty Global plc — Class A* | 35,845 | 1,491,152 | ||||||
| Expedia, Inc. | 18,823 | 1,364,668 | ||||||
| Staples, Inc. | 105,488 | 1,196,234 | ||||||
| Total Consumer Discretionary | 128,576,108 | |||||||
| HEALTH CARE - 12.7% | ||||||||
| Gilead Sciences, Inc.* | 248,241 | 17,590,358 | ||||||
| Amgen, Inc. | 121,844 | 15,028,239 | ||||||
| Biogen Idec, Inc.* | 38,147 | 11,668,023 | ||||||
| Express Scripts Holding Co.* | 125,237 | 9,404,046 | ||||||
| Celgene Corp.* | 65,522 | 9,146,871 | ||||||
| Alexion Pharmaceuticals, Inc.* | 31,924 | 4,856,598 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 15,796 | 4,743,223 | ||||||
| Cerner Corp.* | 55,505 | 3,122,156 | ||||||
| Illumina, Inc.* | 20,693 | 3,076,221 | ||||||
| Mylan, Inc.* | 60,016 | 2,930,581 | ||||||
| Intuitive Surgical, Inc.* | 6,159 | 2,697,580 | ||||||
| Vertex Pharmaceuticals, Inc.* | 38,053 | 2,691,108 | ||||||
| Henry Schein, Inc.* | 13,788 | 1,645,874 | ||||||
| Catamaran Corp.* | 33,297 | 1,490,374 | ||||||
| Total Health Care | 90,091,252 | |||||||
| CONSUMER STAPLES - 4.3% | ||||||||
| Mondelez International, Inc. — Class A | 283,016 | 9,778,202 | ||||||
| Costco Wholesale Corp. | 70,963 | 7,925,148 | ||||||
| Kraft Foods Group, Inc. | 96,235 | 5,398,784 | ||||||
| Whole Foods Market, Inc. | 60,023 | 3,043,766 | ||||||
| Keurig Green Mountain, Inc. | 26,888 | 2,839,104 | ||||||
| Monster Beverage Corp.* | 26,926 | 1,870,011 | ||||||
| Total Consumer Staples | 30,855,015 | |||||||
| INDUSTRIALS - 1.7% | ||||||||
| PACCAR, Inc. | 57,193 | 3,857,096 | ||||||
| Fastenal Co. | 47,894 | 2,362,132 | ||||||
| Verisk Analytics, Inc. — Class A* | 26,928 | 1,614,603 | ||||||
| Stericycle, Inc.* | 13,745 | 1,561,707 | ||||||
| Expeditors International of Washington, Inc. | 32,706 | 1,296,139 | ||||||
| CH Robinson Worldwide, Inc. | 24,472 | 1,282,088 | ||||||
| Total Industrials | 11,973,765 | |||||||
| 10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| NASDAQ-100® FUND |
| Shares | Value | |||||||
| TELECOMMUNICATION SERVICES - 1.0% | ||||||||
| Vodafone Group plc ADR | 84,624 | $ | 3,115,009 | |||||
| VimpelCom Ltd. ADR | 266,612 | 2,407,506 | ||||||
| SBA Communications Corp. — Class A* | 20,735 | 1,886,056 | ||||||
| Total Telecommunication Services | 7,408,571 | |||||||
| MATERIALS - 0.3% | ||||||||
| Sigma-Aldrich Corp. | 19,281 | 1,800,460 | ||||||
| Total Common Stocks | ||||||||
| (Cost $302,176,244) | 648,033,159 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENTS††,2 - 14.0% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 54,016,231 | 54,016,231 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 22,792,976 | 22,792,976 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 15,413,390 | 15,413,390 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 7,181,349 | 7,181,349 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $99,403,946) | 99,403,946 | |||||||
| SECURITIES LENDING COLLATERAL††,3 - 0.4% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,447,837 | 1,447,837 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 1,291,915 | 1,291,915 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 243,548 | 243,548 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $2,983,300) | 2,983,300 | |||||||
| Total Investments - 105.7% | ||||||||
| (Cost $404,563,490) | $ | 750,420,405 | ||||||
| Other Assets & Liabilities, net - (5.7)% | (40,145,094 | ) | ||||||
| Total Net Assets - 100.0% | $ | 710,275,311 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (loss) | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 NASDAQ-100 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $7,314,930) | 102 | $ | (51,835 | ) | ||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Barclays Bank plc | ||||||||
| April 2014 NASDAQ-100 Index Swap, | ||||||||
| Terminating 04/30/144 | ||||||||
| (Notional Value $30,143,601) | 8,383 | $ | 209,025 | |||||
| Goldman Sachs International | ||||||||
| April 2014 NASDAQ-100 Index Swap, | ||||||||
| Terminating 04/29/144 | ||||||||
| (Notional Value $7,455,352) | 2,073 | 31,922 | ||||||
| Credit Suisse Capital, LLC | ||||||||
| April 2014 NASDAQ-100 Index Swap, | ||||||||
| Terminating 04/28/144 | ||||||||
| (Notional Value $18,683,335) | 5,196 | (173,983 | ) | |||||
| (Total Notional Value | ||||||||
| $56,282,288) | $ | 66,964 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 2 | Repurchase Agreements — See Note 5. |
| 3 | Securities lending collateral — See Note 10. |
| 4 | Total Return based on NASDAQ-100 Index +/- financing at a variable rate. ADR — American Depositary Receipt plc — Public Limited Company |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 11 |
| NASDAQ-100® FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
March 31, 2014
| ||||
Assets: | ||||
| Investments, at value - including $2,883,320 of securities loaned | ||||
| (cost $302,176,244) | $ | 648,033,159 | ||
| Repurchase agreements, at value | ||||
| (cost $102,387,246) | 102,387,246 | |||
| Total investments | ||||
| (cost $404,563,490) | 750,420,405 | |||
| Segregated cash with broker | 14,803,742 | |||
| Unrealized appreciation on swap agreements | 240,947 | |||
| Receivables: | ||||
| Fund shares sold | 932,936 | |||
| Dividends | 254,065 | |||
| Swap settlement | 179,337 | |||
| Variation margin | 46,410 | |||
| Foreign taxes reclaim | 2,685 | |||
| Securities lending income | 1,444 | |||
| Interest | 65 | |||
| Total assets | 766,882,036 | |||
Liabilities: | ||||
| Unrealized depreciation on swap agreements | 173,983 | |||
| Payable for: | ||||
| Securities purchased | 49,954,928 | |||
| Upon return of securities loaned | 2,983,300 | |||
| Fund shares redeemed | 2,301,072 | |||
| Management fees | 434,943 | |||
| Transfer agent and administrative fees | 144,981 | |||
| Portfolio accounting fees | 43,889 | |||
| Distribution and service fees | 33,065 | |||
| Miscellaneous | 536,564 | |||
| Total liabilities | 56,606,725 | |||
Net assets | $ | 710,275,311 | ||
Net assets consist of: | ||||
| Paid in capital | $ | 370,405,630 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (6,002,363 | ) | ||
| Net unrealized appreciation on investments | 345,872,044 | |||
| Net assets | $ | 710,275,311 | ||
Investor Class: | ||||
| Net assets | $ | 632,597,953 | ||
| Capital shares outstanding | 29,590,658 | |||
| Net asset value per share | $ | 21.38 | ||
Advisor Class: | ||||
| Net assets | $ | 36,751,382 | ||
| Capital shares outstanding | 1,879,735 | |||
| Net asset value per share | $ | 19.55 | ||
A-Class: | ||||
| Net assets | $ | 21,751,458 | ||
| Capital shares outstanding | 1,082,169 | |||
| Net asset value per share | $ | 20.10 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 21.10 | ||
C-Class: | ||||
| Net assets | $ | 19,174,518 | ||
| Capital shares outstanding | 1,040,722 | |||
| Net asset value per share | $ | 18.42 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
Year Ended March 31, 2014
| ||||
Investment Income: | ||||
| Dividends (net of foreign withholding tax of $2,890) | $ | 8,760,027 | ||
| Income from securities lending, net | 37,161 | |||
| Interest | 9,168 | |||
| Total investment income | 8,806,356 | |||
Expenses: | ||||
| Management fees | 4,668,452 | |||
| Transfer agent and administrative fees | 1,556,150 | |||
| Distribution and service fees: | ||||
| Advisor Class | 227,230 | |||
| A-Class | 53,887 | |||
| C-Class | 149,560 | |||
| Portfolio accounting fees | 498,189 | |||
| Custodian fees | 69,182 | |||
| Trustees’ fees* | 63,835 | |||
| Line of credit interest expense | 105 | |||
| Miscellaneous | 1,161,558 | |||
| Total expenses | 8,448,148 | |||
| Net investment income | 358,208 | |||
Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 76,751,130 | |||
| Swap agreements | 11,357,991 | |||
| Futures contracts | 6,794,515 | |||
| Net realized gain | 94,903,636 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 67,853,604 | |||
| Swap agreements | (5,285 | ) | ||
| Futures contracts | (53,648 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | 67,794,671 | |||
| Net realized and unrealized gain | 162,698,307 | |||
| Net increase in net assets resulting from operations | $ | 163,056,515 | ||
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 12 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| NASDAQ-100® FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 358,208 | $ | 460,302 | ||||
| Net realized gain on investments | 94,903,636 | 111,630,461 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 67,794,671 | (110,322,128 | ) | |||||
| Net increase in net assets resulting from operations | 163,056,515 | 1,768,635 | ||||||
Distributions to shareholders from: | ||||||||
| Net realized gains | ||||||||
| Investor Class | (52,374,827 | ) | — | |||||
| Advisor Class | (3,185,736 | ) | — | |||||
| A-Class | (2,215,102 | ) | — | |||||
| C-Class | (1,712,829 | ) | — | |||||
| Total distributions to shareholders | (59,488,494 | ) | — | |||||
Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 797,805,960 | 1,477,916,448 | ||||||
| Advisor Class | 747,398,780 | 480,871,589 | ||||||
| A-Class | 65,905,567 | 68,152,115 | ||||||
| C-Class | 26,628,147 | 29,758,316 | ||||||
| Distributions reinvested | ||||||||
| Investor Class | 46,546,535 | — | ||||||
| Advisor Class | 3,164,981 | — | ||||||
| A-Class | 2,113,562 | — | ||||||
| C-Class | 1,686,286 | — | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (743,050,821 | ) | (1,792,700,742 | ) | ||||
| Advisor Class | (761,022,258 | ) | (526,907,940 | ) | ||||
| A-Class | (71,718,486 | ) | (58,126,520 | ) | ||||
| C-Class | (23,621,291 | ) | (32,187,854 | ) | ||||
| Net increase (decrease) from capital share transactions | 91,836,962 | (353,224,588 | ) | |||||
| Net increase (decrease) in net assets | 195,404,983 | (351,455,953 | ) | |||||
Net assets: | ||||||||
| Beginning of year | 514,870,328 | 866,326,281 | ||||||
| End of year | $ | 710,275,311 | $ | 514,870,328 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | — | $ | (525,244 | ) | |||
Capital share activity: | ||||||||
| Shares sold | ||||||||
| Investor Class | 38,652,000 | 83,557,992 | ||||||
| Advisor Class | 40,432,732 | 29,677,623 | ||||||
| A-Class | 3,476,725 | 4,019,789 | ||||||
| C-Class | 1,472,390 | 1,929,154 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| Investor Class | 2,248,625 | — | ||||||
| Advisor Class | 166,841 | — | ||||||
| A-Class | 108,499 | — | ||||||
| C-Class | 94,206 | — | ||||||
| Shares redeemed | ||||||||
| Investor Class | (36,409,149 | ) | (101,458,207 | ) | ||||
| Advisor Class | (39,713,114 | ) | (32,634,043 | ) | ||||
| A-Class | (3,861,027 | ) | (3,516,436 | ) | ||||
| C-Class | (1,328,165 | ) | (2,076,951 | ) | ||||
| Net increase (decrease) in shares | 5,340,563 | (20,501,079 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
| 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 18.38 | $ | 17.92 | $ | 15.23 | $ | 12.83 | $ | 8.15 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .02 | .02 | (.05 | ) | (.07 | ) | (.07 | ) | ||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 5.01 | .44 | 2.74 | 2.47 | 4.75 | |||||||||||||||
| Total from investment operations | 5.03 | .46 | 2.69 | 2.40 | 4.68 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (2.03 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (2.03 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 21.38 | $ | 18.38 | $ | 17.92 | $ | 15.23 | $ | 12.83 | ||||||||||
| Total Returnb | 27.74 | % | 2.57 | % | 17.66 | % | 18.71 | % | 57.42 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 632,598 | $ | 461,269 | $ | 770,626 | $ | 579,925 | $ | 571,761 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.10 | % | 0.13 | % | (0.34 | %) | (0.50 | %) | (0.63 | %) | ||||||||||
| Total expenses | 1.29 | % | 1.26 | % | 1.27 | % | 1.31 | % | 1.30 | % | ||||||||||
| Portfolio turnover rate | 141 | % | 94 | % | 94 | % | 39 | % | 34 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.04 | $ | 16.70 | $ | 14.27 | $ | 12.09 | $ | 7.72 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.01 | ) | (.08 | ) | (.13 | ) | (.12 | ) | (.12 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.55 | .42 | 2.56 | 2.30 | 4.49 | |||||||||||||||
| Total from investment operations | 4.54 | .34 | 2.43 | 2.18 | 4.37 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (2.03 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (2.03 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 19.55 | $ | 17.04 | $ | 16.70 | $ | 14.27 | $ | 12.09 | ||||||||||
| Total Returnb | 27.02 | % | 2.04 | % | 17.03 | % | 18.03 | % | 56.61 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 36,751 | $ | 16,930 | $ | 65,970 | $ | 120,277 | $ | 17,859 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.05 | %) | (0.51 | %) | (0.87 | %) | (1.00 | %) | (1.13 | %) | ||||||||||
| Total expenses | 1.79 | % | 1.75 | % | 1.76 | % | 1.80 | % | 1.80 | % | ||||||||||
| Portfolio turnover rate | 141 | % | 94 | % | 94 | % | 39 | % | 34 | % | ||||||||||
| 14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| NASDAQ-100® FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.42 | $ | 17.03 | $ | 14.52 | $ | 12.27 | $ | 7.82 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.03 | ) | (.02 | ) | (.09 | ) | (.11 | ) | (.09 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.74 | .41 | 2.60 | 2.36 | 4.54 | |||||||||||||||
| Total from investment operations | 4.71 | .39 | 2.51 | 2.25 | 4.45 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (2.03 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (2.03 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 20.10 | $ | 17.42 | $ | 17.03 | $ | 14.52 | $ | 12.27 | ||||||||||
| Total Returnb | 27.42 | % | 2.29 | % | 17.29 | % | 18.34 | % | 56.91 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 21,751 | $ | 23,656 | $ | 14,553 | $ | 19,806 | $ | 15,128 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.14 | %) | (0.09 | %) | (0.61 | %) | (0.81 | %) | (0.86 | %) | ||||||||||
| Total expenses | 1.54 | % | 1.52 | % | 1.53 | % | 1.56 | % | 1.55 | % | ||||||||||
| Portfolio turnover rate | 141 | % | 94 | % | 94 | % | 39 | % | 34 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 16.22 | $ | 15.97 | $ | 13.72 | $ | 11.67 | $ | 7.49 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.16 | ) | (.13 | ) | (.19 | ) | (.19 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.39 | .38 | 2.44 | 2.24 | 4.34 | |||||||||||||||
| Total from investment operations | 4.23 | .25 | 2.25 | 2.05 | 4.18 | |||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net realized gains | (2.03 | ) | — | — | — | — | ||||||||||||||
| Total distributions | (2.03 | ) | — | — | — | — | ||||||||||||||
| Net asset value, end of period | $ | 18.42 | $ | 16.22 | $ | 15.97 | $ | 13.72 | $ | 11.67 | ||||||||||
| Total Returnb | 26.46 | % | 1.57 | % | 16.40 | % | 17.57 | % | (55.81 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 19,175 | $ | 13,015 | $ | 15,177 | $ | 11,864 | $ | 12,216 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.89 | %) | (0.84 | %) | (1.35 | %) | (1.52 | %) | (1.63 | %) | ||||||||||
| Total expenses | 2.29 | % | 2.26 | % | 2.27 | % | 2.31 | % | 2.30 | % | ||||||||||
| Portfolio turnover rate | 141 | % | 94 | % | 94 | % | 39 | % | 34 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 15 |
| NOTES TO FINANCIAL STATEMENTS |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers the NASDAQ-100® Fund (the “Fund”), while the other funds are contained in separate reports. Only A-Class, C-Class, Advisor Class and Investor Class shares had been issued by the Fund.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Fund’s securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Fund and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date.
Repurchase agreements are valued at amortized cost, which approximates market value.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
The value of swap agreements entered into by the Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s market value is then adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreements.
16 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts and options thereupon, and other derivative investments, 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; and (iii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis.
C. Distributions of net investment income and distributions of net realized gains, if any, are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
D. Upon entering into a futures contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
E. Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses.
F. The Fund may leave cash overnight in its cash account with the custodian, U.S. Bank. Periodically, the 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.
Segregated cash with the broker is held as collateral for investments in derivative instruments such as futures contracts or swap agreements.
G. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution fees relating to A-Class shares and service and distribution fees related to Advisor Class shares and C-Class shares, are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.
H. Throughout the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
2. Financial Instruments
As part of its investment strategy, the Fund utilizes a variety of derivative instruments including futures and swap agreements. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statement of Assets and Liabilities.
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.
THE RYDEX FUNDS ANNUAL REPORT | 17
| NOTES TO FINANCIAL STATEMENTS (continued) |
There are significant risks associated with a Fund’s use of futures contracts and related options, 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 the 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 restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund 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. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
As investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, this creates an opportunity for increased net income but, at the same time, leverage risk. 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 it had not been leveraged.
In conjunction with the use of futures and swap agreements, the Fund is required to maintain collateral in various forms. The Fund uses, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or the repurchase agreements allocated to each Fund.
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.
3. Fees and Other Transactions with Affiliates
Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Fund.
| Management Fees | |
| Fund | (as a % of Net Assets) |
| NASDAQ-100® Fund | 0.75% |
RFS provides transfer agent and administrative services to the Fund calculated at an annual percentage rate of 0.25% of the average daily net assets of the Fund.
RFS also provides accounting services to the Fund for fees calculated at annualized rates below, based on the average daily net assets of the Fund.
| Fund Accounting Fees | (as a % of net assets) |
| On the first $250 million | 0.10% |
| On the next $250 million | 0.075% |
| On the next $250 million | 0.05% |
| Over $750 million | 0.03% |
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution and Shareholder Services Plan applicable to its Advisor Class shares and a Distribution Plan applicable to A-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Fund will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services. With regard to Advisor Class shares only, if a Service Provider provides shareholder services, GFD will receive shareholder servicing fees from the Fund at an annual rate not to exceed 0.25% of average daily net assets.
18 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
GFD, in turn, will compensate Service Providers for providing such services, while retaining a portion of such payments to compensate itself for shareholder services it performs.
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Fund to pay annual distribution and service fees of 1.00% of the Fund’s C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2014, GFD retained sales charges of $333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
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 following table summarizes the inputs used to value the Fund’s net assets at March 31, 2014:
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| NASDAQ-100® Fund | $ | 648,033,159 | $ | — | $ | 102,387,246 | $ | 240,947 | $ | — | $ | 750,661,352 | ||||||||||||
| Liabilities | ||||||||||||||||||||||||
| NASDAQ-100® Fund | $ | — | $ | 51,835 | $ | — | $ | 173,983 | $ | — | $ | 225,818 | ||||||||||||
* Other financial instruments may include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end.
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.
For the year ended March 31, 2014, there were no transfers between levels.
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 U.S. Government Agencies. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds,
THE RYDEX FUNDS ANNUAL REPORT | 19
| NOTES TO FINANCIAL STATEMENTS (continued) |
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 March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and | ||||||||||||||||||
| Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| HSBC Group | U.S. Treasury Strips | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 519,000,000 | $ | 519,000,144 | 11/15/39 - 05/15/40 | $ | 1,347,115,400 | $ | 529,380,006 | |||||||||
| RBC Capital Markets | U.S. TIP Notes | |||||||||||||||||
| 0.02% | 0.13% - 2.50% | |||||||||||||||||
| Due 04/01/14 | 219,000,000 | 219,000,091 | 07/15/16 - 07/15/22 | 156,009,700 | 175,640,035 | |||||||||||||
| U.S. Treasury Strips | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 11/15/26 - 02/15/36 | 81,000,000 | 47,740,000 | ||||||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Notes | |||||||||||||||||
| 0.01% | 1.25% - 7.88% | |||||||||||||||||
| Due 04/01/14 | 148,095,295 | 148,095,336 | 08/15/15 - 02/15/21 | 137,725,900 | 151,057,202 | |||||||||||||
| Deutsche Bank | U.S. Treasury Note | |||||||||||||||||
| 0.02% | 0.88% | |||||||||||||||||
| Due 04/01/14 | 69,000,000 | 69,000,038 | 09/15/16 | 70,039,600 | 70,380,047 |
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the 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 Fund utilized derivatives for the following purposes:
| Fund | Index Exposure | Liquidity | ||||||
| NASDAQ-100® Fund | x | x |
The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Fund’s net assets on a daily basis.
| Approximate percentage of Fund’s | ||||||||
| net assets on a daily basis | ||||||||
| Fund | Long | Short | ||||||
| NASDAQ-100® Fund | 10 | % | — | |||||
The following is a summary of the location of derivative investments on the Fund’s Statement of Assets and Liabilities as of March 31, 2014:
20 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
| Derivative Investment Type | Asset Derivatives | Liability Derivatives | ||
| Equity contracts | Variation margin | |||
| Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Fund’s derivative investments categorized by primary risk exposure at March 31, 2014:
Asset Derivative Investments Value
| Futures | Swaps | Total Value at | ||||||||||
| Equity | Equity | March 31, | ||||||||||
| Fund | Contracts* | Contracts | 2014 | |||||||||
| NASDAQ-100® Fund | $ | — | $ | 240,947 | $ | 240,947 | ||||||
| Liability Derivative Investments Value | ||||||||||||
| Futures | Swaps | Total Value at | ||||||||||
| Equity | Equity | March 31, | ||||||||||
| Fund | Contracts* | Contracts | 2014 | |||||||||
| NASDAQ-100® Fund | $ | 51,835 | $ | 173,983 | $ | 225,818 | ||||||
* Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
The following is a summary of the location of derivative investments on the Fund’s Statement of Operations for the year ended March 31, 2014:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives |
| Equity contracts | Net realized gain (loss) on swap agreements |
| Net realized gain (loss) on futures contracts | |
| Net change in unrealized appreciation (depreciation) on swap agreements | |
| Net change in unrealized appreciation (depreciation) on futures contracts |
The following is a summary of the Fund’s realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statement of Operations categorized by primary risk exposure for the year ended March 31, 2014:
Realized Gain (Loss) on Derivative Investments Recognized on the Statement of Operations
| Futures | Swaps | |||||||||||
| Equity | Equity | |||||||||||
| Fund | Contracts | Contracts | Total | |||||||||
| NASDAQ-100® Fund | $ | 6,794,515 | $ | 11,357,991 | $ | 18,152,506 | ||||||
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statement of Operations
| Futures | Swaps | |||||||||||
| Equity | Equity | |||||||||||
| Fund | Contracts | Contracts | Total | |||||||||
| NASDAQ-100® Fund | $ | (53,648 | ) | $ | (5,285 | ) | $ | (58,933 | ) | |||
7. Federal Income Tax Information
The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Fund’s 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 Fund’s tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
THE RYDEX FUNDS ANNUAL REPORT | 21
| NOTES TO FINANCIAL STATEMENTS (continued) |
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| NASDAQ-100® Fund | $ | — |
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| NASDAQ-100® Fund | $ | — | $ | 59,488,494 | $ | 59,488,494 | ||||||
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| NASDAQ-100® Fund | $ | — | $ | — | $ | — |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | (Depreciation) | Carryforward | ||||||||||||
| NASDAQ-100® Fund | $ | 13,825,128 | $ | — | $ | 326,044,553 | $ | — | ||||||||
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 typically due to wash sales, mark-to-market on futures contracts, and utilization of earnings and profits on shareholder redemptions. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on the net assets or NAV per share.
On the Statement of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| NASDAQ-100® Fund | $ | 78,162,924 | $ | 167,036 | $ | (78,329,960 | ) | |||||
22 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| NASDAQ-100® Fund | $ | 424,442,816 | $ | 330,167,058 | $ | (4,189,469 | ) | $ | 325,977,589 | |||||||
8. Securities Transactions
For the year ended March 31, 2014, 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 | ||||||
| NASDAQ-100® Fund | $ | 829,059,577 | $ | 812,547,756 | ||||
9. 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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Fund did not have any other borrowings under this agreement at March 31, 2014.
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Amount | |||
| NASDAQ-100® Fund | $ | 8,312 | ||
10. Portfolio Securities Loaned
The Fund may lend its securities to approved brokers to earn additional income. Security lending income shown on the Statement of Operations is shown net of rebates paid to the borrowers and earnings on cash collateral investments shared with the lending agent. Within this arrangement, the Fund acts as the lender, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Fund receives cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Fund’s securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies and cash. The Fund bears the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Fund the next business day. Although the collateral mitigates the risk, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
THE RYDEX FUNDS ANNUAL REPORT | 23
| NOTES TO FINANCIAL STATEMENTS (continued) |
At March 31, 2014, the Fund participated in securities lending as follows:
| Cash | ||||||||
| Value of | Collateral | |||||||
| Fund | Securities Loaned | Received | ||||||
| NASDAQ-100® Fund | $ | 2,883,320 | $ | 2,983,300 | ||||
Cash collateral received was invested in the following joint repurchase agreements at March 31, 2014:
| Counterparty and | ||||||||||||||||||
| Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| BNP Paribas Securities Corp. | U.S. TIP Bond | |||||||||||||||||
| 0.05% | 0.75% | |||||||||||||||||
| Due 04/01/14 | $ | 1,447,837 | $ | 1,447,838 | 02/15/42 | $ | 1,629,404 | $ | 1,476,753 | |||||||||
| HSBC Securities, Inc. | Fannie Mae Strips | |||||||||||||||||
| 0.05% | 0.00% | |||||||||||||||||
| Due 04/01/14 | 1,291,915 | 1,291,917 | 07/15/14 - 01/15/30 | 1,630,084 | 1,317,718 | |||||||||||||
| Deutsche Bank Securities, Inc. | U.S. Treasury Note/Bond | |||||||||||||||||
| 0.05% - 0.08% | 1.75% - 8.75% | |||||||||||||||||
| Due 04/01/14 | 243,548 | 243,549 | 05/15/17 - 05/15/23 | 235,004 | 225,696 | |||||||||||||
| Fannie Mae Strip | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 05/15/30 | 43,746 | 22,728 | ||||||||||||||||
11. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds 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 the Tribune Company 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 Series Funds, 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 Series Funds 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 law-suits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
24 | THE RYDEX FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168 U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
12. 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 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
THE RYDEX FUNDS ANNUAL REPORT | 25
| NOTES TO FINANCIAL STATEMENTS (concluded) |
been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statement of Assets and Liabilities in conformity with U.S. GAAP.
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statement of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of Assets | ||||||||||||||||||||||||||
| Gross Amounts Offset | Presented on the | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statement of | Statement of Assets | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Assets1 | Assets and Liabilities | and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| NASDAQ-100® Fund | Swap equity contracts | $ | 240,947 | $ | — | $ | 240,947 | $— | $— | $ | 240,947 | |||||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statement of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of | ||||||||||||||||||||||||||
| Gross Amounts Offset | Liabilities Presented | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statement of | on the Statement of | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Liabilities1 | Assets and Liabilities | Assets and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| NASDAQ-100® Fund | Swap equity contracts | $ | 173,983 | $ | — | $ | 173,983 | $ | — | $ | — | $ | 173,983 | |||||||||||||
| 1 | Exchange traded futures are excluded from these reported amounts. |
| 2 | Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as Segregated cash with broker on the Statement of Assets and Liabilities. |
26 | THE RYDEX FUNDS ANNUAL REPORT
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of NASDAQ-100® Fund (one of the series constituting the Rydex Series Funds) (the “Fund”) as of March 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of NASDAQ-100® Fund, a series of the Rydex Series Funds, at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
 | |
| McLean, Virginia | |
| May 22, 2014 |
THE RYDEX FUNDS ANNUAL REPORT | 27
| OTHER INFORMATION (Unaudited) |
Tax Information
This information is being provided as required by the Internal Revenue Code (IRC). Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
With respect to the taxable year ended March 31, 2014, the Fund hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
| NASDAQ-100® Fund | ||||
| From long-term capital gains, subject to the 15% rate gains category: | $ | 59,488,494 | ||
| From long-term capital gains, using proceeds from shareholder redemptions: | 50,928,053 | |||
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.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
28 | 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 calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEE
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Donald C. Cacciapaglia* (1951) | Trustee from 2012 to present. | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present).
Former: Chairman and Chief Executive Officer, Channel Capital Group, Inc. (2002–2010). | 214 | Delaware Life (2013–present); Guggenheim Life and Annuity Company (2011–present); Paragon Life Insurance Company of Indiana (2011–present). |
INDEPENDENT TRUSTEES
| Corey A. Colehour (1945) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Retired. | 131 | None. | ||||
| J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Governance and Nominating Committees from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | Trustee of Epiphany Funds (4) (2009–present). | ||||
| John O. Demaret (1940) | Trustee from 1998 to present and Chairman of the Board from 2006 to present; Member and Chairman of the Audit Committee from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | None. |
THE RYDEX FUNDS ANNUAL REPORT | 29
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
INDEPENDENT TRUSTEES - concluded
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Werner E. Keller (1940) | Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005–present). | 131 | None. | ||||
| Thomas F. Lydon, Jr. (1960) | Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present. | Current: President, Global Trends Investments (registered investment adviser) (1996–present). | 131 | Board of Directors of US Global Investors (GROW) (1995–present). | ||||
| Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Chairman and Member of the Governance and Nominating Committees from 1998 to present. | Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977–2010). | 131 | None. | ||||
| Roger Somers (1944) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Current: Founder and Chief Executive Officer, Arrow Limousine (1962–present). | 131 | None. |
OFFICERS
| Name, Address | Position(s) Held with | |||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | ||
| Birth of Officer | Length of Time Served | During Past 5 Years | ||
| Donald C. Cacciapaglia (1951) | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present).
Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. (2002–2010). | ||
| Michael P. Byrum (1970) | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010–present); President and Chief Investment Officer, Rydex Holdings, LLC (2008–present); Director and Chairman, Advisory Research Center, Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC (2005–present).
Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009–2010) and Secretary (2002–2010), Rydex Fund Services, LLC; Director (2008–2010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors, LLC; Director (2008–2010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors II, LLC. |
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
30 | THE RYDEX FUNDS ANNUAL REPORT
| INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
OFFICERS - concluded
| Name, Address | Position(s) Held with | |||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | ||
| Birth of Officer | Length of Time Served | During Past 5 Years | ||
| Nikolaos Bonos (1963) | Vice President and Treasurer (2003–present). | Current: Treasurer and Vice President, certain other funds in the Fund Complex (2003–present); Senior Vice President, Security Investors, LLC (2010–present); Chief Executive Officer, Guggenheim Specialized Products, LLC (2009–present); President and Chief Executive Officer, Rydex Fund Services, LLC (2009–present); Vice President, Rydex Holdings, LLC (2008–present).
Former: Senior Vice President, Security Global Investors, LLC (2010–2011); Senior Vice President, Rydex Advisors, LLC (2006–2011); Senior Vice President, Rydex Advisors II, LLC (2006–2011). | ||
| Elisabeth Miller (1968) | Chief Compliance Officer (2012–present). | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012–present); Chief Compliance Officer, Security Investors, LLC (2012–present); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012–present); Vice President, Guggenheim Funds Distributors, LLC (2014–present).
Former: Chief Compliance Officer, Guggenheim Distributors, LLC (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); Senior Manager, Guggenheim Distributors, LLC (2004–2009). | ||
| Joseph M. Arruda (1966) | Assistant Treasurer (2006–present). | Current: Assistant Treasurer, certain other funds in the Fund Complex (2006–present); Vice President, Security Investors, LLC (2010–present); Chief Financial Officer and Manager, Guggenheim Specialized Products, LLC (2009–present).
Former: Vice President, Security Global Investors, LLC (2010–2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010). | ||
| Amy J. Lee (1961) | Vice President (2009–present) and Secretary (2012–present). | Current: Chief Legal Officer, certain other funds in the Fund Complex (2013–present); Senior Managing Director, Guggenheim Investments (2012–present).
Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004–2012). |
THE RYDEX FUNDS ANNUAL REPORT | 31
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) |
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments. com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
32 | THE RYDEX FUNDS ANNUAL REPORT
| GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)(concluded) |
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
THE RYDEX FUNDS ANNUAL REPORT | 33
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3.31.2014
Rydex Funds Annual Report
Fixed Income Fund
Inverse Government Long Bond Strategy Fund
| RJUNF-ANN-2-0314x0315 | guggenheiminvestments.com |
Go Green! Eliminate Mailbox Clutter
Go paperless with Guggenheim Investments eDelivery—a service giving you full online access to account information and documents. Save time, cut down on mailbox clutter and be a friend to the environment with eDelivery.
With Guggenheim Investments eDelivery you can:
| · | View online confirmations and statements at your convenience. |
| · | Receive email notifications when your most recent confirmations, statements and other account documents are available for review. |
| · | Access prospectuses, annual reports and semiannual reports online. |
If you have questions about Guggenheim Investments eDelivery service, contact one of our Shareholder Service Representatives at 800.820.0888.
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604
TABLE OF CONTENTS
| THE RYDEX FUNDS ANNUAL REPORT | 1 |
March 31, 2014
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for one of our Funds (the “Fund”) that is part of the Rydex Funds. This report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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 the Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Donald C. Cacciapaglia
President
April 30, 2014
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.
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.
The Fixed Income Funds may not be suitable for all investors. • Fixed income investments are subject to credit, liquidity, interest rate and, depending on the instrument, counterparty risk. • These risks may be increased to the extent fixed income investments are concentrated in any one issuer, industry, region or country. • The market value of fixed income investments generally will fluctuate with, among other things, the financial condition of the obligors on the underlying debt obligations, general economic conditions, the condition of certain financial markets, political events, developments or trends in any particular industry and changes in prevailing interest rates. • In general, any interest rate increases can cause the price of a debt security to decrease and vice versa.
| 2 | THE RYDEX FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
| THE RYDEX FUNDS ANNUAL REPORT | 3 |
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
Barclays Long Treasury Bond 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 non convertible. The Long U.S. Treasury Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
| 4 | THE RYDEX FUNDS ANNUAL REPORT |
A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited)
The Inverse Government Long Bond Strategy Fund described in this report is benchmarked daily to an inverse leveraged version of a published index. To properly evaluate the performance of this fund, it is essential to understand the effect of mathematical compounding on its respective return.
Because of the nonlinear effects of leverage applied over time, it is possible for a fund to perform in line with its benchmark for several individual periods in a row, yet seem to trail the benchmark over the entire period. It is also possible that a fund that performs in-line with its benchmark on a daily basis may seem to outperform its benchmark over longer periods.
An Example of Compounding
For example, consider a hypothetical fund that is designed to produce returns that correspond to 150% of an index. On the first day of a period, the index rises from a level of 100 to a level of 106, producing a 6.0% 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 | |||||||||||||||||||||
| Level | Performance | Expectation | Fund NAV | Performance | Assessment | |||||||||||||||||||
| Start | 100 | $ | 10.00 | |||||||||||||||||||||
| Day 1 | 106 | 6.0 | % | 9.0 | % | $ | 10.90 | 9.0 | % | In line | ||||||||||||||
| Day 2 | 99 | -6.6 | % | -9.9 | % | $ | 9.82 | -9.9 | % | In line | ||||||||||||||
| Cumulative | -1.0 | % | -1.5 | % | -1.8 | % | -0.3 | % | ||||||||||||||||
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
| 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, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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.
| 6 | THE RYDEX FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded)
| Beginning | Ending | Expenses | |||||||||
| Expense | Fund | Account Value | Account Value | Paid During | |||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | |||||||
| Table 1. Based on actual Fund return3 | |||||||||||
| Inverse Government Long Bond Strategy Fund | |||||||||||
| Investor Class | 3.86% | (5.13%) | $1,000.00 | $948.70 | $18.75 | ||||||
| Advisor Class | 4.28% | (5.04%) | 1,000.00 | 949.60 | 20.80 | ||||||
| A-Class | 4.11% | (5.24%) | 1,000.00 | 947.60 | 19.96 | ||||||
| C-Class | 4.86% | (5.61%) | 1,000.00 | 943.90 | 23.55 | ||||||
| Table 2. Based on hypothetical 5% return (before expenses) | |||||||||||
| Inverse Government Long Bond Strategy Fund | |||||||||||
| Investor Class | 3.86% | 5.00% | $1,000.00 | $1,005.68 | $19.30 | ||||||
| Advisor Class | 4.28% | 5.00% | 1,000.00 | 1,003.59 | 21.38 | ||||||
| A-Class | 4.11% | 5.00% | 1,000.00 | 1,004.44 | 20.54 | ||||||
| C-Class | 4.86% | 5.00% | 1,000.00 | 1,000.70 | 24.24 |
| 1 | This ratio represents annualized Net Expenses, which include interest expense related to securities sold short. Excluding short interest expense, the operating expense ratio of the Inverse Government Long Bond Strategy Fund would be 1.41%, 1.91%, 1.66% and 2.41% for the Investor Class, Advisor Class, A-Class and C-Class, respectively. |
| 2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
| THE RYDEX FUNDS ANNUAL REPORT | 7 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
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 March 31, 2014, the Inverse Government Long Bond Strategy Fund Investor Class returned 4.69%. The price movement of the Long Treasury Bond was 1.00% for the same period. The Fund maintained a daily correlation of over 99% to its benchmark. The return of a comparison index, the Barclays Long Treasury Bond Index, was -4.18%.
At the beginning of the period, the yield on the 30-year bond was 3.10%, rose to a high of 3.97% at December 31, 2013, before sliding to 3.72% at March 31, 2014.
Yields remained range-bound for April of 2013, supported by Federal Reserve policy, strong demand and low inflation.
The market changed abruptly in May, however, when the then-Federal Reserve chairman Ben Bernanke announced that the Fed might soon taper its quantitative easing policy. Investors rushed immediately to take profits and the long bond yield began to climb. Signs of a strengthening economy and recovery in the housing market pushed the 30-year yield higher during the summer until September, when the Fed did an about face and stated that it would not cut its stimulus policy for the time being.
Lower yields prevailed through September and October, but were short-lived. Signs of improving growth made the taper program more likely and the market pushed the 30-year bond yield higher in November and December. As anticipated, the Fed finally came through with a certain plan to begin its taper program. The combination of Fed news and increasingly strong economic reports drove yields higher.
In the first quarter of 2014, inclement U.S. weather caused weaker-than-expected economic data. At the same time, emerging-market volatility driven by reactions to the Fed’s tapering drove investors back to U.S. Treasuries, with the long bond yield ending the period at 3.72%.
Derivatives in the Fund are used to help provide exposure to the composition of the benchmark in the highest efficient manner and not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
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 5 of this report.
Performance displayed represents past performance, which is no guarantee of future results.
| 8 | THE RYDEX FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| Investor Class | March 3, 1995 |
| Advisor Class | August 1, 2003 |
| A-Class | March 31, 2004 |
| C-Class | March 28, 2001 |
The Fund invests principally in short sales and derivative investments such as futures contracts.
Cumulative Fund Performance*
| Average Annual Returns* | ||||||||||||
| Periods Ended March 31, 2014 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Investor Class Shares | 4.69 | % | -7.13 | % | -6.72 | % | ||||||
| Advisor Class Shares | 4.87 | % | -7.55 | % | -7.15 | % | ||||||
| A-Class Shares | 4.51 | % | -7.37 | % | -6.95 | % | ||||||
| A-Class Shares with sales charge† | -0.49 | % | -8.26 | % | -7.40 | % | ||||||
| C-Class Shares | 3.73 | % | -8.05 | % | -7.64 | % | ||||||
| C-Class Shares with CDSC‡ | 2.73 | % | -8.05 | % | -7.64 | % | ||||||
| Daily Price Movement of Long Treasury Bond** | 1.00 | % | 0.42 | % | -0.74 | % | ||||||
| Barclays Long Treasury Bond Index | -4.18 | % | 4.81 | % | 6.12 | % | ||||||
| * | 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 Barclays Long Treasury Bond Index and Daily Price Movement of Long Treasury Bond are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on Investor Class shares and A-Class shares only; performance for Advisor Class shares and C-Class shares will vary due to differences in fee structures. |
| ** | Does not reflect any interest. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE RYDEX FUNDS ANNUAL REPORT | 9 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE GOVERNMENT LONG BOND STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| FEDERAL AGENCY DISCOUNT NOTES†† - 94.3% | ||||||||
| Farmer Mac1 | ||||||||
| 0.01% due 04/01/14 | $ | 100,000,000 | $ | 100,000,000 | ||||
| 0.09% due 07/25/14 | 30,000,000 | 29,996,160 | ||||||
| 0.10% due 04/01/14 | 15,000,000 | 15,000,000 | ||||||
| 0.16% due 09/23/14 | 15,000,000 | 14,996,355 | ||||||
| 0.10% due 10/27/14 | 15,000,000 | 14,994,780 | ||||||
| 0.10% due 04/25/14 | 9,491,000 | 9,490,810 | ||||||
| Total Farmer Mac | 184,478,105 | |||||||
| Freddie Mac2 | ||||||||
| 0.11% due 06/10/14 | 15,000,000 | 14,999,130 | ||||||
| 0.09% due 10/29/14 | 15,000,000 | 14,994,720 | ||||||
| 0.10% due 10/29/14 | 15,000,000 | 14,994,720 | ||||||
| 0.13% due 06/25/14 | 10,000,000 | 9,999,290 | ||||||
| Total Freddie Mac | 54,987,860 | |||||||
| Federal Farm Credit Bank1 | ||||||||
| 0.16% due 06/10/14 | 15,000,000 | 14,999,130 | ||||||
| 0.10% due 06/27/14 | 10,000,000 | 9,999,270 | ||||||
| Total Federal Farm Credit Bank | 24,998,400 | |||||||
| Federal Home Loan Bank1 | ||||||||
| 0.10% due 04/25/14 | 10,000,000 | 9,999,800 | ||||||
| 0.19% due 04/09/14 | 10,000,000 | 9,999,578 | ||||||
| Total Federal Home Loan Bank | 19,999,378 | |||||||
| Total Federal Agency Discount Notes | ||||||||
| (Cost $284,430,507) | 284,463,743 | |||||||
| REPURCHASE AGREEMENTS†† - 110.5% | ||||||||
| Individual Repurchase Agreement3 | ||||||||
| Barclays Capital issued 03/31/14 | ||||||||
| at 0.01% due 04/01/14 | ||||||||
| (secured by U.S. Treasury Bond, | ||||||||
| at a rate of 3.63% and | ||||||||
| maturing 02/15/44 as collateral, | ||||||||
| with a value of $197,612,380) | ||||||||
| to be repurchased at $193,737,681 | 193,737,627 | 193,737,627 | ||||||
| Joint Repurchase Agreements4 | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 75,805,454 | 75,805,454 | ||||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 31,987,273 | 31,987,273 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 21,630,888 | 21,630,888 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 10,078,182 | 10,078,182 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $333,239,424) | 333,239,424 | |||||||
| Total Investments - 204.8% | ||||||||
| (Cost $617,669,931) | $ | 617,703,167 | ||||||
| U.S. GOVERNMENT SECURITIES SOLD SHORT† - (50.4)% | ||||||||
| U.S. Treasury Bond | ||||||||
| 3.63% due 02/15/44 | 150,192,000 | (151,975,530 | ) | |||||
| Total U.S. Government Securities Sold Short | ||||||||
| (Proceeds $149,534,141) | (151,975,530 | ) | ||||||
| Other Assets & Liabilities, net - (54.4)% | (164,131,267 | ) | ||||||
| Total Net Assets - 100.0% | $ | 301,596,370 | ||||||
| Unrealized | ||||||||
| Contracts | Loss | |||||||
| INTEREST RATE FUTURES CONTRACTS SOLD SHORT† | ||||||||
| June 2014 U.S. Treasury Ultra Long Bond | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $171,302,875) | 1,186 | $ | (469,875 | ) | ||||
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
| 2 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
| 3 | All or a portion of this security is pledged as short collateral at March 31, 2014. |
| 4 | Repurchase Agreements — See Note 5. |
| 10 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $284,430,507) | $ | 284,463,743 | ||
| Repurchase agreements, at value | ||||
| (cost $333,239,424) | 333,239,424 | |||
| Total investments | ||||
| (cost $617,669,931) | 617,703,167 | |||
| Segregated cash with broker | 6,454,800 | |||
| Receivables: | ||||
| Variation margin | 770,363 | |||
| Fund shares sold | 739,298 | |||
| Interest | 145 | |||
| Total assets | 625,667,773 | |||
| Liabilities: | ||||
| Securities sold short, at value | ||||
| (proceeds $149,534,141) | 151,975,530 | |||
| Payable for: | ||||
| Fund shares redeemed | 125,499,909 | |||
| Accrued interest | 676,797 | |||
| Securities purchased | 45,228,964 | |||
| Management fees | 266,678 | |||
| Distribution and service fees | 84,412 | |||
| Transfer agent and administrative fees | 74,077 | |||
| Portfolio accounting fees | 27,189 | |||
| Miscellaneous | 237,847 | |||
| Total liabilities | 324,071,403 | |||
| Net assets | $ | 301,596,370 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 669,376,403 | ||
| Accumulated net investment loss | (4,248,821 | ) | ||
| Accumulated net realized loss on investments | (360,653,184 | ) | ||
| Net unrealized depreciation on investments | (2,878,028 | ) | ||
| Net assets | $ | 301,596,370 | ||
| Investor Class: | ||||
| Net assets | $ | 177,735,333 | ||
| Capital shares outstanding | 3,862,968 | |||
| Net asset value per share | $ | 46.01 | ||
| Advisor Class: | ||||
| Net assets | $ | 16,679,351 | ||
| Capital shares outstanding | 381,460 | |||
| Net asset value per share | $ | 43.73 | ||
| A-Class: | ||||
| Net assets | $ | 49,858,981 | ||
| Capital shares outstanding | 1,115,956 | |||
| Net asset value per share | $ | 44.68 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 46.91 | ||
| C-Class: | ||||
| Net assets | $ | 57,322,705 | ||
| Capital shares outstanding | 1,420,533 | |||
| Net asset value per share | $ | 40.35 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Interest | $ | 171,718 | ||
| Total investment income | 171,718 | |||
| Expenses: | ||||
| Management fees | 3,740,344 | |||
| Transfer agent and administrative fees | 1,038,984 | |||
| Distribution and service fees: | ||||
| Advisor Class | 447,807 | |||
| A-Class | 137,747 | |||
| C-Class | 618,839 | |||
| Portfolio accounting fees | 369,278 | |||
| Short interest expense | 8,458,870 | |||
| Custodian fees | 46,485 | |||
| Trustees’ fees* | 37,221 | |||
| Line of credit interest expense | 924 | |||
| Miscellaneous | 613,624 | |||
| Total expenses | 15,510,123 | |||
| Net investment loss | (15,338,405 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Futures contracts | 11,741,466 | |||
| Securities sold short | (210,040 | ) | ||
| Net realized gain | 11,531,426 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 29,213 | |||
| Securities sold short | (1,234,987 | ) | ||
| Futures contracts | (265,527 | ) | ||
| Net change in unrealized appreciation (depreciation) | (1,471,301 | ) | ||
| Net realized and unrealized gain | 10,060,125 | |||
| Net decrease in net assets resulting from operations | $ | (5,278,280 | ) | |
* 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 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (15,338,405 | ) | $ | (10,875,290 | ) | ||
| Net realized gain (loss) on investments | 11,531,426 | (17,708,508 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | (1,471,301 | ) | (24,405,350 | ) | ||||
| Net decrease in net assets resulting from operations | (5,278,280 | ) | (52,989,148 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| Investor Class | 1,212,780,870 | 3,594,467,805 | ||||||
| Advisor Class | 5,382,740,545 | 2,168,935,484 | ||||||
| A-Class | 105,073,218 | 100,243,846 | ||||||
| C-Class | 28,159,469 | 19,297,982 | ||||||
| Cost of shares redeemed | ||||||||
| Investor Class | (1,181,336,410 | ) | (3,668,091,952 | ) | ||||
| Advisor Class | (5,368,048,897 | ) | (2,344,063,973 | ) | ||||
| A-Class | (88,137,870 | ) | (101,709,475 | ) | ||||
| C-Class | (28,117,046 | ) | (26,000,280 | ) | ||||
| Net increase (decrease) from capital share transactions | 63,113,879 | (256,920,563 | ) | |||||
| Net increase (decrease) in net assets | 57,835,599 | (309,909,711 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 243,760,771 | 553,670,482 | ||||||
| End of year | $ | 301,596,370 | $ | 243,760,771 | ||||
| Accumulated net investment loss at end of year | $ | (4,248,821 | ) | $ | (2,708,996 | ) | ||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| Investor Class | 25,688,339 | 83,099,792 | ||||||
| Advisor Class | 119,675,656 | 52,021,061 | ||||||
| A-Class | 2,241,652 | 2,359,055 | ||||||
| C-Class | 674,822 | 499,461 | ||||||
| Shares redeemed | ||||||||
| Investor Class | (25,096,700 | ) | (84,948,202 | ) | ||||
| Advisor Class | (119,576,482 | ) | (56,052,307 | ) | ||||
| A-Class | (1,893,603 | ) | (2,388,174 | ) | ||||
| C-Class | (677,648 | ) | (682,567 | ) | ||||
| Net increase (decrease) in shares | 1,036,036 | (6,091,881 | ) | |||||
| * | Capital share activity for the periods presented through February 21, 2014 has been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 11 in Notes to Financial Statements. |
| 12 | 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Investor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 43.94 | $ | 48.33 | $ | 65.42 | $ | 73.23 | $ | 66.61 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.65 | ) | (1.20 | ) | (2.15 | ) | (3.10 | ) | (1.65 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.72 | (3.19 | ) | (14.94 | ) | (4.71 | ) | 8.27 | ||||||||||||
| Total from investment operations | 2.07 | (4.39 | ) | (17.09 | ) | (7.81 | ) | 6.62 | ||||||||||||
| Net asset value, end of period | $ | 46.01 | $ | 43.94 | $ | 48.33 | $ | 65.42 | $ | 73.23 | ||||||||||
| Total Returnb | 4.69 | % | (9.10 | %) | (26.07 | %) | (10.72 | %) | 9.98 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 177,735 | $ | 143,739 | $ | 247,454 | $ | 406,031 | $ | 376,574 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (3.46 | %) | (2.82 | %) | (3.99 | %) | (4.78 | %) | (2.23 | %) | ||||||||||
| Total expensesd | 3.50 | % | 2.99 | % | 4.13 | % | 5.06 | % | 2.53 | % | ||||||||||
| Portfolio turnover rate | 1,097 | % | 1,309 | % | 1,107 | % | 771 | % | 985 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| Advisor Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 41.72 | $ | 46.17 | $ | 62.98 | $ | 70.84 | $ | 64.76 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.67 | ) | (1.35 | ) | (2.05 | ) | (3.30 | ) | (1.95 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.68 | (3.10 | ) | (14.76 | ) | (4.56 | ) | 8.03 | ||||||||||||
| Total from investment operations | 2.01 | (4.45 | ) | (16.81 | ) | (7.86 | ) | 6.08 | ||||||||||||
| Net asset value, end of period | $ | 43.73 | $ | 41.72 | $ | 46.17 | $ | 62.98 | $ | 70.84 | ||||||||||
| Total Returnb | 4.87 | % | (9.64 | %) | (26.75 | %) | (11.08 | %) | 9.42 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 16,679 | $ | 11,776 | $ | 199,137 | $ | 44,798 | $ | 66,668 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (3.69 | %) | (3.29 | %) | (4.22 | %) | (5.28 | %) | (2.79 | %) | ||||||||||
| Total expensesd | 3.72 | % | 3.45 | % | 4.38 | % | 5.56 | % | 3.09 | % | ||||||||||
| Portfolio turnover rate | 1,097 | % | 1,309 | % | 1,107 | % | 771 | % | 985 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE RYDEX FUNDS ANNUAL REPORT | 13 |
INVERSE GOVERNMENT LONG BOND STRATEGY FUND
FINANCIAL HIGHLIGHTS (concluded)
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 42.77 | $ | 47.18 | $ | 64.00 | $ | 71.82 | $ | 65.49 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.73 | ) | (1.35 | ) | (2.25 | ) | (3.20 | ) | (1.75 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.64 | (3.06 | ) | (14.57 | ) | (4.62 | ) | 8.08 | ||||||||||||
| Total from investment operations | 1.91 | (4.41 | ) | (16.82 | ) | (7.82 | ) | 6.33 | ||||||||||||
| Net asset value, end of period | $ | 44.68 | $ | 42.77 | $ | 47.18 | $ | 64.00 | $ | 71.82 | ||||||||||
| Total Returnb | 4.51 | % | (9.43 | %) | (26.25 | %) | (10.86 | %) | 9.62 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 49,859 | $ | 32,842 | $ | 37,607 | $ | 73,475 | $ | 80,151 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (3.73 | %) | (3.20 | %) | (4.24 | %) | (5.03 | %) | (2.47 | %) | ||||||||||
| Total expensesd | 3.78 | % | 3.37 | % | 4.38 | % | 5.31 | % | 2.77 | % | ||||||||||
| Portfolio turnover rate | 1,097 | % | 1,309 | % | 1,107 | % | 771 | % | 985 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014c | 2013c | 2012c | 2011c | 2010c | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 38.92 | $ | 43.25 | $ | 59.09 | $ | 66.81 | $ | 61.39 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (1.86 | ) | (1.50 | ) | (2.40 | ) | (3.40 | ) | (2.15 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.29 | (2.83 | ) | (13.44 | ) | (4.32 | ) | 7.57 | ||||||||||||
| Total from investment operations | 1.43 | (4.33 | ) | (15.84 | ) | (7.72 | ) | 5.42 | ||||||||||||
| Net asset value, end of period | $ | 40.35 | $ | 38.92 | $ | 43.25 | $ | 59.09 | $ | 66.81 | ||||||||||
| Total Returnb | 3.73 | % | (10.06 | %) | (26.82 | %) | (11.53 | %) | 8.79 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 57,323 | $ | 55,404 | $ | 69,472 | $ | 114,470 | $ | 140,451 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (4.45 | %) | (3.96 | %) | (4.98 | %) | (5.78 | %) | (3.17 | %) | ||||||||||
| Total expensesd | 4.49 | % | 4.13 | % | 5.12 | % | 6.06 | % | 3.47 | % | ||||||||||
| Portfolio turnover rate | 1,097 | % | 1,309 | % | 1,107 | % | 771 | % | 985 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not reflect the impact of any applicable sales charges. |
| c | Reverse share split — Per share amounts for the periods presented through February 21, 2014 have been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 11 in Notes to Financial Statements. |
| d | Total expenses may include interest expense related to short sales. Excluding interest expense, the operating expense ratios for the years ended would be: |
| 03/31/14 | 03/28/13 | 03/31/12 | 03/31/11 | 03/31/10 | ||||||||||||||||
| Investor Class | 1.41 | % | 1.39 | % | 1.39 | % | 1.42 | % | 1.41 | % | ||||||||||
| Advisor Class | 1.91 | % | 1.88 | % | 1.87 | % | 1.91 | % | 1.91 | % | ||||||||||
| A-Class | 1.66 | % | 1.64 | % | 1.65 | % | 1.67 | % | 1.66 | % | ||||||||||
| C-Class | 2.41 | % | 2.39 | % | 2.40 | % | 2.42 | % | 2.41 | % | ||||||||||
| 14 | THE RYDEX FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers the Inverse Government Long Bond Strategy Fund (the “Fund”). Only A-Class, C-Class, Advisor Class and Investor Class shares had been issued by the Fund.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
The 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 transaction fees, which may cause the Fund to experience high portfolio turnover.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Fund’s securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Fund and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
The NAV is calculated at the close of the New York Stock Exchange (“NYSE”), usually 4:00 p.m. The NAV is calculated using the current market value of the Fund’s total assets as of the respective time of calculation. These financial statements are based on the March 31, 2014, NAV.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
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. Other debt securities with a maturity of greater than 60 days at
| THE RYDEX FUNDS ANNUAL REPORT | 15 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 yields, 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 and repurchase agreements are valued at amortized cost, which approximates market value.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts, and other derivative investments, 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; and (iii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis.
C. Distributions of net investment income in the Fund and distributions of net realized gains, if any, in the Fund are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
D. When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales. The Fund is exposed to market risk based on the amount, if any, that the market value of the security exceeds the market value of the securities in the segregated account.
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 treasury 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.
E. Upon entering into a futures contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
F. Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedule of Investments reflect the effective rates paid at the time of purchase by the Fund. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
G. The Fund may leave cash overnight in their cash account with the custodian, U.S. Bank. Periodically, the 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.
Segregated cash with the broker is held as collateral for investments in derivative instruments such as futures contracts.
H. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution fees relating to A-Class shares and service
| 16 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
and distribution fees related to Advisor Class shares and C-Class shares, are charged directly to specific Classes. In addition, certain expenses have been allocated to the Fund on a pro rata basis upon the respective aggregate net assets of each Fund in the Trust.
I. Throughout the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
2. Financial Instruments
As part of their investment strategy, the Fund utilizes short sales and a variety of derivative instruments including futures. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statement of Assets and Liabilities.
A short sale is a transaction in which the 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, that Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, that Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
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 and related options, 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 the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default.
As investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, this creates an opportunity for increased net income but, at the same time, leverage risk. 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 it had not been leveraged.
In conjunction with the use of short sales and futures, the Fund is required to maintain collateral in various forms. The Fund uses, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or the repurchase agreements allocated to the Fund.
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.
3. Fees and Other Transactions with Affiliates
Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at the annualized rate of 0.90% of the average daily net assets of the Fund.
RFS provides transfer agent and administrative services to the Fund calculated at an annual percentage rate of 0.25% of the average daily net assets the Fund.
RFS also provides accounting services to the Fund for fees calculated at annualized rates below, based on the average daily net assets of the Fund.
| Fund Accounting Fees | (as a % of net assets) | |||
| On the first $250 million | 0.10 | % | ||
| On the next $250 million | 0.075 | % | ||
| On the next $250 million | 0.05 | % | ||
| Over $750 million | 0.03 | % | ||
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution and Shareholder Services Plan applicable to its Advisor Class shares and a Distribution Plan applicable to A-Class shares and for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may
| THE RYDEX FUNDS ANNUAL REPORT | 17 |
NOTES TO FINANCIAL STATEMENTS (continued)
receive compensation. If a Service Provider provides distribution services, the Fund will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services. With regard to Advisor Class shares only, if a Service Provider provides shareholder services, GFD will receive shareholder servicing fees from the Fund 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 shareholder services it performs.
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Fund to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the shareholder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2014, GFD retained sales charges of $ 333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
4. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. 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 following table summarizes the inputs used to value the Funds’ net assets at March 31, 2014:
| Level 1 | Level 1 | Level 2 | Level 3 | |||||||||||||||||
| Investments | Other Financial | Investments | Investments | |||||||||||||||||
| In Securities | Instruments* | In Securities | In Securities | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Inverse Government Long Bond Strategy Fund | $ | — | $ | — | $ | 617,703,167 | $ | — | $ | 617,703,167 | ||||||||||
| Liabilities | ||||||||||||||||||||
| Inverse Government Long Bond Strategy Fund | $ | 151,975,530 | $ | 469,875 | $ | — | $ | — | $ | 152,445,405 | ||||||||||
* Other financial instruments may include futures contracts, which are reported as unrealized gain/loss at period end.
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.
For the year ended March 31, 2014, there were no transfers between levels.
| 18 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
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 U.S. Government Agencies. 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 March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and | ||||||||||||||||||
| Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| HSBC Group | U.S. Treasury Strips | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 519,000,000 | $ | 519,000,144 | 11/15/39 - 05/15/40 | $ | 1,347,115,400 | $ | 529,380,006 | |||||||||
| RBC Capital Markets | U.S. TIP Notes | |||||||||||||||||
| 0.02% | 0.13% - 2.50% | |||||||||||||||||
| Due 04/01/14 | 219,000,000 | 219,000,091 | 07/15/16 - 07/15/22 | 156,009,700 | 175,640,035 | |||||||||||||
| U.S. Treasury Strips | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 11/15/26 - 02/15/36 | 81,000,000 | 47,740,000 | ||||||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Notes | |||||||||||||||||
| 0.01% | 1.25% - 7.88% | |||||||||||||||||
| Due 04/01/14 | 148,095,295 | 148,095,336 | 08/15/15 - 02/15/21 | 137,725,900 | 151,057,202 | |||||||||||||
| Deutsche Bank | U.S. Treasury Note | |||||||||||||||||
| 0.02% | 0.88% | |||||||||||||||||
| Due 04/01/14 | 69,000,000 | 69,000,038 | 09/15/16 | 70,039,600 | 70,380,047 | |||||||||||||
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the 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 Fund utilized derivatives for the following purposes:
| Fund | Index Exposure | Liquidity |
| Inverse Government Long Bond Strategy Fund | x | x |
The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Fund’s net assets on a daily basis.
| Approximate percentage of Fund’s | ||||||||
| net assets on a daily basis | ||||||||
| Fund | Long | Short | ||||||
| Inverse Government Long Bond Strategy Fund | — | 60 | % | |||||
The following is a summary of the location of derivative investments on the Fund’s Statement of Assets and Liabilities as of March 31, 2014:
| Derivative Investment Type | Liability Derivatives |
| Interest Rate contracts | Variation margin |
| THE RYDEX FUNDS ANNUAL REPORT | 19 |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table sets forth the fair value of the Fund’s derivative investments categorized by primary risk exposure at March 31, 2014:
| Liability Derivative Investments Value | ||||
| Futures | ||||
| Interest Rate | ||||
| Fund | Contracts* | |||
| Inverse Government Long Bond Strategy Fund | $ | 469,875 | ||
* Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.
The following is a summary of the location of derivative investments on the Fund’s Statement of Operations for the year ended March 31, 2014:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives |
| Interest Rate contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts |
The following is a summary of the Fund’s realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statement of Operations categorized by primary risk exposure for the year ended March 31, 2014:
| Realized Gain (Loss) on Derivative Investments Recognized on the Statement of Operations | ||||
| Futures | ||||
| Interest Rate | ||||
| Fund | Contracts | |||
| Inverse Government Long Bond Strategy Fund | $ | 11,741,466 | ||
| Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statement of Operations | ||||
| Futures | ||||
| Interest Rate | ||||
| Fund | Contracts | |||
| Inverse Government Long Bond Strategy Fund | $ | (265,527 | ) | |
7. Federal Income Tax Information
The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Fund’s 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 Fund’s tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Fund was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. The Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred
| 20 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| Inverse Government Long Bond Strategy Fund | $ | 88,415,754 | ||
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| Inverse Government Long Bond Strategy Fund | $ | — | $ | — | $ | — |
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| Inverse Government Long Bond Strategy Fund | $ | — | $ | — | $ | — |
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | (Depreciation) | Carryforward1 | ||||||||||||
| Inverse Government Long Bond Strategy Fund | $ | — | $ | — | $ | (4,283,278 | ) | $ | (359,247,934 | ) | ||||||
Capital Loss Carryforward amounts may be limited due to Federal income tax regulations.
1A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Total | ||||||||||||||||||||||||||||||||
| Expires in | Expires in | Expires in | Expires in | Expires in | Unlimited | Unlimited | Capital Loss | |||||||||||||||||||||||||
| Fund | 2015 | 2016 | 2017 | 2018 | 2019 | Short-Term | Long-Term | Carryforward | ||||||||||||||||||||||||
| Inverse Government Long Bond Strategy Fund | $ | (60,731,802 | ) | $ | (2,188,094 | ) | $ | (24,167,315 | ) | $ | (68,305,233 | ) | $ | (23,242,075 | ) | $ | (153,818,597 | ) | $ | (26,794,818 | ) | $ | (359,247,934 | ) | ||||||||
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 typically due to late year loss deferrals, losses deferred due to wash sales, and mark-to market adjustments on futures contracts. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on the net assets or NAV per share.
On the Statement of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| Inverse Government Long Bond Strategy Fund | $ | (96,011,523 | ) | $ | 13,798,580 | $ | 82,212,943 | |||||
| THE RYDEX FUNDS ANNUAL REPORT | 21 |
NOTES TO FINANCIAL STATEMENTS (continued)
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| Inverse Government Long Bond Strategy Fund | $ | 619,545,056 | $ | — | $ | (1,841,889 | ) | $ | (1,841,889 | ) | ||||||
Pursuant to Federal income tax regulations applicable to investment companies, the Fund has elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Fund has also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2014:
| Fund | Ordinary | Capital | ||||||
| Inverse Government Long Bond Strategy Fund | $ | (4,248,821 | ) | $ | — | |||
8. Securities Transactions
For the year ended March 31, 2014, the cost of purchases and proceeds from sales of government securities were:
| Fund | Purchases | Sales | ||||||
| Inverse Government Long Bond Strategy Fund | $ | (2,492,839,327 | ) | $ | (2,488,959,279 | ) | ||
9. 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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Fund did not have any borrowings under this agreement at March 31, 2014.
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Average Daily Balance | |||
| Inverse Government Long Bond Strategy Fund | $ | 72,863 | ||
10. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds 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 the Tribune Company 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 Series Funds, 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 Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
| 22 | THE RYDEX FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded)
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 April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168; U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
11. Reverse Share Split
The Inverse Government Long Bond Strategy Fund underwent a one-for-five reverse share split effective February 21, 2014. The effect of the transaction was to divide the number of outstanding shares of the Fund by five, resulting in a corresponding increase in the net asset value per share. The share transactions presented in the statement of changes in net assets and the per share data in the financial highlights for each of the periods presented prior to February 21, 2014 have been restated to reflect this reverse share split. There were no changes in net assets, results of operations or total return as a result of this transaction.
| THE RYDEX FUNDS ANNUAL REPORT | 23 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Inverse Government Long Bond Strategy Fund (one of the series constituting the Rydex Series Funds) (the “Fund”) as of March 31, 2014, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Inverse Government Long Bond Strategy Fund, a series of the Rydex Series Funds, at March 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
May 22, 2014
| 24 | THE RYDEX FUNDS ANNUAL REPORT |
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.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
| THE RYDEX FUNDS ANNUAL REPORT | 25 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEES
| Number of | |||||||||
| Portfolios in | Other | ||||||||
| Position(s) Held with the | Fund Complex | Directorships | |||||||
| Name and Year | Trust, Term of Office and | Principal Occupation(s) | Overseen by | Held by | |||||
| of Birth of Trustee | Length of Time Served | During Past 5 Years | Trustee** | Trustee | |||||
| Donald C. Cacciapaglia* (1951) | Trustee from 2012 to present. | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). Former: Chairman and Chief Executive Officer, Channel Capital Group, Inc. (2002–2010). | 214 | Delaware Life (2013–present); Guggenheim Life and Annuity Company (2011–present); Paragon Life Insurance Company of Indiana (2011–present). | |||||
| INDEPENDENT TRUSTEES | |||||||||
| Corey A. Colehour (1945) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Retired. | 131 | None. | |||||
| J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Governance and Nominating Committees from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | Trustee of Epiphany Funds (4) (2009–present). | |||||
| John O. Demaret (1940) | Trustee from 1998 to present and Chairman of the Board from 2006 to present; Member and Chairman of the Audit Committee from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | None. | |||||
| 26 | THE RYDEX FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued)
INDEPENDENT TRUSTEES - concluded
| Number of | |||||||||
| Portfolios in | Other | ||||||||
| Position(s) Held with the | Fund Complex | Directorships | |||||||
| Name and Year | Trust, Term of Office and | Principal Occupation(s) | Overseen by | Held by | |||||
| of Birth of Trustee | Length of Time Served | During Past 5 Years | Trustee** | Trustee | |||||
| Werner E. Keller (1940) | Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005–present). | 131 | None. | |||||
| Thomas F. Lydon, Jr. (1960) | Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present. | Current: President, Global Trends Investments (registered investment adviser) (1996–present). | 131 | Board of Directors of US Global Investors (GROW) (1995–present). | |||||
| Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Chairman and Member of the Governance and Nominating Committees from 1998 to present. | Retired.
Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 131 | None. | |||||
| Roger Somers (1944) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Current: Founder and Chief Executive Officer, Arrow Limousine (1962–present). | 131 | None. | |||||
| OFFICERS | |||||||||
| Name, Address | Position(s) Held with | ||||||||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | |||||||
| Birth of Officer | Length of Time Served | During Past 5 Years | |||||||
| Donald C. Cacciapaglia (1951) | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). | |||||||
| Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. (2002–2010). | |||||||||
| Michael P. Byrum (1970) | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010–present); President and Chief Investment Officer, Rydex Holdings, LLC (2008–present); Director and Chairman, Advisory Research Center, Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC (2005–present). | |||||||
| Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009–2010) and Secretary (2002–2010), Rydex Fund Services, LLC; Director (2008–2010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors, LLC; Director (2008–2010), Chief Investment Officer (2006–2010), President (2004–2010) and Secretary (2002–2010), Rydex Advisors II, LLC. | |||||||||
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
| THE RYDEX FUNDS ANNUAL REPORT | 27 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded)
OFFICERS – concluded
| Name, Address | Position(s) Held with | |||
| and Year of | the Trust, Term of Office and | Principal Occupation(s) | ||
| Birth of Officer | Length of Time Served | During Past 5 Years | ||
| Nikolaos Bonos (1963) | Vice President and Treasurer (2003–present). | Current: Treasurer and Vice President, certain other funds in the Fund Complex (2003–present); Senior Vice President, Security Investors, LLC (2010–present); Chief Executive Officer, Guggenheim Specialized Products, LLC (2009–present); President and Chief Executive Officer, Rydex Fund Services, LLC (2009–present); Vice President, Rydex Holdings, LLC (2008–present).
Former: Senior Vice President, Security Global Investors, LLC (2010–2011); Senior Vice President, Rydex Advisors, LLC (2006–2011); Senior Vice President, Rydex Advisors II, LLC (2006–2011). | ||
| Elisabeth Miller (1968) | Chief Compliance Officer (2012–present). | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012–present); Chief Compliance Officer, Security Investors, LLC (2012–present); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012–present); Vice President, Guggenheim Funds Distributors, LLC (2014–present). | ||
| Former: Chief Compliance Officer, Guggenheim Distributors, LLC (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); Senior Manager, Guggenheim Distributors, LLC (2004–2009). | ||||
| Joseph M. Arruda (1966) | Assistant Treasurer (2006–present). | Current: Assistant Treasurer, certain other funds in the Fund Complex (2006–present); Vice President, Security Investors, LLC (2010–present); Chief Financial Officer and Manager, Guggenheim Specialized Products, LLC (2009–present). | ||
| Former: Vice President, Security Global Investors, LLC (2010–2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010). | ||||
| Amy J. Lee (1961) | Vice President (2009–present) and Secretary (2012–present). | Current: Chief Legal Officer, certain other funds in the Fund Complex (2013–present); Senior Managing Director, Guggenheim Investments (2012–present). | ||
| Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004–2012). |
| 28 | THE RYDEX FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
| THE RYDEX FUNDS ANNUAL REPORT | 29 |
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)(concluded)
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| 30 | THE RYDEX FUNDS ANNUAL REPORT |
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3.31.2014
Guggenheim Funds Annual Report
| Guggenheim Alternatives Funds |
| Guggenheim Long Short Equity Fund |
| (Formerly, Guggenheim U.S. Long Short Momentum Fund) |
| Guggenheim Event Driven and Distressed Strategies Fund |
| Rydex International Equity Funds |
| Rydex Emerging Markets 2x Strategy Fund |
| Rydex Inverse Emerging Markets 2x Strategy Fund |
| Rydex Fixed Income Fund |
| Rydex Emerging Markets Bond Strategy Fund |
| RSTF-ANN-0314x0315 | guggenheiminvestments.com |
Go Green! Eliminate Mailbox Clutter
Go paperless with Guggenheim Investments eDelivery—a service giving you full online access to account information and documents. Save time, cut down on mailbox clutter and be a friend to the environment with eDelivery.
With Guggenheim Investments eDelivery you can:
| ■ | View online confirmations and statements at your convenience. | |
| ■ | Receive email notifications when your most recent confirmations, statements and other account documents are available for review. | |
| ■ | Access prospectuses, annual reports and semiannual reports online. |
If you have questions about the Guggenheim Investments eDelivery service, contact one of our Shareholder Service Representatives at 800.820.0888.
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604
THE GUGGENHEIM FUNDS ANNUAL REPORT | 1
March 31, 2014
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for two Guggenheim Alternatives Funds, two Rydex International Equity Funds and a Rydex Fixed Income Fund (“the Funds”), which had an inception date of October 8, 2013. Performance for the other Funds in this report covers performance for the one-year period ended March 31, 2014.
The Investment Adviser is 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,
Donald C. Cacciapaglia
President
April 30, 2014
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.
Alternative funds may not be suitable for all investors because of the sophisticated and aggressive investment techniques the funds employ, such as leverage, derivatives and short selling. • The more you invest in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. • The use of short selling involves increased risks and costs. You risk paying more for a security than you received from its sale. Theoretically, stocks sold short have the risk of unlimited losses. • The use of derivatives such as futures, options and swap agreements may expose an investment to additional risks that it would not be subject to if you invested directly in the securities underlying those derivatives. • Additionally, certain alternative strategies tied to hard assets such as commodities, currencies and real estate, may be subject to greater volatility as they may be affected by overall market movements, changes in interest rates or factors affecting a particular industry, commodity or currency, such as droughts, floods, weather, livestock disease, embargos, tariffs and international economic, political and regulatory developments. • No investment strategy can guarantee a return in a declining market. Additionally, an investor could lose all or a substantial amount of their investment.
The Long Short Equity Fund is subject to a number of risks and is not 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. • Certain of the derivative instruments, such as swaps and structured notes, are also subject to the risks of counterparty default and adverse tax treatment. • The Fund’s use of short selling involves increased risk and costs, including paying more for a security than it received from its sale and the risk of unlimited losses. • The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those leveraged investments. • The Fund’s investments in developed and emerging foreign markets may increase the Fund’s volatility due to the impact of diplomatic, political or economic developments on the country in question. • Additionally, 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 currencies. • The Fund’s fixed income investments will change in value in response to interest rate changes and other factors. • In certain circumstances the Fund may be subject to liquidity risk and it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. • 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. • Please read the prospectus for more detailed information regarding these and other risks.
2 | THE GUGGENHEIM FUNDS ANNUAL REPORT
March 31, 2014
The Event Driven and Distressed Strategies Fund is subject to a number of risks and is not suitable for all investors. • The Fund’s use of derivatives such as futures, options, structured notes, exchange-traded 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 underlying those derivatives. • Certain of the derivative instruments, such as swaps and structured notes, are also subject to the risks of counterparty default and adverse tax treatment. • The Fund’s use of short selling involves increased risk and costs, including paying more for a security than it received from its sale and the risk of unlimited losses. • The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. • The Fund’s investments in foreign markets may increase the Fund’s volatility due to the impact of diplomatic, political or economic developments on the country in question. • Additionally, 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 currencies. •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 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. • The Fund’s exposure to the event driven market is considered speculative and may subject the Fund to additional losses. • In certain circumstances the Fund may be subject to liquidity risk and it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. • 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.
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. • The Leveraged and Inverse Emerging Markets Funds’ investments in developed and emerging foreign markets may increase the Funds’ volatility due to the impact of diplomatic, political or economic developments on the country in question. • Additionally, the Funds’ direct and indirect exposure to foreign currencies subjects the Funds 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 currencies. • A Fund’s investment in the securities of non-U.S. companies in the form of American Depositary Receipts (ADRs) poses special risks associated with international investing, including fluctuating exchange rates, government regulations and differences in liquidity, which may affect the volatility and performance of a fund.
The Emerging Markets Bond Strategy Fund may not be suitable for all investors. Investments in securities, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. • The Fund’s investments in bonds and financial instruments that in combination have economic characteristics similar to emerging markets bonds carries additional risks when compared to investing in U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question. • The Fund’s investments in derivatives, including credit default swaps, 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 exposure to high yield securities may subject the Fund to greater volatility. • The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. • The Fund’s investments in bank obligations may expose it to adverse developments in or related to the banking industry. • The Funds 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 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 investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. • 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 other risks.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 3
| ECONOMIC AND MARKET OVERVIEW (Unaudited) | March 31, 2014 |
Investment markets continued to rally through the 12 months ended March 31, 2014, thanks to a steadily improving U.S. economy and ongoing U.S. central bank easing. Contributing to performance of equities were growing confidence in the sustainability of the U.S. economic recovery, favorable corporate profit growth, supportive valuations, interest rates below their long-run level, and positive inflows, as investors concerned about the end of quantitative easing and its impact on interest rates rotated out of fixed-income investments into equities.
An issue during the period was when the U.S. Federal Reserve (the “Fed”) would start to scale back its asset purchases, particularly since equity markets were strong while abundant liquidity and steady easing had produced a benign credit environment with low default rates. Speculation that tapering would start mid-2013 touched off market volatility and a jump in Treasury yields in May, which moderated after the Fed refrained from easing in September. That, along with the resolution of issues related to a government shutdown in October and eventual agreement on raising the debt ceiling, set the stage for an equity rally on the back of stronger economic growth that lasted into the new year.
After announcing in December 2013 that, based on positive economic data and a better jobs picture, it would reduce its monthly bond purchases by $10 billion, tapering finally began in January 2014. The Fed continued to taper even after acknowledging in March that the economy had slowed during the winter months, which were unusually harsh for much of the U.S. By April, it was buying only $55 billion a month, down from $85 billion in December 2013.
In March 2014, while noting that the U.S. economy has not yet reached full employment, the Fed also unlinked attainment of a 6.5% unemployment level with a potential rate hike, since the unemployment rate in February was approaching that level. Revised guidance from new Fed Chair Janet Yellen seemed to indicate that a rise might not be considered until mid-2015, at the earliest, although she stressed that it would depend on labor market conditions and the inflation rate. Still, the date was earlier than many market participants had expected, which knocked the market off record highs reached earlier in the six-month period.
Even though upcoming economic reports may reflect the impacts from the severe winter weather, and international tensions remain high, the arrival of spring was expected to return the U.S. economy to its improving trend. Pent-up demand resulting from the huge gap in household formation over the prior several years continues to buoy the housing market, while a pickup in global demand bodes well for the U.S. manufacturing sector. Consumption is rising due to an increase in net worth, resulting from the rebound in housing and asset prices, which has boosted retail sales, and consumer sentiment measures. The consensus expectation for 2014 growth stands at 3.0%, compared with 1.9% for 2013.
Overseas, the picture is mixed. Relations between Russia and the West have sunk to levels not seen since the Cold War. Investors can expect ongoing instability in the region, which is likely to keep U.S. interest rates subdued for the time being. Europe seems to be on more solid economic footing, with data suggesting growth has improved in the core, and even more so in peripheral countries. Japan’s economic growth is slowing, but should regain momentum after the Bank of Japan implements more monetary accommodation. China’s economy, while facing a number of structural challenges, should begin to stabilize as policymakers take actions to prevent a hard landing.
Momentum driven by the favorable macro environment is supporting equities and moving spreads tighter, helping perpetuate the risk-on mode that has prevailed in the U.S. since 2008. Investors who want income will have to keep investing, but buying cheap securities may be a thing of the past. Recent volatility indicates that investors must guard against becoming complacent about the quality of investments they make and their inherent risks. The Fed continues pumping enormous amounts of liquidity into the system, but with little expectation that it will raise interest rates before 2015, the expansion is likely to continue. Even when the Fed does hike, it typically takes another two years before a recession threatens growth. While the economy may be entering a new era where interest rates head higher over the long term, there is likely a ceiling on how high rates can rise in advance of eventual monetary tightening.
4 | THE GUGGENHEIM FUNDS ANNUAL REPORT
| ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | March 31, 2014 |
For the 12 months ended March 31, 2014, the Standard & Poor’s 500® (“S&P 500”) Index* returned 21.86%. The Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index* returned 17.56%. The return of the MSCI Emerging Markets Index* was 1.43%.
In the bond market, the Barclays U.S. Aggregate Bond Index* posted a -0.10% return for the period, while the Barclays U.S. Corporate High Yield Index* returned 7.54%. The return of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% 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.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
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 US & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
BofA Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index tracks the performance of U.S. dollar-denominated emerging market and cross-over sovereign debt publicly issued in the eurobond or U.S. domestic market. Qualifying countries must have a BBB1 or lower foreign currency long-term sovereign debt rating (based on an average of Moody’s, S&P and Fitch). Countries that are not rated, or that are rated “D” or “SD” by one or several rating agencies qualify for inclusion in the index but individual non-performing securities are removed. Qualifying securities must have at least one year remaining term to final maturity, at least 18 months to maturity at point of issuance, a fixed or floating coupon and a minimum amount outstanding of $250 million. Local currency debt is excluded from the Index. Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest.
BNY Mellon Emerging Markets 50 ADR Index is capitalization-weighted and designed to track the performance of approximately 50 emerging market-based depositary receipts.
Credit Suisse Event Driven Liquid Index reflects the returns of a dynamic basket of liquid, investable market factors selected and weighted in accordance with an algorithm that aims to approximate the aggregate returns of the universe of event driven hedge fund managers, as represented by the Event Driven sector of the Dow Jones Credit Suisse Hedge Fund Index.
HFRX Equity Hedge Index is designed to be representative of the overall composition of the equity hedge segment of the hedge fund universe. In an equity hedge strategy both long and short positions primarily in equities are maintained. Equities which are believed to be undervalued are bought and equities which are believed to be overvalued are sold.
Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity market. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of the market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. equity market.
Russell 3000® Index measures the performance of the largest 3000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 5
| A BRIEF NOTE ON THE COMPOUNDING OF RETURNS (Unaudited) |
Rydex Emerging Markets 2x Strategy Fund and Rydex Inverse Emerging Markets 2x Strategy Fund 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. 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 | |||||||||||||||||||
| Level | Performance | Expectation | Fund NAV | Performance | Assessment | |||||||||||||||||
| Start | 100 | $ | 10.00 | |||||||||||||||||||
| Day 1 | 106 | 6.0 | % | 9.0 | % | $ | 10.90 | 9.0 | % | In line | ||||||||||||
| Day 2 | 99 | -6.6 | % | -9.9 | % | $ | 9.82 | -9.9 | % | In line | ||||||||||||
| Cumulative | -1.0 | % | -1.5 | % | -1.8 | % | -0.3% | |||||||||||||||
As illustrated by this simple example, the effect of leverage can make it difficult to form expectations or judgments about fund performance given only the returns of the unleveraged index.
Because certain funds seek to track the performance of their benchmark on a daily basis, mathematical compounding, especially with respect to those funds that use leverage as part of their investment strategy, may prevent a fund from correlating with the monthly, quarterly, annual or other period performance of its benchmark. Due to the compounding of daily returns, leveraged and inverse funds’ returns over periods other than one day will likely differ in amount and possibly direction from the benchmark return for the same period. Investors should monitor their leveraged and inverse funds’ holdings consistent with their strategies, as frequently as daily. For those funds that consistently apply leverage, the value of the fund’s shares will tend to increase or decrease more than the value of any increase or decrease in its benchmark index. For more on correlation, leverage and other risks, please read the prospectus.
In general, any change in direction in an index will produce compounding that seems to work against an investor. Were the index to move in the same direction (either up or down) for two or more periods in a row, the compounding of those returns would work in an investor’s favor, causing the fund to seemingly beat its benchmark.
As a general rule of thumb, more leverage in a fund will magnify the compounding effect, while less leverage will generally produce results that are more in line with expectations. In addition, periods of high volatility in an underlying index will also cause the effects of compounding to be more pronounced, while lower volatility will produce a more muted effect.
6 | THE GUGGENHEIM 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, or 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 September 30, 2013 and ending March 31, 2014.
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.
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 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 GUGGENHEIM FUNDS ANNUAL REPORT | 7
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| Long Short Equity Fund | ||||||||||||||||||||
| A-Class | 2.36 | % | 4.73 | % | $1,000.00 | $1,047.30 | $12.05 | |||||||||||||
| C-Class | 3.11 | % | 4.32 | % | 1,000.00 | 1,043.20 | 15.84 | |||||||||||||
| H-Class | 2.35 | % | 4.71 | % | 1,000.00 | 1,047.10 | 11.99 | |||||||||||||
| Institutional Class | 2.10 | % | 4.81 | % | 1,000.00 | 1,048.10 | 10.72 | |||||||||||||
| Event Driven and Distressed Strategies Fund | ||||||||||||||||||||
| A-Class | 1.90 | % | 5.19 | % | 1,000.00 | 1,051.90 | 9.72 | |||||||||||||
| C-Class | 2.65 | % | 4.77 | % | 1,000.00 | 1,047.70 | 13.53 | |||||||||||||
| H-Class | 1.90 | % | 5.19 | % | 1,000.00 | 1,051.90 | 9.72 | |||||||||||||
| Institutional Class | 1.65 | % | 5.32 | % | 1,000.00 | 1,053.20 | 8.45 | |||||||||||||
| Emerging Markets 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.76 | % | (1.97 | %) | 1,000.00 | 980.30 | 8.69 | |||||||||||||
| C-Class | 2.66 | % | (2.30 | %) | 1,000.00 | 977.00 | 13.11 | |||||||||||||
| H-Class | 1.75 | % | (2.11 | %) | 1,000.00 | 978.90 | 8.63 | |||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.76 | % | (3.07 | %) | 1,000.00 | 969.30 | 8.64 | |||||||||||||
| C-Class | 2.43 | % | (3.50 | %) | 1,000.00 | 965.00 | 11.90 | |||||||||||||
| H-Class | 1.76 | % | (3.17 | %) | 1,000.00 | 968.30 | 8.64 | |||||||||||||
| Emerging Markets Bond Strategy Fund4 | ||||||||||||||||||||
| A-Class | 1.83 | % | 0.72 | % | 1,000.00 | 1,007.20 | 8.76 | 5 | ||||||||||||
| C-Class | 2.39 | % | 0.40 | % | 1,000.00 | 1,004.00 | 11.42 | 5 | ||||||||||||
| H-Class | 1.64 | % | 0.80 | % | 1,000.00 | 1,008.00 | 7.85 | 5 | ||||||||||||
8 | THE GUGGENHEIM FUNDS ANNUAL REPORT
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1 | Return | September 30, 2013 | March 31, 2014 | Period2 | ||||||||||||||||
| Table 2. Based on hypothetical 5% return (before expenses) | ||||||||||||||||||||
| Long Short Equity Fund | ||||||||||||||||||||
| A-Class | 2.36 | % | 5.00 | % | $1,000.00 | $1,013.16 | $11.85 | |||||||||||||
| C-Class | 3.11 | % | 5.00 | % | 1,000.00 | 1,009.42 | 15.58 | |||||||||||||
| H-Class | 2.35 | % | 5.00 | % | 1,000.00 | 1,013.21 | 11.80 | |||||||||||||
| Institutional Class | 2.10 | % | 5.00 | % | 1,000.00 | 1,014.46 | 10.55 | |||||||||||||
| Event Driven and Distressed Strategies Fund | ||||||||||||||||||||
| A-Class | 1.90 | % | 5.00 | % | 1,000.00 | 1,015.46 | 9.55 | |||||||||||||
| C-Class | 2.65 | % | 5.00 | % | 1,000.00 | 1,011.72 | 13.29 | |||||||||||||
| H-Class | 1.90 | % | 5.00 | % | 1,000.00 | 1,015.46 | 9.55 | |||||||||||||
| Institutional Class | 1.65 | % | 5.00 | % | 1,000.00 | 1,016.70 | 8.30 | |||||||||||||
| Emerging Markets 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.76 | % | 5.00 | % | 1,000.00 | 1,016.16 | 8.85 | |||||||||||||
| C-Class | 2.66 | % | 5.00 | % | 1,000.00 | 1,011.67 | 13.34 | |||||||||||||
| H-Class | 1.75 | % | 5.00 | % | 1,000.00 | 1,016.21 | 8.80 | |||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | ||||||||||||||||||||
| A-Class | 1.76 | % | 5.00 | % | 1,000.00 | 1,016.16 | 8.85 | |||||||||||||
| C-Class | 2.43 | % | 5.00 | % | 1,000.00 | 1,012.81 | 12.19 | |||||||||||||
| H-Class | 1.76 | % | 5.00 | % | 1,000.00 | 1,016.16 | 8.85 | |||||||||||||
| Emerging Markets Bond Strategy Fund | ||||||||||||||||||||
| A-Class | 1.83 | % | 5.00 | % | 1,000.00 | 1,015.11 | 8.79 | |||||||||||||
| C-Class | 2.39 | % | 5.00 | % | 1,000.00 | 1,012.44 | 11.46 | |||||||||||||
| H-Class | 1.64 | % | 5.00 | % | 1,000.00 | 1,016.02 | 7.88 | |||||||||||||
| 1 | This ratio represents annualized net expenses, which includes interest and dividend expense. Excluding these expenses, the operating expense ratios would be: |
| Long Short Equity Fund | Emerging Markets Bond Strategy Fund | ||||||||
| A-Class | 1.67 | % | 1.58 | % | |||||
| C-Class | 2.42 | % | 2.32 | % | |||||
| H-Class | 1.67 | % | 1.57 | % | |||||
| Institutional Class | 1.42 | % | – | ||||||
| 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 182/365 (to reflect the one-half year period). |
| 3 | Actual cumulative return at net asset value for the period September 30, 2013 to March 31, 2014. |
| 4 | Since commencement of operations: October 8, 2013. |
| 5 | 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 174/365 (to reflect the since inception period). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 9
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
OBJECTIVE: Seeks long-term capital appreciation.
For the one-year period ended March 31, 2014, the Long Short Equity Fund H-Class (formerly, the U.S. Long Short Momentum Fund) returned 11.75%.
The Fund’s Board of Trustees approved changes to the Fund effective October 30, 2013: a name change, new principal investment strategies and a new benchmark. The change of investment strategies better aligns the risk and return profile of the Fund with its new HFRX Equity Hedge Index benchmark and the long/short equity peer universe.
The Fund’s new benchmark, the HFRX Equity Hedge Index, returned 7.03% for the one-year period ended March 31, 2014, but it was the benchmark only from October 31, 2013 through March 31, 2014. The Fund’s previous benchmark, the Russell 3000, returned 22.61% for the one-year period.
The annualized risk for the Fund was 6.0%, roughly in line with the 5.4% annualized risk of the HFRX Equity Hedge Index, and significantly lower than the risk level of a long-only equity index.
Trend-based strategies performed well through much of the twelve month period ended March 31, 2014. Our industry, stock and style tilts–each of which seeks to capture market trends through price momentum–all contributed positive returns to Fund performance.
Industry tilts based on momentum performed particularly well during the second calendar quarter of 2013. Overweights in Media, Auto Components, Internet & Catalog Retail, and Biotechnology companies, as well as short positions in Metals & Mining companies, produced gains for the Fund.
Stock tilts excelled during the second and third calendar quarters of 2013. During this period, Exxon Mobil, IBM, and Nu Skin Enterprises, Inc. were the three biggest contributors to returns on the long side, while Allied Nevada and Walter Energy short positions contributed significant positive returns to the Fund.
Style tilts produced their largest gains in the fourth calendar quarter of 2013, with underweights of Book/Price and overweights of the Revenue/Price style both adding significant value to Fund performance.
The Fund’s assets can be subdivided into long and short positions. During the trailing twelve months, the long basket represented 67% of assets on average, while the short, or hedging, basket averaged 23% of assets. The balance of Fund assets was allocated to cash during this time due to a lack of attractive shorting opportunities.
The strength of equity markets resulted in a contribution of 18.3% to the Fund’s returns from the long equity basket. Grossing up long-basket returns highlights the value added by this portfolio of stocks relative to a long-only equity benchmark. A full 100% allocation to the Fund’s long equity basket would have returned 27.3%, 4.9% better than a traditional capitalization-weighted basket representing the Russell 1000 Index, which returned 22.4% during the period.
In the last month of this reporting period, we saw a significant rotation in market leadership as high momentum names fell dramatically and low momentum names outperformed the market. This resulted in negative alpha generation for our short basket during the first calendar quarter of 2014. In spite of this, our short basket still generated positive alpha for the trailing twelve month period. A full -100% allocation to our short basket would have returned -18.0%, versus a -22.4% return if an investor simply shorted the Russell 1000 Index, an improvement of 4.4% over this alternative hedging approach. While our hedging approach outperformed a whole market hedge, the rising prices of our hedging basket did create a -4.1% contribution to Fund returns. Transaction costs and Fund expenses also reduced returns costing the Fund -2.6% during the year.
Performance displayed represents past performance which is no guarantee of future results.
10 | THE GUGGENHEIM FUNDS ANNUAL REPORT
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Cumulative Fund Performance*
| Inception Dates: | ||
| A-Class | March 31, 2004 | |
| C-Class | March 22, 2002 | |
| H-Class | March 22, 2002 | |
| Institutional Class | November 30, 2011 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Lexmark International, Inc. — Class A | 0.6 | % | ||
| Copa Holdings S.A. — Class A | 0.6 | % | ||
| Advanced Micro Devices, Inc. | 0.6 | % | ||
| Harsco Corp. | 0.6 | % | ||
| Thor Industries, Inc. | 0.6 | % | ||
| Alaska Air Group, Inc. | 0.6 | % | ||
| Diebold, Inc. | 0.6 | % | ||
| Kronos Worldwide, Inc. | 0.6 | % | ||
| Freescale Semiconductor Ltd. | 0.6 | % | ||
| Service Corporation International | 0.6 | % | ||
| Top Ten Total | 6.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
Average Annual Returns*
Periods Ended March 31, 2014
| 1 Year | 5 Year | 10 Year | ||||||||||
| A-Class Shares | 11.80% | 11.90% | 4.73% | |||||||||
| A-Class Shares with sales charge† | 6.50% | 10.82% | 4.23% | |||||||||
| C-Class Shares | 10.97% | 11.08% | 3.98% | |||||||||
| C-Class Shares with CDSC‡ | 9.97% | 11.08% | 3.98% | |||||||||
| H-Class Shares | 11.75% | 11.90% | 4.77% | |||||||||
| Russell 3000 Index | 22.61% | 21.93% | 7.86% | |||||||||
| HFRX Equity Hedge Index | 7.03% | 3.14% | 0.22% |
| Since | ||||||||
| Inception | ||||||||
| 1 Year | (11/30/11) | |||||||
| Institutional Class Shares | 12.06% | 9.33% | ||||||
| Russell 3000 Index | 22.61% | 22.25% | ||||||
| HFRX Equity Hedge Index | 7.03% | 6.93% |
| * | 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 3000 Index and the HFRX Equity Hedge Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares and Institutional Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 11 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| LONG SHORT EQUITY FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 65.9% | ||||||||
| CONSUMER DISCRETIONARY - 18.4% | ||||||||
| Thor Industries, Inc.1 | 5,400 | $ | 329,724 | |||||
| Service Corporation International1 | 16,303 | 324,104 | ||||||
| Leggett & Platt, Inc.1 | 9,731 | 317,620 | ||||||
| John Wiley & Sons, Inc. — Class A1 | 5,498 | 316,905 | ||||||
| Hyatt Hotels Corp. — Class A*,1 | 5,866 | 315,649 | ||||||
| Darden Restaurants, Inc.1 | 6,217 | 315,575 | ||||||
| Lear Corp.1 | 3,742 | 313,281 | ||||||
| BorgWarner, Inc.1 | 5,060 | 311,038 | ||||||
| Ford Motor Co.1 | 19,893 | 310,331 | ||||||
| Allison Transmission Holdings, Inc. | 10,363 | 310,268 | ||||||
| Liberty Interactive Corp. — Class A*,1 | 10,677 | 308,245 | ||||||
| Gentex Corp.1 | 9,746 | 307,291 | ||||||
| Harley-Davidson, Inc.1 | 4,600 | 306,406 | ||||||
| TRW Automotive Holdings Corp.*,1 | 3,746 | 305,749 | ||||||
| Regal Entertainment Group — Class A1 | 16,252 | 303,587 | ||||||
| Clear Channel Outdoor Holdings, Inc. — Class A1 | 33,290 | 303,272 | ||||||
| Johnson Controls, Inc.1 | 6,366 | 301,239 | ||||||
| Wendy’s Co.1 | 32,900 | 300,048 | ||||||
| Six Flags Entertainment Corp.1 | 7,455 | 299,318 | ||||||
| Expedia, Inc.1 | 4,095 | 296,887 | ||||||
| Penn National Gaming, Inc.*,1 | 24,091 | 296,801 | ||||||
| Goodyear Tire & Rubber Co.1 | 11,304 | 295,374 | ||||||
| News Corp. — Class A*,1 | 17,000 | 292,740 | ||||||
| Cablevision Systems Corp. — Class A1 | 17,272 | 291,379 | ||||||
| Choice Hotels International, Inc.1 | 6,300 | 289,800 | ||||||
| Taylor Morrison Home Corp. — Class A*,1 | 12,298 | 289,003 | ||||||
| General Motors Co.1 | 8,300 | 285,686 | ||||||
| Groupon, Inc. — Class A*,1 | 36,280 | 284,434 | ||||||
| Priceline Group, Inc.*,1 | 231 | 275,327 | ||||||
| Liberty Ventures*,1 | 2,107 | 274,605 | ||||||
| Amazon.com, Inc.*,1 | 800 | 269,216 | ||||||
| SeaWorld Entertainment, Inc.1 | 8,903 | 269,138 | ||||||
| TripAdvisor, Inc.*,1 | 2,877 | 260,627 | ||||||
| zulily, Inc. — Class A*,2 | 5,037 | 252,807 | ||||||
| HomeAway, Inc.*,1 | 6,622 | 249,451 | ||||||
| Delphi Automotive plc1 | 3,670 | 249,046 | ||||||
| Netflix, Inc.*,1 | 685 | 241,141 | ||||||
| Morningstar, Inc.1 | 193 | 15,251 | ||||||
| Brinker International, Inc.1 | 100 | 5,245 | ||||||
| Total Consumer Discretionary | 10,883,608 | |||||||
| INFORMATION TECHNOLOGY - 15.4% | ||||||||
| Lexmark International, Inc. — Class A1 | 7,440 | 344,398 | ||||||
| Advanced Micro Devices, Inc.*,1,2 | 83,807 | 336,066 | ||||||
| Diebold, Inc.1 | 8,181 | 326,340 | ||||||
| Freescale Semiconductor Ltd.*,1 | 13,304 | 324,751 | ||||||
| CommScope Holding Company, Inc.*,1 | 12,928 | 319,063 | ||||||
| Atmel Corp.*,1 | 38,150 | 318,934 | ||||||
| Maxim Integrated Products, Inc.1 | 9,527 | 315,534 | ||||||
| JDS Uniphase Corp.*,1 | 22,352 | 312,928 | ||||||
| NCR Corp.*,1 | 8,523 | 311,516 | ||||||
| Fairchild Semiconductor International, Inc. — Class A*,1 | 22,552 | 310,992 | ||||||
| Science Applications International Corp.1 | 8,293 | 310,075 | ||||||
| Silicon Laboratories, Inc.*,1 | 5,915 | 309,059 | ||||||
| Ingram Micro, Inc. — Class A*,1 | 10,412 | 307,779 | ||||||
| AOL, Inc.*,1 | 6,950 | 304,202 | ||||||
| Compuware Corp.1 | 28,551 | 299,785 | ||||||
| VeriSign, Inc.*,1 | 5,530 | 298,122 | ||||||
| Equinix, Inc.*,1 | 1,610 | 297,592 | ||||||
| EchoStar Corp. — Class A*,1 | 6,238 | 296,679 | ||||||
| Akamai Technologies, Inc.*,1 | 5,066 | 294,892 | ||||||
| Solera Holdings, Inc.1 | 4,577 | 289,907 | ||||||
| Rovi Corp.*,1 | 12,542 | 285,706 | ||||||
| CDW Corp.1 | 10,242 | 281,040 | ||||||
| Polycom, Inc.*,1 | 20,382 | 279,641 | ||||||
| LinkedIn Corp. — Class A*,1 | 1,497 | 276,855 | ||||||
| IAC/InterActiveCorp1 | 3,864 | 275,851 | ||||||
| Rackspace Hosting, Inc.*,1 | 8,266 | 271,290 | ||||||
| Twitter, Inc.*,2 | 5,700 | 266,019 | ||||||
| NetApp, Inc.1 | 7,148 | 263,761 | ||||||
| Leidos Holdings, Inc.1 | 6,348 | 224,529 | ||||||
| FactSet Research Systems, Inc.1 | 1,959 | 211,200 | ||||||
| Pandora Media, Inc.*,1 | 4,921 | 149,205 | ||||||
| Fortinet, Inc.*,1 | 5,119 | 112,772 | ||||||
| Total Information Technology | 9,126,483 | |||||||
| INDUSTRIALS - 13.4% | ||||||||
| Copa Holdings S.A. — Class A1 | 2,326 | 337,712 | ||||||
| Harsco Corp.1 | 14,197 | 332,636 | ||||||
| Alaska Air Group, Inc.1 | 3,505 | 327,052 | ||||||
| TransDigm Group, Inc.1 | 1,731 | 320,581 | ||||||
| Southwest Airlines Co.1 | 13,524 | 319,302 | ||||||
| L-3 Communications Holdings, Inc.1 | 2,700 | 319,005 | ||||||
| Landstar System, Inc.1 | 5,322 | 315,169 | ||||||
| B/E Aerospace, Inc.*,1 | 3,621 | 314,267 | ||||||
| Northrop Grumman Corp.1 | 2,542 | 313,632 | ||||||
| Con-way, Inc.1 | 7,623 | 313,153 | ||||||
| Delta Air Lines, Inc.1 | 8,951 | 310,152 | ||||||
| Triumph Group, Inc.1 | 4,799 | 309,919 | ||||||
| Alliant Techsystems, Inc.1 | 2,167 | 308,039 | ||||||
| Textron, Inc.1 | 7,800 | 306,462 | ||||||
| Kirby Corp.*,1 | 3,026 | 306,383 | ||||||
| Spirit AeroSystems Holdings, Inc. — Class A*,1 | 10,800 | 304,452 | ||||||
| Lockheed Martin Corp.1 | 1,864 | 304,279 | ||||||
| Huntington Ingalls Industries, Inc.1 | 2,972 | 303,917 | ||||||
| American Airlines Group, Inc.* | 8,200 | 300,120 | ||||||
| Hexcel Corp.*,1 | 6,886 | 299,816 | ||||||
| General Dynamics Corp.1 | 2,745 | 298,985 | ||||||
| Regal-Beloit Corp.1 | 4,079 | 296,585 | ||||||
| Rockwell Collins, Inc.1 | 3,718 | 296,213 | ||||||
| United Continental Holdings, Inc.* | 6,621 | 295,495 | ||||||
| Exelis, Inc.1 | 14,642 | 278,344 | ||||||
| Hubbell, Inc. — Class B1 | 1,612 | 193,230 | ||||||
| United Technologies Corp.1 | 113 | 13,203 | ||||||
| Total Industrials | 7,938,103 | |||||||
| HEALTH CARE - 12.6% | ||||||||
| Hospira, Inc.*,1 | 7,289 | 315,250 | ||||||
| Covance, Inc.*,1 | 3,000 | 311,700 | ||||||
| Merck & Company, Inc.1 | 5,466 | 310,305 | ||||||
| Health Net, Inc.*,1 | 9,091 | 309,185 | ||||||
| 12 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | March 31, 2014 |
| LONG SHORT EQUITY FUND |
| Shares | Value | |||||||
| Eli Lilly & Co.1 | 5,247 | $ | 308,838 | |||||
| PerkinElmer, Inc.1 | 6,800 | 306,408 | ||||||
| Bio-Rad Laboratories, Inc. — Class A*,1 | 2,345 | 300,441 | ||||||
| Premier, Inc. — Class A*,1 | 9,115 | 300,339 | ||||||
| Allergan, Inc.1 | 2,414 | 299,577 | ||||||
| Bruker Corp.*,1 | 13,066 | 297,774 | ||||||
| Techne Corp.1 | 3,478 | 296,917 | ||||||
| Cubist Pharmaceuticals, Inc.*,1 | 3,939 | 288,138 | ||||||
| QIAGEN N.V.*,1 | 13,600 | 286,824 | ||||||
| Myriad Genetics, Inc.*,2 | 8,336 | 285,008 | ||||||
| Mettler-Toledo International, Inc.*,1 | 1,200 | 282,816 | ||||||
| Salix Pharmaceuticals Ltd.*,1 | 2,697 | 279,436 | ||||||
| Mylan, Inc.*,1 | 5,607 | 273,790 | ||||||
| Jazz Pharmaceuticals plc*,1 | 1,973 | 273,616 | ||||||
| BioMarin Pharmaceutical, Inc.*,1 | 3,962 | 270,248 | ||||||
| Theravance, Inc.*,1 | 8,680 | 268,559 | ||||||
| Seattle Genetics, Inc.*,1 | 5,859 | 266,936 | ||||||
| Vertex Pharmaceuticals, Inc.*,1 | 3,728 | 263,644 | ||||||
| Medivation, Inc.*,1 | 3,994 | 257,094 | ||||||
| Incyte Corporation Ltd.*,1 | 4,400 | 235,488 | ||||||
| Pharmacyclics, Inc.*,1 | 2,200 | 220,484 | ||||||
| United Therapeutics Corp.*,1 | 2,000 | 188,060 | ||||||
| Waters Corp.*,1 | 1,100 | 119,251 | ||||||
| AmerisourceBergen Corp. — Class A1 | 826 | 54,177 | ||||||
| Total Health Care | 7,470,303 | |||||||
| MATERIALS - 2.9% | ||||||||
| Kronos Worldwide, Inc.1 | 19,473 | 324,809 | ||||||
| Greif, Inc. — Class A1 | 6,028 | 316,410 | ||||||
| Domtar Corp.1 | 2,800 | 314,216 | ||||||
| Eagle Materials, Inc.1 | 3,482 | 308,714 | ||||||
| Huntsman Corp.1 | 10,307 | 251,697 | ||||||
| Bemis Company, Inc.1 | 4,924 | 193,218 | ||||||
| Total Materials | 1,709,064 | |||||||
| FINANCIALS - 1.7% | ||||||||
| Interactive Brokers Group, Inc. — Class A1 | 13,912 | 301,473 | ||||||
| SEI Investments Co.1 | 6,639 | 223,137 | ||||||
| Bank of Hawaii Corp.1 | 3,505 | 212,438 | ||||||
| Chimera Investment Corp.1 | 43,232 | 132,290 | ||||||
| Artisan Partners Asset Management, | ||||||||
| Inc. — Class A1 | 2,021 | 129,849 | ||||||
| Total Financials | 999,187 | |||||||
| ENERGY - 0.5% | ||||||||
| PBF Energy, Inc. — Class A1 | 12,323 | 317,933 | ||||||
| TELECOMMUNICATION SERVICES - 0.5% | ||||||||
| Windstream Holdings, Inc.1,2 | 38,291 | 315,518 | ||||||
| CONSUMER STAPLES - 0.5% | ||||||||
| Avon Products, Inc.1 | 16,928 | 247,827 | ||||||
| Total Common Stocks | ||||||||
| (Cost $35,769,537) | 39,008,026 | |||||||
Face | ||||||||
| REPURCHASE AGREEMENTS††,3 - 41.0% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 13,176,095 | 13,176,095 | |||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 5,559,855 | 5,559,855 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 3,759,764 | 3,759,764 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,751,735 | 1,751,735 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $24,247,449) | 24,247,449 | |||||||
| SECURITIES LENDING COLLATERAL††,4 - 1.9% | ||||||||
| Repurchase Agreements | ||||||||
| BNP Paribas Securities Corp. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 542,199 | 542,199 | ||||||
| HSBC Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% | ||||||||
| due 04/01/14 | 483,808 | 483,808 | ||||||
| Deutsche Bank Securities, Inc. | ||||||||
| issued 03/31/14 at 0.05% - 0.08% | ||||||||
| due 04/01/14 | 91,206 | 91,206 | ||||||
| Total Securities Lending Collateral | ||||||||
| (Cost $1,117,213) | 1,117,213 | |||||||
| Total Investments - 108.8% | ||||||||
| (Cost $61,134,199) | $ | 64,372,688 | ||||||
Shares | ||||||||
| COMMON STOCKS SOLD SHORT† - (21.2)% | ||||||||
| TELECOMMUNICATION SERVICES - (0.1)% | ||||||||
| Verizon Communications, Inc. | 1,342 | (63,839 | ) | |||||
| HEALTH CARE - (0.5)% | ||||||||
| Abbott Laboratories | 3,890 | (149,804 | ) | |||||
| Medtronic, Inc. | 2,603 | (160,189 | ) | |||||
| Total Health Care | (309,993 | ) | ||||||
| MATERIALS - (0.7)% | ||||||||
| Rockwood Holdings, Inc. | 1,659 | (123,430 | ) | |||||
| Freeport-McMoRan Copper & Gold, Inc. | 4,211 | (139,258 | ) | |||||
| Southern Copper Corp. | 5,060 | (147,296 | ) | |||||
| Total Materials | (409,984 | ) | ||||||
| INDUSTRIALS - (1.6)% | ||||||||
| FedEx Corp. | 1,132 | (150,058 | ) | |||||
| Danaher Corp. | 2,020 | (151,500 | ) | |||||
| General Electric Co. | 5,986 | (154,978 | ) | |||||
| United Parcel Service, Inc. — Class B | 1,598 | (155,613 | ) | |||||
| 3M Co. | 1,150 | (156,009 | ) | |||||
| Chicago Bridge & Iron Company N.V. | �� | 1,838 | (160,182 | ) | ||||
| Total Industrials | (928,340 | ) | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 13 |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| LONG SHORT EQUITY FUND |
| Shares | Value | |||||||
| CONSUMER STAPLES - (1.8)% | ||||||||
| Mondelez International, Inc. — Class A | 563 | $ | (19,452 | ) | ||||
| Estee Lauder Companies, Inc. — Class A | 1,378 | (92,161 | ) | |||||
| Keurig Green Mountain, Inc. | 1,404 | (148,248 | ) | |||||
| Kimberly-Clark Corp. | 1,429 | (157,547 | ) | |||||
| Procter & Gamble Co. | 1,995 | (160,797 | ) | |||||
| Colgate-Palmolive Co. | 2,479 | (160,813 | ) | |||||
| Nu Skin Enterprises, Inc. — Class A | 1,989 | (164,789 | ) | |||||
| Energizer Holdings, Inc. | 1,654 | (166,624 | ) | |||||
| Total Consumer Staples | (1,070,431 | ) | ||||||
| ENERGY - (3.5)% | ||||||||
| Pioneer Natural Resources Co. | 777 | (145,408 | ) | |||||
| Occidental Petroleum Corp. | 1,600 | (152,464 | ) | |||||
| Apache Corp. | 1,860 | (154,287 | ) | |||||
| National Oilwell Varco, Inc. | 2,003 | (155,974 | ) | |||||
| EOG Resources, Inc. | 810 | (158,898 | ) | |||||
| Hess Corp. | 1,921 | (159,212 | ) | |||||
| Oil States International, Inc.* | 1,621 | (159,831 | ) | |||||
| FMC Technologies, Inc.* | 3,062 | (160,112 | ) | |||||
| Chevron Corp. | 1,355 | (161,123 | ) | |||||
| Exxon Mobil Corp. | 1,660 | (162,149 | ) | |||||
| Halliburton Co. | 2,764 | (162,771 | ) | |||||
| Schlumberger Ltd. | 1,683 | (164,092 | ) | |||||
| ConocoPhillips | 2,341 | (164,689 | ) | |||||
| Total Energy | (2,061,010 | ) | ||||||
| FINANCIALS - (4.9)% | ||||||||
| Crown Castle International Corp. | 260 | (19,183 | ) | |||||
| General Growth Properties, Inc. | 1,776 | (39,072 | ) | |||||
| HCP, Inc. | 3,177 | (123,236 | ) | |||||
| Ocwen Financial Corp.* | 3,332 | (130,548 | ) | |||||
| AvalonBay Communities, Inc. | 1,045 | (137,229 | ) | |||||
| MBIA, Inc.* | 10,295 | (144,027 | ) | |||||
| Ventas, Inc. | 2,411 | (146,034 | ) | |||||
| Goldman Sachs Group, Inc. | 903 | (147,957 | ) | |||||
| Citigroup, Inc. | 3,140 | (149,464 | ) | |||||
| American Express Co. | 1,680 | (151,250 | ) | |||||
| Prologis, Inc. | 3,715 | (151,683 | ) | |||||
| American Tower Corp. — Class A | 1,860 | (152,278 | ) | |||||
| American International Group, Inc. | 3,050 | (152,531 | ) | |||||
| Equity Residential | 2,638 | (152,978 | ) | |||||
| Public Storage | 911 | (153,494 | ) | |||||
| Simon Property Group, Inc. | 940 | (154,160 | ) | |||||
| Travelers Companies, Inc. | 1,840 | (156,584 | ) | |||||
| Boston Properties, Inc. | 1,373 | (157,250 | ) | |||||
| MetLife, Inc. | 2,980 | (157,344 | ) | |||||
| ACE Ltd. | 1,590 | (157,505 | ) | |||||
| Popular, Inc.* | 5,088 | (157,677 | ) | |||||
| Total Financials | (2,891,484 | ) | ||||||
| CONSUMER DISCRETIONARY - (8.1)% | ||||||||
| GNC Holdings, Inc. — Class A | 1,357 | (59,735 | ) | |||||
| Guess?, Inc. | 5,116 | (141,202 | ) | |||||
| DSW, Inc. — Class A | 3,944 | (141,432 | ) | |||||
| Tiffany & Co. | 1,668 | (143,698 | ) | |||||
| LKQ Corp.* | 5,460 | (143,871 | ) | |||||
| Dollar General Corp.* | 2,601 | (144,303 | ) | |||||
| The Gap, Inc. | 3,640 | (145,818 | ) | |||||
| Ascena Retail Group, Inc.* | 8,548 | (147,709 | ) | |||||
| CarMax, Inc.* | 3,160 | (147,888 | ) | |||||
| Home Depot, Inc. | 1,870 | (147,973 | ) | |||||
| Dollar Tree, Inc.* | 2,875 | (150,018 | ) | |||||
| Cabela’s, Inc.* | 2,295 | (150,345 | ) | |||||
| Lowe’s Companies, Inc. | 3,080 | (150,612 | ) | |||||
| TJX Companies, Inc. | 2,510 | (152,232 | ) | |||||
| Urban Outfitters, Inc.* | 4,180 | (152,445 | ) | |||||
| O’Reilly Automotive, Inc.* | 1,031 | (152,990 | ) | |||||
| AutoZone, Inc.* | 285 | (153,074 | ) | |||||
| L Brands, Inc. | 2,699 | (153,222 | ) | |||||
| Ross Stores, Inc. | 2,150 | (153,832 | ) | |||||
| Genuine Parts Co. | 1,772 | (153,898 | ) | |||||
| Target Corp. | 2,560 | (154,906 | ) | |||||
| Murphy USA, Inc.* | 3,822 | (155,135 | ) | |||||
| Bed Bath & Beyond, Inc.* | 2,258 | (155,350 | ) | |||||
| Advance Auto Parts, Inc. | 1,236 | (156,354 | ) | |||||
| Aaron’s, Inc. | 5,175 | (156,492 | ) | |||||
| Hasbro, Inc. | 2,830 | (157,405 | ) | |||||
| Nordstrom, Inc. | 2,521 | (157,436 | ) | |||||
| Polaris Industries, Inc. | 1,130 | (157,872 | ) | |||||
| Kohl’s Corp. | 2,821 | (160,233 | ) | |||||
| Macy’s, Inc. | 2,707 | (160,498 | ) | |||||
| GameStop Corp. — Class A | 4,006 | (164,647 | ) | |||||
| Ulta Salon Cosmetics & Fragrance, Inc.* | 1,754 | (170,980 | ) | |||||
| Total Consumer Discretionary | (4,793,605 | ) | ||||||
| Total Common Stock Sold Short | ||||||||
| (Proceeds $12,274,261) | (12,528,686 | ) | ||||||
| Total Securities Sold Short - (21.2)% | ||||||||
| (Proceeds $12,274,261) | $ | (12,528,686 | ) | |||||
| Other Assets & Liabilities, net - 12.4% | 7,361,265 | |||||||
| Total Net Assets - 100.0% | $ | 59,205,267 | ||||||
| * | 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 short security collateral at March 31, 2014. |
| 2 | All or portion of this security is on loan at March 31, 2014 — See Note 10. |
| 3 | Repurchase Agreements — See Note 5. |
| 4 | Securities lending collateral — See Note 10. plc — Public Limited Company |
| 14 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| LONG SHORT EQUITY FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
March 31, 2014
| Assets: | ||||
| Investments, at value - including $1,097,049 of | ||||
| securities loaned | ||||
| (cost $35,769,537) | $ | 39,008,026 | ||
| Repurchase agreements, at value | ||||
| (cost $25,364,662) | 25,364,662 | |||
| Total investments | ||||
| (cost $61,134,199) | 64,372,688 | |||
| Segregated cash with broker | 8,610,375 | |||
| Receivables: | ||||
| Fund shares sold | 156,151 | |||
| Dividends | 35,145 | |||
| Securities lending income | 4,708 | |||
| Interest | 15 | |||
| Total assets | 73,179,082 | |||
| Liabilities: | ||||
| Securities sold short, at value | ||||
| (proceeds $12,274,261) | 12,528,686 | |||
| Payable for: | ||||
| Upon return of securities loaned | 1,117,213 | |||
| Fund shares redeemed | 184,753 | |||
| Management fees | 43,304 | |||
| Distribution and service fees | 25,542 | |||
| Transfer agent and administrative fees | 12,029 | |||
| Portfolio accounting fees | 4,811 | |||
| Miscellaneous | 57,477 | |||
| Total liabilities | 13,973,815 | |||
| Net assets | $ | 59,205,267 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 126,283,121 | ||
| Accumulated net investment loss | (238,102 | ) | ||
| Accumulated net realized loss on investments | (69,823,816 | ) | ||
| Net unrealized appreciation on investments | 2,984,064 | |||
| Net assets | $ | 59,205,267 | ||
| A-Class: | ||||
| Net assets | $ | 7,551,704 | ||
| Capital shares outstanding | 501,164 | |||
| Net asset value per share | $ | 15.07 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 15.82 | ||
| C-Class: | ||||
| Net assets | $ | 22,353,966 | ||
| Capital shares outstanding | 1,625,108 | |||
| Net asset value per share | $ | 13.76 | ||
| H-Class: | ||||
| Net assets | $ | 29,287,282 | ||
| Capital shares outstanding | 1,937,135 | |||
| Net asset value per share | $ | 15.12 | ||
| Institutional Class: | ||||
| Net assets | $ | 12,315 | ||
| Capital shares outstanding | 808 | |||
| Net asset value per share | $ | 15.24 |
| STATEMENT OF |
| OPERATIONS |
Year Ended March 31, 2014
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $1,576) | $ | 737,128 | ||
| Income from securities lending, net | 23,265 | |||
| Interest | 5,667 | |||
| Total investment income | 766,060 | |||
| Expenses: | ||||
| Management fees | 522,080 | |||
| Transfer agent and administrative fees | 145,022 | |||
| Distribution and service fees: | ||||
| A-Class | 19,503 | |||
| C-Class | 230,237 | |||
| H-Class | 67,929 | |||
| Portfolio accounting fees | 58,009 | |||
| Short sales dividend expense | 300,947 | |||
| Prime broker interest expense | 94,623 | |||
| Custodian fees | 6,759 | |||
| Trustees’ fees* | 6,478 | |||
| Miscellaneous | 87,918 | |||
| Total expenses | 1,539,505 | |||
| Net investment loss | (773,445 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 10,115,633 | |||
| Futures contracts | 102,660 | |||
| Securities sold short | (2,855,706 | ) | ||
| Net realized gain | 7,362,587 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (1,234,153 | ) | ||
| Securities sold short | 752,446 | |||
| Futures contracts | (7,093 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (488,800 | ) | ||
| Net realized and unrealized gain | 6,873,787 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 6,100,342 |
* 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 GUGGENHEIM FUNDS ANNUAL REPORT | 15 |
| LONG SHORT EQUITY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (773,445 | ) | $ | (472,793 | ) | ||
| Net realized gain on investments | 7,362,587 | 8,118,418 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (488,800 | ) | (7,745,424 | ) | ||||
| Net increase (decrease) in net assets resulting from operations | 6,100,342 | (99,799 | ) | |||||
| Distributions to shareholders from: | ||||||||
| Net investment income | ||||||||
| A-Class | — | (41,370 | ) | |||||
| C-Class | — | (101,016 | ) | |||||
| H-Class | — | (106,079 | ) | |||||
| Institutional Class | — | (13 | ) | |||||
| Total distributions to shareholders | — | (248,478 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 4,913,621 | 10,682,916 | ||||||
| C-Class | 1,459,676 | 573,881 | ||||||
| H-Class | 16,322,796 | 4,071,001 | ||||||
| Institutional Class | 1,001 | — | ||||||
| Distributions reinvested | ||||||||
| A-Class | — | 40,128 | ||||||
| C-Class | — | 98,169 | ||||||
| H-Class | — | 101,654 | ||||||
| Institutional Class | — | 13 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (11,324,362 | ) | (14,166,103 | ) | ||||
| C-Class | (5,045,687 | ) | (9,494,408 | ) | ||||
| H-Class | (16,148,434 | ) | (32,243,335 | ) | ||||
| Institutional Class | (1,055 | ) | — | |||||
| Net decrease from capital share transactions | (9,822,444 | ) | (40,336,084 | ) | ||||
| Net decrease in net assets | (3,722,102 | ) | (40,684,361 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 62,927,369 | 103,611,730 | ||||||
| End of year | $ | 59,205,267 | $ | 62,927,369 | ||||
| Accumulated net investment loss at end of year | $ | (238,102 | ) | $ | (392,623 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 345,762 | 809,308 | ||||||
| C-Class | 110,051 | 47,416 | ||||||
| H-Class | 1,125,572 | 313,089 | ||||||
| Institutional Class | 69 | — | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | — | 3,136 | ||||||
| C-Class | — | 8,320 | ||||||
| H-Class | — | 7,915 | ||||||
| Institutional Class | — | 1 | ||||||
| Shares redeemed | ||||||||
| A-Class | (816,705 | ) | (1,083,452 | ) | ||||
| C-Class | (384,136 | ) | (796,553 | ) | ||||
| H-Class | (1,129,156 | ) | (2,476,765 | ) | ||||
| Institutional Class | (69 | ) | — | |||||
| Net decrease in shares | (748,612 | ) | (3,167,585 | ) | ||||
| 16 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO 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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 13.48 | $ | 13.28 | $ | 14.28 | $ | 12.59 | $ | 8.62 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.13 | ) | (.05 | ) | .03 | (.04 | ) | (.07 | ) | |||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.72 | .30 | (1.03 | ) | 1.73 | 4.04 | ||||||||||||||
| Total from investment operations | 1.59 | .25 | (1.00 | ) | 1.69 | 3.97 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.05 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.05 | ) | — | — | — | ||||||||||||||
| Redemption fees collected | — | — | — | — | b | — | b | |||||||||||||
| Net asset value, end of period | $ | 15.07 | $ | 13.48 | $ | 13.28 | $ | 14.28 | $ | 12.59 | ||||||||||
| Total Returnc | 11.80 | % | 1.89 | % | (7.00 | %) | 13.42 | % | 46.06 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 7,552 | $ | 13,106 | $ | 16,510 | $ | 25,447 | $ | 36,231 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.91 | %) | (0.35 | %) | 0.21 | % | (0.33 | %) | (0.62 | %) | ||||||||||
| Total expensese | 2.34 | % | 1.92 | % | 1.66 | % | 1.71 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | 256 | % | 183 | % | 190 | % | 231 | % | 375 | % | ||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 12.40 | $ | 12.31 | $ | 13.33 | $ | 11.85 | $ | 8.17 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.24 | ) | (.14 | ) | (.07 | ) | (.13 | ) | (.14 | ) | ||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.60 | .28 | (.95 | ) | 1.61 | 3.82 | ||||||||||||||
| Total from investment operations | 1.36 | .14 | (1.02 | ) | 1.48 | 3.68 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.05 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.05 | ) | — | — | — | ||||||||||||||
| Redemption fees collected | — | — | — | — | b | — | b | |||||||||||||
| Net asset value, end of period | $ | 13.76 | $ | 12.40 | $ | 12.31 | $ | 13.33 | $ | 11.85 | ||||||||||
| Total Returnc | 10.97 | % | 1.14 | % | (7.65 | %) | 12.49 | % | 45.04 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 22,354 | $ | 23,554 | $ | 32,503 | $ | 50,381 | $ | 64,918 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.79 | %) | (1.12 | %) | (0.54 | %) | (1.08 | %) | (1.37 | %) | ||||||||||
| Total expensese | 3.11 | % | 2.69 | % | 2.41 | % | 2.46 | % | 2.43 | % | ||||||||||
| Portfolio turnover rate | 256 | % | 183 | % | 190 | % | 231 | % | 375 | % | ||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 17 |
| LONG SHORT EQUITY FUND |
| FINANCIAL HIGHLIGHTS (continued) |
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 | ||||||||||||||||
| March 31, | March 28, | March 31, | March 31, | March 31, | ||||||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 13.53 | $ | 13.33 | $ | 14.32 | $ | 12.63 | $ | 8.65 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.16 | ) | (.04 | ) | .03 | (.04 | ) | (.07 | ) | |||||||||||
| Net gain (loss) on investments | ||||||||||||||||||||
| (realized and unrealized) | 1.75 | .29 | (1.02 | ) | 1.73 | 4.05 | ||||||||||||||
| Total from investment operations | 1.59 | .25 | (.99 | ) | 1.69 | 3.98 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | (.05 | ) | — | — | — | ||||||||||||||
| Total distributions | — | (.05 | ) | — | — | — | ||||||||||||||
| Redemption fees collected | — | — | — | — | b | — | b | |||||||||||||
| Net asset value, end of period | $ | 15.12 | $ | 13.53 | $ | 13.33 | $ | 14.32 | $ | 12.63 | ||||||||||
| Total Returnc | 11.75 | % | 1.88 | % | (6.91 | %) | 13.38 | % | 46.01 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 29,287 | $ | 26,257 | $ | 54,589 | $ | 87,212 | $ | 99,418 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (1.07 | %) | (0.29 | %) | 0.20 | % | (0.31 | %) | (0.63 | %) | ||||||||||
| Total expensese | 2.36 | % | 1.88 | % | 1.66 | % | 1.70 | % | 1.68 | % | ||||||||||
| Portfolio turnover rate | 256 | % | 183 | % | 190 | % | 231 | % | 375 | % | ||||||||||
| 18 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| LONG SHORT EQUITY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | Period Ended | ||||||||||
| March 31, | March 28, | March 31, | ||||||||||
| Institutional Class | 2014 | 2013 | 2012d | |||||||||
| Per Share Data | ||||||||||||
| Net asset value, beginning of period | $ | 13.60 | $ | 13.33 | $ | 12.39 | ||||||
| Income (loss) from investment operations: | ||||||||||||
| Net investment income (loss)a | (.12 | ) | (.02 | ) | .06 | |||||||
| Net gain (loss) on investments | ||||||||||||
| (realized and unrealized) | 1.76 | .31 | .88 | |||||||||
| Total from investment operations | 1.64 | .29 | .94 | |||||||||
| Less distributions from: | ||||||||||||
| Net investment income | — | (.02 | ) | — | ||||||||
| Total distributions | — | (.02 | ) | — | ||||||||
| Net asset value, end of period | $ | 15.24 | $ | 13.60 | $ | 13.33 | ||||||
| Total Returnc | 12.06 | % | 2.15 | % | 7.59 | % | ||||||
| Ratios/Supplemental Data | ||||||||||||
| Net assets, end of period (in thousands) | $ | 12 | $ | 11 | $ | 11 | ||||||
| Ratios to average net assets: | ||||||||||||
| Net investment income (loss) | (0.82 | %) | (0.17 | %) | 1.29 | % | ||||||
| Total expensese | 2.11 | % | 1.72 | % | 1.36 | % | ||||||
| Portfolio turnover rate | 256 | % | 183 | % | 190 | % | ||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Redemption fees collected are less than $0.01 per share. |
| c | Total return does not reflect the impact of any applicable sales charges. |
| d | Since commencement of operations: November 30, 2011. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
| e | Excluding interest and dividend expense related to short sales, the operating ratios for the years or periods presented would be: |
| 3/31/14 | 3/28/13 | 3/31/12 | 3/31/11 | 3/31/10 | ||||||||||||||||
| A-Class | 1.68 | % | 1.65 | % | 1.66 | % | 1.69 | % | 1.68 | % | ||||||||||
| C-Class | 2.42 | % | 2.40 | % | 2.41 | % | 2.44 | % | 2.43 | % | ||||||||||
| H-Class | 1.67 | % | 1.65 | % | 1.66 | % | 1.69 | % | 1.68 | % | ||||||||||
| Institutional Class | 1.42 | % | 1.41 | % | N/A | N/A | N/A | |||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 19 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
EVENT DRIVEN AND DISTRESSED STRATEGIES FUND
OBJECTIVE: Seeks to achieve capital growth.
The Event Driven and Distressed Strategies Fund H-Class returned 9.54% for the one-year period ended March 31, 2014. By comparison, the S&P 500 Index returned 21.86% and the Credit Suisse Event Driven Liquid Index returned 10.32%.
The Fund gains exposure to event driven and distressed situations through various exposures, such as merger arbitrage, high yield, equities, and volatility. During the period, the Fund used derivatives, such as swaps and futures, as the primary instrument to gain exposure to these factors. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
The main positive drivers of performance were the high yield and small-capitalization equity exposures. The unique Illiquidity Factor in the strategy was added to the portfolio during this period for the first time since 2010, and also contributed positively during the 12-month period. The weight of this exposure grew during the year, suggesting that Event Driven hedge-fund managers were taking greater illiquidity risk as they searched for yield. The Fund also had positive contributions from distressed equity and merger arbitrage exposures.
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 Dates: | ||
| A-Class | June 30, 2010 | |
| C-Class | June 30, 2010 | |
| H-Class | June 30, 2010 | |
| Institutional Class | June 30, 2010 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 20 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||
| Inception | ||||||||
| 1 Year | (06/30/10) | |||||||
| A-Class Shares | 9.58% | 8.28% | ||||||
| A-Class Shares with sales charge† | 4.39% | 6.88% | ||||||
| C-Class Shares | 8.74% | 7.44% | ||||||
| C-Class Shares with CDSC‡ | 7.74% | 7.44% | ||||||
| H-Class Shares | 9.54% | 8.28% | ||||||
| Institutional Class Shares | 9.84% | 8.55% | ||||||
| Credit Suisse Event Driven Liquid Index | 10.32% | 9.90% | ||||||
| S&P 500 Index | 21.86% | 19.78% |
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Credit Suisse Event Driven Liquid 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 graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares and Institutional Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 21 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| EVENT DRIVEN AND DISTRESSED STRATEGIES FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 80.4% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 5,827,078 | $ | 5,827,078 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 2,458,825 | 2,458,825 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,662,741 | 1,662,741 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 774,698 | 774,698 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $10,723,342) | 10,723,342 | |||||||
| Total Investments - 80.4% | ||||||||
| (Cost $10,723,342) | $ | 10,723,342 | ||||||
| Other Assets & Liabilities, net - 19.6% | 2,617,653 | |||||||
| Total Net Assets - 100.0% | $ | 13,340,995 | ||||||
| Unrealized | ||||||||
| Contracts | Loss | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 Russell 2000 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,634,080) | 14 | $ | (28,405 | ) | ||||
| INTEREST RATE FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 U.S. Treasury 5 Year | ||||||||
| Note Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $6,781,219) | 57 | $ | (42,390 | ) | ||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Credit Suisse International, LLC | ||||||||
| April 2014 Credit Suisse Merger | ||||||||
| Arbitrage Liquid Index Swap | ||||||||
| Terminating 04/22/143 | ||||||||
| (Notional Value $5,600,899) | 4,827 | $ | (5,696 | ) | ||||
| Credit Suisse International, LLC | ||||||||
| April 2014 Credit Suisse Illiquidity | ||||||||
| Premium Liquid Index Swap | ||||||||
| Terminating 04/22/144 | ||||||||
| (Notional Value $7,054,896) | 5,932 | (43,322 | ) | |||||
| (Total Notional Value | ||||||||
| $12,655,795) | $ | (49,018 | ) |
CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENTS PROTECTION SOLD††,2
| Protection | Upfront | |||||||||||||||||||||||
| Premium | Maturity | Notional | Notional | Premiums | Unrealized | |||||||||||||||||||
| Index | Counterparty | Rate | Date | Principal | Value | Paid | Appreciation | |||||||||||||||||
| CDX.HY-22 Index | Goldman Sachs International | 5.00 | % | 06/20/19 | $ | 1,000,000 | $ | (1,074,576 | ) | $ | 71,388 | $ | 3,188 | |||||||||||
| CDX.HY-22 Index | Barclays Bank plc | 5.00 | % | 06/20/19 | 6,500,000 | (6,984,741 | ) | 464,020 | 20,722 | |||||||||||||||
| † | 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 5. |
| 2 | Credit Default Swaps — See Note 6. |
| 3 | Total Return based on Credit Suisse Merger Arbitrage Liquid Index +/- financing at a variable rate. |
| 4 | Total Return based on Credit Suisse Illiquidity Premium Liquid Index +/- financing at a variable rate. plc — Public Limited Company |
| 22 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EVENT DRIVEN AND DISTRESSED STRATEGIES FUND |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| March 31, 2014 |
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $10,723,342) | $ | 10,723,342 | ||
| Segregated cash with broker | 2,119,875 | |||
| Upfront premiums paid on credit default swaps | 535,408 | |||
| Unrealized appreciation on swap agreements | 23,910 | |||
| Receivables: | ||||
| Fund shares sold | 200,509 | |||
| Variation margin | 32,733 | |||
| Protection fees on credit default swaps | 12,507 | |||
| Investment advisor | 1,261 | |||
| Total assets | 13,649,545 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 49,018 | |||
| Payable for: | ||||
| Due to broker | 171,161 | |||
| Fund shares redeemed | 44,223 | |||
| Licensing fees | 21,010 | |||
| Management fees | 9,300 | |||
| Distribution and service fees | 3,005 | |||
| Transfer agent and administrative fees | 2,583 | |||
| Portfolio accounting fees | 1,033 | |||
| Custodian fees | 122 | |||
| Miscellaneous | 7,095 | |||
| Total liabilities | 308,550 | |||
| Net assets | $ | 13,340,995 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 12,925,711 | ||
| Undistributed net investment income | 21,935 | |||
| Accumulated net realized gain on investments | 489,252 | |||
| Net unrealized depreciation on investments | (95,903 | ) | ||
| Net assets | $ | 13,340,995 | ||
| A-Class: | ||||
| Net assets | $ | 4,303,286 | ||
| Capital shares outstanding | 151,403 | |||
| Net asset value per share | $ | 28.42 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 29.84 | ||
| C-Class: | ||||
| Net assets | $ | 1,253,042 | ||
| Capital shares outstanding | 45,514 | |||
| Net asset value per share | $ | 27.53 | ||
| H-Class: | ||||
| Net assets | $ | 6,809,187 | ||
| Capital shares outstanding | 239,565 | |||
| Net asset value per share | $ | 28.42 | ||
| Institutional Class: | ||||
| Net assets | $ | 975,480 | ||
| Capital shares outstanding | 33,973 | |||
| Net asset value per share | $ | 28.71 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended March 31, 2014 |
| Investment Income: | ||||
| Dividends | $ | 17,113 | ||
| Interest | 2,491 | |||
| Income from securities lending, net | 743 | |||
| Total investment income | 20,347 | |||
| Expenses: | ||||
| Management fees | 102,147 | |||
| Transfer agent and administrative fees | 28,374 | |||
| Distribution and service fees: | ||||
| A-Class | 7,688 | |||
| C-Class | 7,931 | |||
| H-Class | 16,296 | |||
| Portfolio accounting fees | 11,350 | |||
| Licensing fees | 39,361 | |||
| Custodian fees | 1,319 | |||
| Trustees’ fees* | 1,022 | |||
| Prime broker interest expense | 74 | |||
| Miscellaneous | 16,805 | |||
| Total expenses | 232,367 | |||
| Less: | ||||
| Expenses waived by Advisor | (13,168 | ) | ||
| Net expenses | 219,199 | |||
| Net investment loss | (198,852 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (15,466 | ) | ||
| Swap agreements | 898,731 | |||
| Futures contracts | 493,834 | |||
| Net realized gain | 1,377,099 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | (27,252 | ) | ||
| Swap agreements | (37,161 | ) | ||
| Futures contracts | (106,412 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | (170,825 | ) | ||
| Net realized and unrealized gain | 1,206,274 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 1,007,422 |
| * | 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 GUGGENHEIM FUNDS ANNUAL REPORT | 23 |
| EVENT DRIVEN AND DISTRESSED STRATEGIES FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (198,852 | ) | $ | (90,035 | ) | ||
| Net realized gain on investments | 1,377,099 | 842,332 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (170,825 | ) | 16,129 | |||||
| Net increase in net assets resulting from operations | 1,007,422 | 768,426 | ||||||
| Distributions to shareholders from: | ||||||||
| Net realized gains | ||||||||
| A-Class | (170,099 | ) | — | |||||
| C-Class | (44,651 | ) | — | |||||
| H-Class | (394,614 | ) | — | |||||
| Institutional Class | (60,484 | ) | — | |||||
| Total distributions to shareholders | (669,848 | ) | — | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 3,375,449 | 2,996,925 | ||||||
| C-Class | 843,617 | 488,372 | ||||||
| H-Class | 2,523,264 | 2,355,423 | ||||||
| Institutional Class | 256,708 | 720,286 | ||||||
| Distributions reinvested | ||||||||
| A-Class | 163,722 | — | ||||||
| C-Class | 44,596 | — | ||||||
| H-Class | 389,688 | — | ||||||
| Institutional Class | 59,898 | — | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (1,418,770 | ) | (3,657,692 | ) | ||||
| C-Class | (690,580 | ) | (552,423 | ) | ||||
| H-Class | (2,423,769 | ) | (2,899,724 | ) | ||||
| Institutional Class | (263,890 | ) | (206,045 | ) | ||||
| Net increase (decrease) from capital share transactions | 2,859,933 | (754,878 | ) | |||||
| Net increase in net assets | 3,197,507 | 13,548 | ||||||
| Net assets: | ||||||||
| Beginning of year | 10,143,488 | 10,129,940 | ||||||
| End of year | $ | 13,340,995 | $ | 10,143,488 | ||||
| Undistributed net investment income/Accumulated net investment loss at end of year | $ | 21,935 | $ | (24,198 | ) | |||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 119,577 | 112,031 | ||||||
| C-Class | 30,556 | 18,959 | ||||||
| H-Class | 89,167 | 90,146 | ||||||
| Institutional Class | 8,974 | 26,823 | ||||||
| Shares issued from reinvestment of distributions | ||||||||
| A-Class | 5,879 | — | ||||||
| C-Class | 1,649 | — | ||||||
| H-Class | 13,992 | — | ||||||
| Institutional Class | 2,130 | — | ||||||
| Shares redeemed | ||||||||
| A-Class | (49,520 | ) | (138,867 | ) | ||||
| C-Class | (25,215 | ) | (21,348 | ) | ||||
| H-Class | (86,131 | ) | (111,346 | ) | ||||
| Institutional Class | (9,210 | ) | (7,667 | ) | ||||
| Net increase (decrease) in shares | 101,848 | (31,269 | ) | |||||
| 24 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EVENT DRIVEN AND DISTRESSED STRATEGIES 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 | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 27.56 | $ | 25.37 | $ | 26.86 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.49 | ) | (.21 | ) | (.37 | ) | (.33 | ) | ||||||||
| Net gain (loss) on investments | ||||||||||||||||
| (realized and unrealized) | 3.09 | 2.40 | (.36 | ) | 4.27 | |||||||||||
| Total from investment operations | 2.60 | 2.19 | (.73 | ) | 3.94 | |||||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Total distributions | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Net asset value, end of period | $ | 28.42 | $ | 27.56 | $ | 25.37 | $ | 26.86 | ||||||||
| Total Returnc | 9.58 | % | 8.63 | % | (2.60 | %) | 16.24 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,303 | $ | 2,080 | $ | 2,595 | $ | 11,591 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.73 | %) | (0.80 | %) | (1.43 | %) | (1.65 | %) | ||||||||
| Total expensesd | 2.02 | % | 2.03 | % | 1.93 | % | 2.03 | % | ||||||||
| Net expensese | 1.90 | % | 1.91 | % | 1.85 | % | 1.89 | % | ||||||||
| Portfolio turnover rate | 161 | % | 228 | % | 513 | % | — | |||||||||
| Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 26.95 | $ | 24.99 | $ | 26.67 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.67 | ) | (.43 | ) | (.52 | ) | (.48 | ) | ||||||||
| Net gain (loss) on investments | ||||||||||||||||
| (realized and unrealized) | 2.99 | 2.39 | (.40 | ) | 4.23 | |||||||||||
| Total from investment operations | 2.32 | 1.96 | (.92 | ) | 3.75 | |||||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Total distributions | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Net asset value, end of period | $ | 27.53 | $ | 26.95 | $ | 24.99 | $ | 26.67 | ||||||||
| Total Returnc | 8.74 | % | 7.89 | % | (3.38 | %) | 15.46 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 1,253 | $ | 1,038 | $ | 1,022 | $ | 1,363 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (2.45 | %) | (1.67 | %) | (2.04 | %) | (2.42 | %) | ||||||||
| Total expensesd | 2.77 | % | 2.79 | % | 2.66 | % | 2.79 | % | ||||||||
| Net expensese | 2.65 | % | 2.66 | % | 2.60 | % | 2.65 | % | ||||||||
| Portfolio turnover rate | 161 | % | 228 | % | 513 | % | — | |||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 25 |
| EVENT DRIVEN AND DISTRESSED STRATEGIES FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 27.57 | $ | 25.37 | $ | 26.86 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.49 | ) | (.23 | ) | (.34 | ) | (.33 | ) | ||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.08 | 2.43 | (.39 | ) | 4.27 | |||||||||||
| Total from investment operations | 2.59 | 2.20 | (.73 | ) | 3.94 | |||||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Total distributions | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Net asset value, end of period | $ | 28.42 | $ | 27.57 | $ | 25.37 | $ | 26.86 | ||||||||
| Total Returnc | 9.54 | % | 8.67 | % | (2.60 | %) | 16.24 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 6,809 | $ | 6,134 | $ | 6,183 | $ | 8,886 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.72 | %) | (0.88 | %) | (1.33 | %) | (1.67 | %) | ||||||||
| Total expensesd | 2.02 | % | 2.03 | % | 1.91 | % | 2.04 | % | ||||||||
| Net expensese | 1.90 | % | 1.91 | % | 1.85 | % | 1.90 | % | ||||||||
| Portfolio turnover rate | 161 | % | 228 | % | 513 | % | — | |||||||||
| Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| Institutional Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 27.76 | $ | 25.49 | $ | 26.91 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.42 | ) | (.19 | ) | (.23 | ) | (.27 | ) | ||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.11 | 2.46 | (.43 | ) | 4.26 | |||||||||||
| Total from investment operations | 2.69 | 2.27 | (.66 | ) | 3.99 | |||||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Total distributions | (1.74 | ) | — | (.76 | ) | (2.08 | ) | |||||||||
| Net asset value, end of period | $ | 28.71 | $ | 27.76 | $ | 25.49 | $ | 26.91 | ||||||||
| Total Returnc | 9.84 | % | 8.91 | % | (2.34 | %) | 16.45 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 975 | $ | 891 | $ | 329 | $ | 59 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.46 | %) | (0.70 | %) | (0.90 | %) | (1.42 | %) | ||||||||
| Total expensesd | 1.77 | % | 1.80 | % | 1.61 | % | 1.79 | % | ||||||||
| Net expensese | 1.65 | % | 1.67 | % | 1.58 | % | 1.65 | % | ||||||||
| Portfolio turnover rate | 161 | % | 228 | % | 513 | % | — | |||||||||
| a | Since commencement of operations: June 30, 2010. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
| b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| c | Total return does not reflect the impact of any applicable sales charges and has not been annualized. |
| 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. |
| 26 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE GUGGENHEIM FUNDS ANNUAL REPORT | 27 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
EMERGING MARKETS 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of a specific benchmark on a daily basis. The Fund’s current benchmark is 200% of the performance of the BNY Mellon Emerging Markets 50 ADR 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 March 31, 2014, Emerging Markets 2x Strategy Fund H-Class returned -10.19%, while the BNY Mellon Emerging Markets 50 ADR Index returned -2.92% over the same period. For comparison, the S&P 500 Index returned 21.86%.
For the period, Emerging Markets 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of 200% of the daily price movement of the BNY Mellon Emerging Markets 50 ADR Index.
For the period, the sectors contributing most to the performance of the underlying index were Information Technology and Consumer Discretionary. All other sectors detracted from performance of the underlying index, with Energy and Materials detracting most.
The holdings contributing most to the performance of the underlying index for the period were ADRs for BRF SA, China Life Insurance Co Ltd. and Ambev SA. The holdings detracting most from return were ADRs for CNOOC Ltd., PetroChina Co. Ltd and Taiwan Semiconductor Manufacturing 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 contributed to the Fund’s 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.
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 Dates: | ||
| A-Class | October 29, 2010 | |
| C-Class | October 29, 2010 | |
| H-Class | October 29, 2010 |
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Taiwan Semiconductor Manufacturing | ||||
| Company Ltd. ADR | 5.6 | % | ||
| China Mobile Ltd. ADR | 3.6 | % | ||
| Baidu, Inc. ADR | 3.2 | % | ||
| Itau Unibanco Holding S.A. ADR | 2.8 | % | ||
| AMBEV S.A. ADR | 2.6 | % | ||
| America Movil SAB de CV ADR | 2.3 | % | ||
| Banco Bradesco S.A. ADR | 2.2 | % | ||
| Petroleo Brasileiro S.A. ADR | 2.2 | % | ||
| Sasol Ltd. ADR | 2.2 | % | ||
| Vale S.A. ADR | 2.0 | % | ||
| Top Ten Total | 28.7 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| 28 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||
| Inception | ||||||||
| 1 Year | (10/29/10) | |||||||
| A-Class Shares | -9.96% | -15.06% | ||||||
| A-Class Shares with sales charge† | -14.21% | -16.27% | ||||||
| C-Class Shares | -10.21% | -15.36% | ||||||
| C-Class Shares with CDSC‡ | -11.10% | -15.36% | ||||||
| H-Class Shares | -10.19% | -15.03% | ||||||
| BNY Mellon Emerging Markets 50 | ||||||||
| ADR Index | -2.92% | -3.97% | ||||||
| S&P 500 Index | 21.86% | 16.86% |
INVESTMENT CONCENTRATION
At March 31, 2014, the investment diversification of the Fund by country was as follows:
| Country | % of Common Stocks | Value | ||||||
| Brazil | 28.22 | % | $ | 1,066,602 | ||||
| China | 18.72 | % | 707,385 | |||||
| Taiwan | 10.91 | % | 412,225 | |||||
| South Korea | 9.27 | % | 350,504 | |||||
| Mexico | 8.91 | % | 336,755 | |||||
| India | 8.16 | % | 308,355 | |||||
| Hong Kong | 6.34 | % | 239,519 | |||||
| South Africa | 4.16 | % | 157,334 | |||||
| Colombia | 1.19 | % | 44,991 | |||||
| Russia | 1.05 | % | 39,597 | |||||
| Indonesia | 1.03 | % | 39,055 | |||||
| Other | 2.04 | % | 76,896 | |||||
| Total Common Stocks | 100.0 | % | $ | 3,779,218 | ||||
| * | 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 BNY Mellon Emerging Markets 50 ADR 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 graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 29 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| EMERGING MARKETS 2x STRATEGY FUND |
| Shares | Value | |||||||
| COMMON STOCKS† - 64.3% | ||||||||
| INFORMATION TECHNOLOGY - 13.2% | ||||||||
| Taiwan Semiconductor Manufacturing | ||||||||
| Company Ltd. ADR | 16,466 | $ | 329,649 | |||||
| Baidu, Inc. ADR* | 1,222 | 186,208 | ||||||
| Infosys Ltd. ADR | 2,156 | 116,812 | ||||||
| Wipro Ltd. ADR | 2,626 | 35,188 | ||||||
| Qihoo 360 Technology Company Ltd. ADR* | 342 | 34,056 | ||||||
| Advanced Semiconductor Engineering, Inc. ADR | 5,481 | 30,420 | ||||||
| LG Display Company Ltd. ADR* | 1,985 | 24,813 | ||||||
| NetEase, Inc. ADR | 322 | 21,671 | ||||||
| Total Information Technology | 778,817 | |||||||
| ENERGY - 13.2% | ||||||||
| Petroleo Brasileiro S.A. ADR | 9,146 | 126,855 | ||||||
| Sasol Ltd. ADR | 2,266 | 126,624 | ||||||
| CNOOC Ltd. ADR | 719 | 109,151 | ||||||
| PetroChina Company Ltd. ADR | 944 | 102,424 | ||||||
| China Petroleum & Chemical Corp. ADR | 1,141 | 102,120 | ||||||
| Petroleo Brasileiro S.A. ADR | 6,658 | 87,553 | ||||||
| Ultrapar Participacoes S.A. ADR | 1,891 | 45,554 | ||||||
| Ecopetrol S.A. ADR | 1,103 | 44,991 | ||||||
| YPF S.A. ADR | 862 | 26,860 | ||||||
| Total Energy | 772,132 | |||||||
| FINANCIALS - 11.4% | ||||||||
| Itau Unibanco Holding S.A. ADR | 11,226 | 166,819 | ||||||
| Banco Bradesco S.A. ADR | 9,409 | 128,622 | ||||||
| China Life Insurance Company Ltd. ADR | 2,219 | 93,952 | ||||||
| Shinhan Financial Group Company Ltd. ADR* | 2,121 | 93,218 | ||||||
| HDFC Bank Ltd. ADR | 1,742 | 71,474 | ||||||
| KB Financial Group, Inc. ADR* | 1,728 | 60,739 | ||||||
| ICICI Bank Ltd. ADR | 1,258 | 55,100 | ||||||
| Total Financials | 669,924 | |||||||
| TELECOMMUNICATION SERVICES - 10.6% | ||||||||
| China Mobile Ltd. ADR | 4,675 | 213,134 | ||||||
| America Movil SAB de CV ADR | 6,896 | 137,092 | ||||||
| Chunghwa Telecom Company Ltd. ADR | 1,700 | 52,156 | ||||||
| Mobile Telesystems OJSC ADR | 2,264 | 39,597 | ||||||
| Telekomunikasi Indonesia Persero Tbk PT ADR | 992 | 39,055 | ||||||
| SK Telecom Company Ltd. ADR | 1,593 | 35,954 | ||||||
| China Telecom Corporation Ltd. ADR | 621 | 28,609 | ||||||
| Telefonica Brasil S.A. ADR | 1,298 | 27,570 | ||||||
| China Unicom Hong Kong Ltd. ADR | 2,005 | 26,386 | ||||||
| Philippine Long Distance Telephone Co. ADR | 384 | 23,432 | ||||||
| Total Telecommunication Services | 622,985 | |||||||
| MATERIALS - 7.1% | ||||||||
| Vale S.A. ADR | 9,431 | 117,417 | ||||||
| POSCO ADR | 1,388 | 96,341 | ||||||
| Vale S.A. ADR | 5,827 | 80,587 | ||||||
| Cemex SAB de CV ADR* | 5,048 | 63,756 | ||||||
| AngloGold Ashanti Ltd. ADR* | 1,798 | 30,710 | ||||||
| Gerdau S.A. ADR | 3,998 | 25,627 | ||||||
| Total Materials | 414,438 | |||||||
| CONSUMER STAPLES - 5.3% | ||||||||
| AMBEV S.A. ADR | 20,319 | 150,564 | ||||||
| Fomento Economico Mexicano | ||||||||
| SAB de CV ADR | 841 | 78,415 | ||||||
| BRF S.A. ADR | 2,888 | 57,702 | ||||||
| Cia Brasileira de Distribuicao Grupo | ||||||||
| Pao de Acucar ADR | 591 | 25,862 | ||||||
| Total Consumer Staples | 312,543 | |||||||
| CONSUMER DISCRETIONARY - 2.0% | ||||||||
| Grupo Televisa SAB ADR | 1,727 | 57,492 | ||||||
| Tata Motors Ltd. ADR | 841 | 29,780 | ||||||
| Ctrip.com International Ltd. ADR* | 579 | 29,193 | ||||||
| Total Consumer Discretionary | 116,465 | |||||||
| UTILITIES - 1.1% | ||||||||
| Korea Electric Power Corp. ADR* | 2,297 | 39,439 | ||||||
| Enersis S.A. ADR | 1,713 | 26,603 | ||||||
| Total Utilities | 66,042 | |||||||
| INDUSTRIALS - 0.4% | ||||||||
| Embraer S.A. ADR | 729 | 25,872 | ||||||
| Total Common Stocks | ||||||||
| (Cost $3,516,806) | 3,779,218 | |||||||
| 30 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | March 31, 2014 |
| EMERGING MARKETS 2x STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 24.8% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 790,322 | $ | 790,322 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 333,489 | 333,489 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 225,517 | 225,517 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 105,072 | 105,072 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $1,454,400) | 1,454,400 | |||||||
| Total Investments - 89.1% | ||||||||
| (Cost $4,971,206) | $ | 5,233,618 | ||||||
| Other Assets & Liabilities, net - 10.9% | 637,676 | |||||||
| Total Net Assets - 100.0% | $ | 5,871,294 | ||||||
| Unrealized | ||||||||
| Units | Gain | |||||||
| OTC EQUITY INDEX SWAP AGREEMENTS†† | ||||||||
| Goldman Sachs International | ||||||||
| April 2014 Bank of New York | ||||||||
| Mellon Emerging Markets 50 ADR | ||||||||
| Index Swap, Terminating 04/29/142 | ||||||||
| (Notional Value $7,970,297) | 3,458 | $ | 217,675 | |||||
| * | 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 5. |
| 2 | Total Return based on Bank of New York Mellon Emerging Markets 50 ADR Index +/- financing at a variable rate. ADR — American Depositary Receipt |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 31 |
| EMERGING MARKETS 2x STRATEGY FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $3,516,806) | $ | 3,779,218 | ||
| Repurchase agreements, at value | ||||
| (cost $1,454,400) | 1,454,400 | |||
| Total investments | ||||
| (cost $4,971,206) | 5,233,618 | |||
| Segregated cash with broker | 1,236,743 | |||
| Unrealized appreciation on swap agreements | 217,675 | |||
| Receivables: | ||||
| Fund shares sold | 119,394 | |||
| Variation margin | 12,147 | |||
| Swap settlement | 11,881 | |||
| Dividends | 1,439 | |||
| Interest | 1 | |||
| Total assets | 6,832,898 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 950,078 | |||
| Management fees | 3,501 | |||
| Distribution and service fees | 1,268 | |||
| Transfer agent and administrative fees | 973 | |||
| Portfolio accounting fees | 584 | |||
| Miscellaneous | 5,200 | |||
| Total liabilities | 961,604 | |||
| Net assets | $ | 5,871,294 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 8,834,730 | ||
| Accumulated net investment loss | (23,296 | ) | ||
| Accumulated net realized loss on investments | (3,420,227 | ) | ||
| Net unrealized appreciation on investments | 480,087 | |||
| Net assets | $ | 5,871,294 | ||
| A-Class: | ||||
| Net assets | $ | 743,911 | ||
| Capital shares outstanding | 11,226 | |||
| Net asset value per share | $ | 66.27 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 69.57 | ||
| C-Class: | ||||
| Net assets | $ | 408,706 | ||
| Capital shares outstanding | 6,243 | |||
| Net asset value per share | $ | 65.46 | ||
| H-Class: | ||||
| Net assets | $ | 4,718,677 | ||
| Capital shares outstanding | 71,100 | |||
| Net asset value per share | $ | 66.37 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $3,106) | $ | 66,013 | ||
| Interest | 402 | |||
| Income from securities lending, net | 1 | |||
| Total investment income | 66,416 | |||
| Expenses: | ||||
| Management fees | 50,630 | |||
| Transfer agent and administrative fees | 14,065 | |||
| Distribution and service fees: | ||||
| A-Class | 1,351 | |||
| C-Class | 3,266 | |||
| H-Class | 11,900 | |||
| Portfolio accounting fees | 7,828 | |||
| Licensing fees | 5,211 | |||
| Custodian fees | 648 | |||
| Trustees’ fees* | 444 | |||
| Line of credit interest expense | 198 | |||
| Miscellaneous | 8,348 | |||
| Total expenses | 103,889 | |||
| Less: | ||||
| Expenses waived by Advisor | (2,959 | ) | ||
| Net expenses | 100,930 | |||
| Net investment loss | (34,514 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (1,033,427 | ) | ||
| Swap agreements | (1,059,154 | ) | ||
| Futures contracts | 145,409 | |||
| Net realized loss | (1,947,172 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Investments | 148,618 | |||
| Swap agreements | 201,112 | |||
| Futures contracts | (981 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | 348,749 | |||
| Net realized and unrealized loss | (1,598,423 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (1,632,937 | ) | |
* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 32 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EMERGING MARKETS 2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets from Operations: | ||||||||
| Net investment loss | $ | (34,514 | ) | $ | (20,212 | ) | ||
| Net realized loss on investments | (1,947,172 | ) | (1,098,163 | ) | ||||
| Net change in unrealized appreciation (depreciation) on investments | 348,749 | 282,695 | ||||||
| Net decrease in net assets resulting from operations | (1,632,937 | ) | (835,680 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 8,531,963 | 1,558,765 | ||||||
| C-Class | 34,714,451 | 13,271,478 | ||||||
| H-Class | 183,477,671 | 99,924,060 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (7,561,718 | ) | (1,755,452 | ) | ||||
| C-Class | (34,363,190 | ) | (13,120,339 | ) | ||||
| H-Class | (179,596,460 | ) | (101,879,772 | ) | ||||
| Net increase (decrease) from capital share transactions | 5,202,717 | (2,001,260 | ) | |||||
| Net increase (decrease) in net assets | 3,569,780 | (2,836,940 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 2,301,514 | 5,138,454 | ||||||
| End of year | $ | 5,871,294 | $ | 2,301,514 | ||||
| Accumulated net investment loss at end of year | $ | (23,296 | ) | $ | (12,029 | ) | ||
| Capital share activity:* | ||||||||
| Shares sold | ||||||||
| A-Class | 126,244 | 19,954 | ||||||
| C-Class | 529,047 | 182,396 | ||||||
| H-Class | 2,825,051 | 1,352,004 | ||||||
| Shares redeemed | ||||||||
| A-Class | (116,456 | ) | (22,675 | ) | ||||
| C-Class | (524,287 | ) | (181,622 | ) | ||||
| H-Class | (2,782,209 | ) | (1,377,463 | ) | ||||
| Net increase (decrease) in shares | 57,390 | (27,406 | ) | |||||
| * | Capital share activity for the year ended presented through February 21, 2014 has been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 12 in Notes to Financial Statements. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 33 |
| EMERGING MARKETS 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 | Period Ended | |||||||||||||
| March 31, | March 28 | March 31, | March 31, | |||||||||||||
| A-Class | 2014f | 2013f | 2012f | 2011a,f | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 73.59 | $ | 87.40 | $ | 134.76 | $ | 125.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.54 | ) | (.35 | ) | (— | )e | (.65 | ) | ||||||||
| Net gain (loss) on investments | ||||||||||||||||
| (realized and unrealized) | (6.78 | ) | (13.46 | ) | (41.76 | ) | 10.41 | |||||||||
| Total from investment operations | (7.32 | ) | (13.81 | ) | (41.76 | ) | 9.76 | |||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | — | — | (5.60 | ) | — | |||||||||||
| Total distributions | — | — | (5.60 | ) | — | |||||||||||
| Net asset value, end of period | $ | 66.27 | $ | 73.59 | $ | 87.40 | $ | 134.76 | ||||||||
| Total Returnc | (9.96 | %) | (15.79 | %) | (30.00 | %) | 7.80 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 744 | $ | 106 | $ | 363 | $ | 992 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (0.82 | %) | (0.51 | %) | (0.01 | %) | (1.42 | %) | ||||||||
| Total expenses | 1.81 | % | 1.88 | % | 1.77 | % | 1.85 | % | ||||||||
| Net expensesd | 1.76 | % | 1.75 | % | 1.69 | % | 1.73 | % | ||||||||
| Portfolio turnover rate | 1,412 | % | 730 | % | 883 | % | 58 | % | ||||||||
| Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
| March 31, | March 28 | March 31, | March 31, | |||||||||||||
| C-Class | 2014f | 2013f | 2012f | 2011a,f | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 72.92 | $ | 87.31 | $ | 134.13 | $ | 125.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (1.04 | ) | (1.25 | ) | (.90 | ) | (1.55 | ) | ||||||||
| Net gain (loss) on investments | ||||||||||||||||
| (realized and unrealized) | (6.42 | ) | (13.14 | ) | (40.32 | ) | 10.68 | |||||||||
| Total from investment operations | (7.46 | ) | (14.39 | ) | (41.22 | ) | 9.13 | |||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | — | — | (5.60 | ) | — | |||||||||||
| Total distributions | — | — | (5.60 | ) | — | |||||||||||
| Net asset value, end of period | $ | 65.46 | $ | 72.92 | $ | 87.31 | $ | 134.13 | ||||||||
| Total Returnc | (10.21 | %) | (16.49 | %) | (29.75 | %) | 7.32 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 409 | $ | 108 | $ | 62 | $ | 726 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.73 | %) | (1.61 | %) | (0.87 | %) | (1.98 | %) | ||||||||
| Total expenses | 2.66 | % | 2.59 | % | 2.54 | % | 2.60 | % | ||||||||
| Net expensesd | 2.61 | % | 2.46 | % | 2.46 | % | 2.49 | % | ||||||||
| Portfolio turnover rate | 1,412 | % | 730 | % | 883 | % | 58 | % | ||||||||
| 34 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EMERGING MARKETS 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | Period Ended | |||||||||||||
| March 31, | March 28 | March 31, | March 31, | |||||||||||||
| H-Class | 2014f | 2013f | 2012f | 2011a,f | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 73.87 | $ | 87.74 | $ | 134.69 | $ | 125.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.34 | ) | (.35 | ) | (.35 | ) | (.55 | ) | ||||||||
| Net gain (loss) on investments | ||||||||||||||||
| (realized and unrealized) | (7.16 | ) | (13.52 | ) | (41.00 | ) | 10.24 | |||||||||
| Total from investment operations | (7.50 | ) | (13.87 | ) | (41.35 | ) | 9.69 | |||||||||
| Less distributions from: | ||||||||||||||||
| Net realized gains | — | — | (5.60 | ) | — | |||||||||||
| Total distributions | — | — | (5.60 | ) | — | |||||||||||
| Net asset value, end of period | $ | 66.37 | $ | 73.87 | $ | 87.74 | $ | 134.69 | ||||||||
| Total Returnc | (10.19 | %) | (15.78 | %) | (29.70 | %) | 7.76 | % | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,719 | $ | 2,087 | $ | 4,713 | $ | 3,705 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (0.51 | %) | (0.49 | %) | (0.37 | %) | (1.05 | %) | ||||||||
| Total expenses | 1.80 | % | 1.83 | % | 1.77 | % | 1.85 | % | ||||||||
| Net expensesd | 1.74 | % | 1.69 | % | 1.69 | % | 1.74 | % | ||||||||
| Portfolio turnover rate | 1,412 | % | 730 | % | 883 | % | 58 | % | ||||||||
| a | Since commencement of operations: October 29, 2010. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
| b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. | |
| c | Total return does not reflect the impact of any applicable sales charges and has not been annualized. |
| d | Net expense information reflects the expense ratios after expense waivers. | |
| e | Net investment income (loss) is less than $0.01 per share. |
| f | Reverse share split — Per share amounts for the periods presented through February 21, 2014 have been restated to reflect a 1:5 reverse share split effective February 21, 2014. See Note 12 in Notes to Financial Statements. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 35 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
INVERSE EMERGING MARKETS 2x STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to 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 BNY Mellon Emerging Markets 50 ADR 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 March 31, 2014, Inverse Emerging Markets 2x Strategy Fund H-Class returned –4.63%, while the BNY Mellon Emerging Markets 50 ADR Index returned -2.92% over the same period. For comparison, the S&P 500 Index returned 21.86%.
For the period, Inverse Emerging Markets 2x Strategy Fund maintained a daily correlation of over 99% to its benchmark of -200% of the daily price movement of the BNY Mellon Emerging Markets 50 ADR Index.
For the period, the sectors contributing most to the performance of the underlying index were Information Technology and Consumer Discretionary. All other sectors detracted from performance of the underlying index, with Energy and Materials detracting most.
The holdings contributing most to the performance of the underlying index for the period were ADRs for BRF SA, China Life Insurance Co Ltd. and Ambev SA. The holdings detracting most from return were ADRs for CNOOC Ltd., PetroChina Co. Ltd and Taiwan Semiconductor Manufacturing 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 contributed to the Fund’s 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.
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 Dates: | ||
| A-Class | October 29, 2010 | |
| C-Class | October 29, 2010 | |
| H-Class | October 29, 2010 |
The Fund invests principally in derivative investments such as swap agreements and futures contracts.
| 36 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) | March 31, 2014 |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended March 31, 2014
| Since | ||||||||
| Inception | ||||||||
| 1 Year | (10/29/10) | |||||||
| A-Class Shares | -4.63% | -8.66% | ||||||
| A-Class Shares with sales charge† | -9.16% | -9.96% | ||||||
| C-Class Shares | -5.23% | -7.67% | ||||||
| C-Class Shares with CDSC‡ | -6.18% | -7.67% | ||||||
| H-Class Shares | -4.63% | -8.68% | ||||||
| BNY Mellon Emerging Markets | ||||||||
| 50 ADR Index | -2.92% | -3.97% | ||||||
| S&P 500 Index | 21.86% | 16.86% |
| * | 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 BNY Mellon Emerging Markets 50 ADR 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 graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structure. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 37 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| INVERSE EMERGING MARKETS 2x STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 71.2% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 4,230,249 | $ | 4,230,249 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,785,019 | 1,785,019 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 1,207,091 | 1,207,091 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 562,403 | 562,403 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $7,784,762) | 7,784,762 | |||||||
| Total Investments - 71.2% | ||||||||
| (Cost $7,784,762) | $ | 7,784,762 | ||||||
| Other Assets & Liabilities, net - 28.8% | 3,150,503 | |||||||
| Total Net Assets - 100.0% | $ | 10,935,265 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (loss) | |||||||
| EQUITY FUTURES CONTRACTS SOLD SHORT† | ||||||||
| June 2014 MSCI Emerging Markets Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $197,340) | 4 | $ | 914 | |||||
| Units | ||||||||
| OTC EQUITY INDEX SWAP AGREEMENTS SOLD SHORT†† | ||||||||
| Goldman Sachs International | ||||||||
| April 2014 Bank of New York Mellon | ||||||||
| Emerging Markets 50 ADR Index Swap, | ||||||||
| Terminating 04/29/142 | ||||||||
| (Notional Value $21,544,860) | 9,347 | $ | (657,973 | ) | ||||
| † | 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 5. |
| 2 | Total Return based on Bank of New York Mellon Emerging Markets 50 ADR Index +/- financing at a variable rate. ADR — American Depositary Receipt |
| 38 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE EMERGING MARKETS 2x STRATEGY FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $7,784,762) | $ | 7,784,762 | ||
| Segregated cash with broker | 3,766,365 | |||
| Receivables: | ||||
| Fund shares sold | 699,065 | |||
| Variation margin | 3,857 | |||
| Interest | 5 | |||
| Total assets | 12,254,054 | |||
| Liabilities: | ||||
| Unrealized depreciation on swap agreements | 657,973 | |||
| Payable for: | ||||
| Fund shares redeemed | 552,578 | |||
| Swap settlement | 76,762 | |||
| Management fees | 10,529 | |||
| Distribution and service fees | 3,474 | |||
| Transfer agent and administrative fees | 2,925 | |||
| Portfolio accounting fees | 1,755 | |||
| Miscellaneous | 12,793 | |||
| Total liabilities | 1,318,789 | |||
| Net assets | $ | 10,935,265 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 17,274,859 | ||
| Accumulated net investment loss | (108,307 | ) | ||
| Accumulated net realized loss on investments | (5,574,228 | ) | ||
| Net unrealized depreciation on investments | (657,059 | ) | ||
| Net assets | $ | 10,935,265 | ||
| A-Class: | ||||
| Net assets | $ | 4,858,793 | ||
| Capital shares outstanding | 264,970 | |||
| Net asset value per share | $ | 18.34 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 19.25 | ||
| C-Class: | ||||
| Net assets | $ | 261,625 | ||
| Capital shares outstanding | 13,745 | |||
| Net asset value per share | $ | 19.03 | ||
| H-Class: | ||||
| Net assets | $ | 5,814,847 | ||
| Capital shares outstanding | 317,247 | |||
| Net asset value per share | $ | 18.33 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Year Ended March 31, 2014 | ||||
| Investment Income: | ||||
| Interest | $ | 1,081 | ||
| Total investment income | 1,081 | |||
| Expenses: | ||||
| Management fees | 76,314 | |||
| Transfer agent and administrative fees | 21,193 | |||
| Distribution and service fees: | ||||
| A-Class | 2,784 | |||
| C-Class | 5,609 | |||
| H-Class | 17,016 | |||
| Portfolio accounting fees | 12,224 | |||
| Custodian fees | 989 | |||
| Trustees’ fees* | 286 | |||
| Miscellaneous | 18,255 | |||
| Total expenses | 154,670 | |||
| Less: | ||||
| Expenses waived by Advisor | (1,895 | ) | ||
| Net expenses | 152,775 | |||
| Net investment loss | (151,694 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | (4,513,753 | ) | ||
| Futures contracts | 65,607 | |||
| Net realized loss | (4,448,146 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Swap agreements | (633,213 | ) | ||
| Futures contracts | 914 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) | (632,299 | ) | ||
| Net realized and unrealized loss | (5,080,445 | ) | ||
| Net decrease in net assets resulting | ||||
| from operations | $ | (5,232,139 | ) | |
* 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 GUGGENHEIM FUNDS ANNUAL REPORT | 39 |
| INVERSE EMERGING MARKETS 2x STRATEGY FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| March 31, | March 28, | |||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (151,694 | ) | $ | (32,613 | ) | ||
| Net realized gain (loss) on investments | (4,448,146 | ) | 142,413 | |||||
| Net change in unrealized appreciation (depreciation) on investments | (632,299 | ) | (76,145 | ) | ||||
| Net increase (decrease) in net assets resulting from operations | (5,232,139 | ) | 33,655 | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | ||||||||
| A-Class | 8,057,592 | 1,703,657 | ||||||
| C-Class | 43,930,520 | 25,100,465 | ||||||
| H-Class | 163,931,981 | 87,435,015 | ||||||
| Cost of shares redeemed | ||||||||
| A-Class | (2,627,231 | ) | (1,344,868 | ) | ||||
| C-Class | (43,874,699 | ) | (26,330,612 | ) | ||||
| H-Class | (155,566,471 | ) | (87,766,103 | ) | ||||
| Net increase (decrease) from capital share transactions | 13,851,692 | (1,202,446 | ) | |||||
| Net increase (decrease) in net assets | 8,619,553 | (1,168,791 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 2,315,712 | 3,484,503 | ||||||
| End of year | $ | 10,935,265 | $ | 2,315,712 | ||||
| Accumulated net investment loss at end of year | $ | (108,307 | ) | $ | (6,847 | ) | ||
| Capital share activity: | ||||||||
| Shares sold | ||||||||
| A-Class | 380,799 | 87,501 | ||||||
| C-Class | 2,127,776 | 1,111,860 | ||||||
| H-Class | 8,074,671 | 4,131,683 | ||||||
| Shares redeemed | ||||||||
| A-Class | (129,267 | ) | (74,495 | ) | ||||
| C-Class | (2,119,778 | ) | (1,168,390 | ) | ||||
| H-Class | (7,858,474 | ) | (4,145,468 | ) | ||||
| Net increase (decrease) in shares | 475,727 | (57,309 | ) | |||||
| 40 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| INVERSE EMERGING MARKETS 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 | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| A-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 19.23 | $ | 19.29 | $ | 21.15 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.35 | ) | (.33 | ) | (.39 | ) | (.16 | ) | ||||||||
| Net gain (loss) on investments (realized and unrealized) | (.54 | ) | .27 | (1.47 | ) | (3.69 | ) | |||||||||
| Total from investment operations | (.89 | ) | (.06 | ) | (1.86 | ) | (3.85 | ) | ||||||||
| Net asset value, end of period | $ | 18.34 | $ | 19.23 | $ | 19.29 | $ | 21.15 | ||||||||
| Total Returnc | (4.63 | %) | (0.26 | %) | (8.84 | %) | (15.40 | %) | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 4,859 | $ | 258 | $ | 8 | $ | 34 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.74 | %) | (1.60 | %) | (1.66 | %) | (1.61 | %) | ||||||||
| Total expenses | 1.78 | % | 1.85 | % | 1.78 | % | 1.85 | % | ||||||||
| Net expensesd | 1.75 | % | 1.71 | % | 1.69 | % | 1.73 | % | ||||||||
| Portfolio turnover rate | — | — | — | — | ||||||||||||
| Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| C-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 20.07 | $ | 20.25 | $ | 21.33 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.52 | ) | (.49 | ) | (.55 | ) | (.25 | ) | ||||||||
| Net gain (loss) on investments (realized and unrealized) | (.52 | ) | .31 | (.53 | ) | (3.42 | ) | |||||||||
| Total from investment operations | (1.04 | ) | (.18 | ) | (1.08 | ) | (3.67 | ) | ||||||||
| Net asset value, end of period | $ | 19.03 | $ | 20.07 | $ | 20.25 | $ | 21.33 | ||||||||
| Total Returnc | (5.23 | %) | (0.84 | %) | (5.06 | %)e | (14.68 | %) | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 262 | $ | 115 | $ | 1,261 | $ | 15 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (2.44 | %) | (2.41 | %) | (2.41 | %) | (2.37 | %) | ||||||||
| Total expenses | 2.48 | % | 2.65 | % | 2.53 | % | 2.57 | % | ||||||||
| Net expensesd | 2.46 | % | 2.51 | % | 2.44 | % | 2.46 | % | ||||||||
| Portfolio turnover rate | — | — | — | — | ||||||||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 41 |
| INVERSE EMERGING MARKETS 2x STRATEGY FUND |
| FINANCIAL HIGHLIGHTS (concluded) |
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 | Period Ended | |||||||||||||
| March 31, | March 28, | March 31, | March 31, | |||||||||||||
| H-Class | 2014 | 2013 | 2012 | 2011a | ||||||||||||
| Per Share Data | ||||||||||||||||
| Net asset value, beginning of period | $ | 19.22 | $ | 19.29 | $ | 21.15 | $ | 25.00 | ||||||||
| Income (loss) from investment operations: | ||||||||||||||||
| Net investment income (loss)b | (.35 | ) | (.33 | ) | (.38 | ) | (.16 | ) | ||||||||
| Net gain (loss) on investments (realized and unrealized) | (.54 | ) | .26 | (1.48 | ) | (3.69 | ) | |||||||||
| Total from investment operations | (.89 | ) | (.07 | ) | (1.86 | ) | (3.85 | ) | ||||||||
| Net asset value, end of period | $ | 18.33 | $ | 19.22 | $ | 19.29 | $ | 21.15 | ||||||||
| Total Returnc | (4.63 | %) | (0.36 | %) | (8.79 | %) | (15.40 | %) | ||||||||
| Ratios/Supplemental Data | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 5,815 | $ | 1,942 | $ | 2,215 | $ | 2,892 | ||||||||
| Ratios to average net assets: | ||||||||||||||||
| Net investment income (loss) | (1.74 | %) | (1.56 | %) | (1.67 | %) | (1.63 | %) | ||||||||
| Total expenses | 1.78 | % | 1.82 | % | 1.79 | % | 1.85 | % | ||||||||
| Net expensesd | 1.76 | % | 1.68 | % | 1.70 | % | 1.74 | % | ||||||||
| Portfolio turnover rate | — | — | — | — | ||||||||||||
| a | Since commencement of operations: October 29, 2010. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
| b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| c | Total return does not reflect the impact of any applicable sales charges and has not been annualized. |
| d | Net expense information reflects the expense ratios after expense waivers. |
| e | Generally, the performance of the Fund’s C-Class shares will underperform the Fund’s H-Class shares and A-Class shares due to the C-Class shares’ higher expense ratio. However, the performance of the Fund’s C-Class shares is greater than that of the H-Class shares and A-Class shares due to the impact large redemptions of C-Class shares had on the expense accruals for C-Class shares. The effect of the expense accruals on the performance of the C-Class shares of the Fund was magnified by the small asset base of the C-Class shares. |
| 42 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
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| THE GUGGENHEIM FUNDS ANNUAL REPORT | 43 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | March 31, 2014 |
EMERGING MARKETS BOND STRATEGY FUND
OBJECTIVE: Seeks to provide investment results that correlate, before fees and expenses, to the performance of the emerging markets bond market as defined by the Advisor.
The Fund invests in emerging markets credit default swaps, U.S. Treasury futures, and bonds with characteristics comparable to that of the emerging market bond market.
The inception date of the Fund was October 8, 2013. For the abbreviated period ended March 31, 2014, the Fund H-Class returned 0.80%. For comparison purposes, the BofA Merrill Lynch U.S. Dollar Emerging Markets Sovereign Plus Index returned 4.10% over the same abbreviated period.
Since the Fund’s inception through March 31, 2014, most countries represented in the Fund experienced tightening credit spreads, with Argentina and Ukraine experiencing the most tightening over the period. In contrast, credit spreads for Venezuela and Russia widened the most over the period.
Derivatives in the Fund were used to help provide exposure to the emerging market bond market in the highest efficient manner, not for hedging purposes. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
Performance displayed represents past performance, which is no guarantee of future results.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Dates: | |
| A-Class | October 8, 2013 |
| C-Class | October 8, 2013 |
| H-Class | October 8, 2013 |
The Fund invests principally in derivative instruments such as swap agreements and futures contracts.
| 44 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | March 31, 2014 |
Cumulative Fund Performance*
Annual Returns*
Period Ended March 31, 2014
| Since | ||||
| Inception | ||||
| (10/08/13) | ||||
| A-Class Shares | 0.72% | |||
| A-Class Shares with sales charge† | -4.08% | |||
| C-Class Shares | 0.40% | |||
| C-Class Shares with CDSC‡ | -0.60% | |||
| H-Class Shares | 0.80% | |||
| BofA ML U.S. Dollar Emerging Markets | ||||
| Sovereign Plus Index | 4.10% |
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The BofA ML U.S. Dollar Emerging Markets Sovereign Plus Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. The graphs are based on A-Class shares and H-Class shares only; performance for C-Class shares will vary due to differences in fee structures. |
| † | Fund returns are calculated using the maximum sales charge of 4.75%. |
| ‡ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 45 |
| SCHEDULE OF INVESTMENTS | March 31, 2014 |
| EMERGING MARKETS BOND STRATEGY FUND |
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENTS††,1 - 75.0% | ||||||||
| HSBC Group | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | $ | 2,481,472 | $ | 2,481,472 | ||||
| RBC Capital Markets | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 1,047,095 | 1,047,095 | ||||||
| Mizuho Financial Group, Inc. | ||||||||
| issued 03/31/14 at 0.01% | ||||||||
| due 04/01/14 | 708,082 | 708,082 | ||||||
| Deutsche Bank | ||||||||
| issued 03/31/14 at 0.02% | ||||||||
| due 04/01/14 | 329,907 | 329,907 | ||||||
| Total Repurchase Agreements | ||||||||
| (Cost $4,566,556) | 4,566,556 | |||||||
| Total Investments - 75.0% | ||||||||
| (Cost $4,566,556) | $ | 4,566,556 | ||||||
| Other Assets & Liabilities, net - 25.0% | 1,522,313 | |||||||
| Total Net Assets - 100.0% | $ | 6,088,869 | ||||||
| Unrealized | ||||||||
| Contracts | Loss | |||||||
| INTEREST RATE FUTURES CONTRACTS PURCHASED† | ||||||||
| June 2014 U.S. Treasury 10 Year Note | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $2,346,500) | 19 | $ | (14,685 | ) | ||||
| June 2014 U.S. Treasury 5 Year Note | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $5,710,500) | 48 | (26,548 | ) | |||||
| (Total Aggregate Value of Contracts | ||||||||
| $8,057,000) | $ | (41,233 | ) | |||||
| CENTRALLY CLEARED CREDIT DEFAULT SWAP AGREEMENT PROTECTION SOLD††,2 |
| Protection | Upfront | |||||||||||||||||||||||
| Premium | Maturity | Notional | Notional | Premiums | Unrealized | |||||||||||||||||||
| Index | Counterparty | Rate | Date | Principal | Value | Paid | Appreciation | |||||||||||||||||
| CDX.EM-21 Index | Barclays Bank plc | 5.00 | % | 06/20/19 | $ | 7,500,000 | $ | (8,207,708 | ) | $ | 626,712 | $ | 80,996 | |||||||||||
| † | 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 5. |
| 2 | Credit Default Swaps — See Note 6. plc — Public Limited Company |
| 46 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| EMERGING MARKETS BOND STRATEGY FUND |
| STATEMENT OF ASSETS | ||||
| AND LIABILITIES | ||||
| March 31, 2014 | ||||
| Assets: | ||||
| Repurchase agreements, at value | ||||
| (cost $4,566,556) | $ | 4,566,556 | ||
| Segregated cash with broker | 810,010 | |||
| Upfront payments paid on credit default swaps | 626,712 | |||
| Unrealized appreciation on swap agreements | 80,996 | |||
| Receivables: | ||||
| Protection fees on credit default swaps | 12,503 | |||
| Variation margin | 2,563 | |||
| Total assets | 6,099,340 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Management fees | 3,378 | |||
| Distribution and service fees | 1,133 | |||
| Transfer agent and administrative fees | 1,126 | |||
| Fund shares redeemed | 879 | |||
| Portfolio accounting fees | 676 | |||
| Custodian fees | 57 | |||
| Miscellaneous | 3,222 | |||
| Total liabilities | 10,471 | |||
| Net assets | $ | 6,088,869 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 6,052,997 | ||
| Undistributed net investment income | 73,498 | |||
| Accumulated net realized loss on investments | (77,389 | ) | ||
| Net unrealized appreciation on investments | 39,763 | |||
| Net assets | $ | 6,088,869 | ||
| A-Class: | ||||
| Net assets | $ | 499,268 | ||
| Capital shares outstanding | 19,836 | |||
| Net asset value per share | $ | 25.17 | ||
| Maximum offering price per share | ||||
| (Net asset value divided by 95.25%) | $ | 26.43 | ||
| C-Class: | ||||
| Net assets | $ | 10,037 | ||
| Capital shares outstanding | 400 | |||
| Net asset value per share | $ | 25.09 | ||
| H-Class: | ||||
| Net assets | $ | 5,579,564 | ||
| Capital shares outstanding | 221,570 | |||
| Net asset value per share | $ | 25.18 | ||
| STATEMENT OF | ||||
| OPERATIONS | ||||
| Period Ended March 31, 2014** | ||||
| Investment Income: | ||||
| Interest | $ | 441 | ||
| Total investment income | 441 | |||
| Expenses: | ||||
| Management fees | 19,647 | |||
| Transfer agent and administrative fees | 6,550 | |||
| Distribution and service fees: | ||||
| A-Class | 133 | |||
| C-Class | 48 | |||
| H-Class | 6,406 | |||
| Portfolio accounting fees | 3,930 | |||
| Custodian fees | 324 | |||
| Prime broker interest expense | 1,911 | |||
| Trustees’ fees* | 233 | |||
| Miscellaneous | 3,828 | |||
| Total expenses | 43,010 | |||
| Net investment loss | (42,569 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Swap agreements | 10,517 | |||
| Futures contracts | 23,652 | |||
| Net realized gain | 34,169 | |||
| Net change in unrealized appreciation | ||||
| (depreciation) on: | ||||
| Swap agreements | 80,996 | |||
| Futures contracts | (41,233 | ) | ||
| Net change in unrealized appreciation | ||||
| (depreciation) | 39,763 | |||
| Net realized and unrealized gain | 73,932 | |||
| Net increase in net assets resulting | ||||
| from operations | $ | 31,363 | ||
| * | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| ** | Since commencement of operations: October 8, 2013. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 47 |
| EMERGING MARKETS BOND STRATEGY FUND |
| STATEMENT OF CHANGES IN NET ASSETS |
| Period Ended | ||||
| March 31, | ||||
| 2014a | ||||
| Increase (Decrease) In Net Assets From Operations: | ||||
| Net investment loss | $ | (42,569 | ) | |
| Net realized gain on investments | 34,169 | |||
| Net change in unrealized appreciation (depreciation) on investments | 39,763 | |||
| Net increase in net assets resulting from operations | 31,363 | |||
| Capital share transactions: | ||||
| Proceeds from sale of shares | ||||
| A-Class | 650,358 | |||
| C-Class | 10,789 | |||
| H-Class | 12,337,077 | |||
| Cost of shares redeemed | ||||
| A-Class | (147,681 | ) | ||
| C-Class | (759 | ) | ||
| H-Class | (6,792,278 | ) | ||
| Net increase from capital share transactions | 6,057,506 | |||
| Net increase in net assets | 6,088,869 | |||
| Net assets: | ||||
| Beginning of period | — | |||
| End of period | $ | 6,088,869 | ||
| Undistributed net investment income at end of period | $ | 73,498 | ||
| Capital share activity: | ||||
| Shares sold | ||||
| A-Class | 25,874 | |||
| C-Class | 431 | |||
| H-Class | 490,331 | |||
| Shares redeemed | ||||
| A-Class | (6,038 | ) | ||
| C-Class | (31 | ) | ||
| H-Class | (268,761 | ) | ||
| Net increase in shares | 241,806 | |||
a Since commencement of operations: October 8, 2013.
| 48 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
EMERGING MARKETS BOND STRATEGY FUND
FINANCIAL HIGHLIGHTS
This table is presented to show selected data for a share outstanding throughout the period and to assist shareholders in evaluating a Fund’s performance for the period presented.
| Period Ended | ||||
| March 31, | ||||
| A-Class | 2014a | |||
| Per Share Data | ||||
| Net asset value, beginning of period | $ | 25.00 | ||
| Income (loss) from investment operations: | ||||
| Net investment income (loss)b | (.21 | ) | ||
| Net gain (loss) on investments (realized and unrealized) | .38 | |||
| Total from investment operations | .17 | |||
| Net asset value, end of period | $ | 25.17 | ||
| Total Returnc | 0.72 | % | ||
| Ratios/Supplemental Data | ||||
| Net assets, end of period (in thousands) | $ | 499 | ||
| Ratios to average net assets: | ||||
| Net investment income (loss) | (1.78 | %) | ||
| Total expensesd | 1.83 | % | ||
| Portfolio turnover rate | — | |||
| Period Ended | ||||
| March 31, | ||||
| C-Class | 2014a | |||
| Per Share Data | ||||
| Net asset value, beginning of period | $ | 25.00 | ||
| Income (loss) from investment operations: | ||||
| Net investment income (loss)b | (.28 | ) | ||
| Net gain (loss) on investments (realized and unrealized) | .37 | |||
| Total from investment operations | .09 | |||
| Net asset value, end of period | $ | 25.09 | ||
| Total Returnc | 0.40 | % | ||
| Ratios/Supplemental Data | ||||
| Net assets, end of period (in thousands) | $ | 10 | ||
| Ratios to average net assets: | ||||
| Net investment income (loss) | (2.34 | %) | ||
| Total expensesd | 2.39 | % | ||
| Portfolio turnover rate | — | |||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 49 |
EMERGING MARKETS BOND STRATEGY FUND
FINANCIAL HIGHLIGHTS (concluded)
This table is presented to show selected data for a share outstanding throughout the period and to assist shareholders in evaluating a Fund’s performance for the period presented.
| Period Ended | ||||
| March 31, | ||||
| H-Class | 2014a | |||
| Per Share Data | ||||
| Net asset value, beginning of period | $ | 25.00 | ||
| Income (loss) from investment operations: | ||||
| Net investment income (loss)b | (.19 | ) | ||
| Net gain (loss) on investments (realized and unrealized) | .37 | |||
| Total from investment operations | .18 | |||
| Net asset value, end of period | $ | 25.18 | ||
| Total Returnc | 0.80 | % | ||
| Ratios/Supplemental Data | ||||
| Net assets, end of period (in thousands) | $ | 5,580 | ||
| Ratios to average net assets: | ||||
| Net investment income (loss) | (1.62 | %) | ||
| Total expensesd | 1.64 | % | ||
| Portfolio turnover rate | — | |||
| a | Since commencement of operations: October 8, 2013. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
| b | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| c | Total return does not reflect the impact of any applicable sales charges and has not been annualized. |
| d | Total expenses may include interest expense. Excluding interest expense, the operating expense ratios for the period presented would be: |
| 3/31/14 | |||||
| A-Class | 1.58% | ||||
| C-Class | 2.32% | ||||
| H-Class | 1.57% | ||||
| 50 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
1. Organization and Significant Accounting Policies
Organization
The Rydex Series Funds (the “Trust”) is registered with the SEC under the Investment Company Act of 1940 (”1940 Act”) as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.
The Trust offers a combination of eight separate classes of shares: Investor Class shares, Advisor Class shares, A-Class shares, C-Class shares, H-Class shares, Y-Class shares, Institutional Class shares and Money Market Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”) if shares are redeemed within 12 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or CDSC.
At March 31, 2014, the Trust consisted of fifty-one separate funds. This report covers the Alternatives, International Equity and Fixed Income Funds (the “Funds”), while the other funds are contained in separate reports. Only A-Class, C-Class, H-Class and Institutional Class shares had been issued by the Funds.
Guggenheim Investments (“GI”) provides advisory services and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.
The International Equity Funds and Fixed Income Fund 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.
Significant Accounting Policies
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 and disclosure of 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.
A. Valuations of the Funds’ securities are supplied primarily by pricing services approved by the Board of Trustees. A Valuation Committee (“Valuation Committee”) is responsible for the oversight of the valuation process of the Funds and convenes monthly, or more frequently as needed. The Valuation Committee will review the valuation of all assets which have been fair valued for reasonableness. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Trustees, regularly review procedures used by, and valuations provided by, the pricing services.
The Trust calculates a NAV twice each business day; at 10:45 a.m. and at the close of the New York Stock Exchange (“NYSE”), usually 4:00 p.m. for the Emerging Markets 2x Strategy Fund, Inverse Emerging Markets 2x Strategy Fund and Emerging Markets Bond Strategy Fund. All other Funds in this report will price at the afternoon NAV. The NAV is calculated using the current market value of each Fund’s total assets as of the respective time of calculation. These financial statements are based on the March 31, 2014, afternoon NAV.
Equity securities listed on an exchange (NYSE or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is deter-
THE GUGGENHEIM FUNDS ANNUAL REPORT | 51
NOTES TO FINANCIAL STATEMENTS (continued)
mined 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 swap agreements and credit default swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s value is then adjusted to include dividends accrued, and financing charges and/or interest associated with the swap agreements.
Repurchase agreements are valued at amortized cost, which approximates market value.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts and options thereupon, and other derivative investments, 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; and (iii) obtaining other information and considerations, including current values in related markets.
B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis.
C. Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.
D. 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 Funds may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
E. Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
F. Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses.
Credit default swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Upfront payments received or made by a Fund on credit default swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (continued)
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.
G. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Trust does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain and loss from investments.
H. The Funds may leave cash overnight in their cash account with the custodian, U.S. Bank. 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.
Segregated cash with the broker is held as collateral for investments in derivative instruments such as futures contracts or swap agreements.
I. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the Classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution fees relating to A-Class shares and H-Class shares and service and distribution fees related to C-Class shares, are charged directly to specific Classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.
J. 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.
2. Financial Instruments
As part of their investment strategy, the Funds utilize short sales and a variety of derivative instruments including futures and swap agreements. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities.
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, that Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, that Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
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 and related options, 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 the 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 restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A credit default swap enables a Fund to buy or sell protection against a defined credit event of an issuer or a basket of securities. Generally, the seller of credit protection against an issuer or basket of securities receives a periodic payment from the buyer to compensate against potential default events. If a default
THE GUGGENHEIM FUNDS ANNUAL REPORT | 53
NOTES TO FINANCIAL STATEMENTS (continued)
event occurs, the seller must pay the buyer the full notional value of the reference obligation in exchange for the reference obligation. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the Fund selling the credit protection. A Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which the Fund is selling credit protection, the default of a third party issuer. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.
The Emerging Markets 2x Strategy Fund and Inverse Emerging Markets 2x Strategy Fund use derivative instruments to achieve leveraged exposure to their respective underlying indices. Since these Funds’ investment strategy involves consistently applied 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. In addition, as investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, this creates an opportunity for increased net income but, at the same time, additional leverage risk. The Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile and riskier than if they had not been leveraged.
In conjunction with the use of short sales, futures and swap agreements, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes, or the repurchase agreements allocated to each Fund.
There are several risks associated with exposure to foreign currencies, foreign issuers and emerging markets. A 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. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Fund may incur transaction costs in connection with conversions between various currencies. The Fund may, but is not obligated to, engage in currency hedging transactions, which generally involve buying currency forward, options or futures contracts. However, not all currency risk may be effectively hedged, and in some cases the costs of hedging techniques may outweigh expected benefits. In such instances, the value of securities denominated in foreign currencies can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
Certain Funds may invest in securities of foreign companies directly, or in financial instruments, such as ADRs and exchange-traded funds, which are indirectly linked to the performance of foreign issuers. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Investing in securities of foreign companies directly, or in financial instruments that are indirectly linked to the performance of foreign issuers, may involve risks not typically associated with investing in U.S. issuers. The value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. Many foreign countries lack accounting and disclosure standards comparable to those that apply to U.S. companies, and it may be more difficult to obtain reliable information regarding a foreign issuer’s financial condition and operations. Transaction costs and costs associated with custody services are generally higher for foreign securities than they are for U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries portions of these taxes are recoverable, the non-recovered portion will reduce the income received by the Fund.
Emerging markets, which consist of countries that have an emerging stock market as defined by S&P, countries
54 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (continued)
or markets with low- to middle-income economies as classified by the World Bank, and other countries or markets with similar characteristics as determined by GI, can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Emerging markets can be subject to greater social, economic, regulatory, and political uncertainties and can be extremely volatile. As a result, the securities of emerging market issuers may present market, credit, currency, liquidity, legal, political and other risks different from, or greater than, the risks of investing in securities of developed foreign countries. In addition, the risks associated with investing in a narrowly defined geographic area are generally more pronounced with respect to investments in emerging market countries. The Fund may also be subject to this risk with respect to its investments in derivatives or other securities or financial instruments whose returns are related to the returns of emerging market securities.
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.
3. Fees and Other Transactions with Affiliates
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:
| Management Fees | |||
| Fund | (as a % of Net Assets) | ||
| Long Short Equity Fund | 0.90% | ||
| Event Driven and Distressed Strategies Fund | 0.90% | ||
| Emerging Markets 2x Strategy Fund | 0.90% | ||
| Inverse Emerging Markets 2x Strategy Fund | 0.90% | ||
| Emerging Markets Bond Strategy Fund | 0.75% | ||
GI has contractually agreed to reduce fees and/or reimburse expenses for the Event Driven and Distressed Strategies Fund to the extent necessary to keep net operating expenses relative to the average daily net assets of A-Class, C-Class, H-Class, and Institutional Class Shares (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, dividends on securities sold short, and extraordinary expenses) from exceeding 1.90%, 2.65%, 1.90%, and 1.65%, respectively. The Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement includes Excluded Expenses and, thus, from time to time may be higher than 1.90%, 2.65%, 1.90% and 1.65%, respectively. This Agreement may be terminated only with the approval of the Fund’s Board of Trustees. In any event, this undertaking will continue until August 1, 2014.
For the year ended March 31, 2014, GI voluntarily agreed to reimburse a portion of the licensing fee charged to the Emerging Markets 2x Strategy Fund and Inverse Emerging Markets 2x Strategy Fund.
RFS provides transfer agent and administrative services to the Funds for fees calculated at an annualized rate of 0.25% of the average daily net assets of each Fund.
RFS also provides accounting services to the Funds for fees calculated at annualized rates below, based on the average daily net assets of each Fund. Effective August 1, 2013, Emerging Markets 2x Strategy Fund and Inverse Emerging Markets 2x Strategy Fund increased their fund accounting fees to 0.15% of fund net assets.
| Fund Accounting Fees | (as a % of net assets) | ||
| Emerging Markets 2x Strategy Fund | 0.15% | ||
| Inverse Emerging Markets 2x Strategy Fund | 0.15% | ||
| Emerging Markets Bond Strategy Fund | 0.15% | ||
| Remaining Funds | |||
| On the first $250 million | 0.10% | ||
| On the next $250 million | 0.075% | ||
| On the next $250 million | 0.05% | ||
| Over $750 million | 0.03% | ||
RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted a Distribution Plan applicable to A-Class shares and H-Class shares for which GFD and other firms that provide distribution and/or shareholder services (“Service Providers”) may receive compensation. If a Service Provider provides distribution services, the Trust will pay distribution fees to GFD at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 of the 1940 Act. GFD, in turn, will pay the Service Provider out of its fees. GFD may, at its discretion, retain a portion of such payments to compensate itself for distribution services.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 55
NOTES TO FINANCIAL STATEMENTS (continued)
The Trust has adopted a separate Distribution and Shareholder Services Plan applicable to its C-Class shares that allows the Funds to pay annual distribution and service fees of 1.00% of the Funds’ C-Class shares average daily net assets. The annual 0.25% service fee compensates the shareholder’s financial advisor for providing ongoing services to the share-holder. The annual distribution fee of 0.75% reimburses GFD for paying the shareholder’s financial advisor an ongoing sales commission. GFD advances the first year’s service and distribution fees to the financial advisor. GFD retains the service and distribution fees on accounts with no authorized dealer of record.
For the year ended March 31, 2014, GFD retained sales charges of $333,837 relating to sales of A-Class shares of the Trust.
Certain officers and trustees of the Trust are also officers of GI, RFS and GFD.
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 following table summarizes the inputs used to value the Funds’ net assets at March 31, 2014:
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Long Short Equity Fund | $ | 39,008,026 | $ | — | $ | 25,364,662 | $ | — | $ | — | $ | 64,372,688 | ||||||||||||
| Event Driven and Distressed Strategies Fund | — | — | 10,723,342 | 23,910 | — | 10,747,252 | ||||||||||||||||||
| Emerging Markets 2x Strategy Fund | 3,779,218 | — | 1,454,400 | 217,675 | — | 5,451,293 | ||||||||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | 914 | 7,784,762 | — | — | 7,785,676 | ||||||||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | 4,566,556 | 80,996 | — | 4,647,552 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Long Short Equity Fund | $ | 12,528,686 | $ | — | $ | — | $ | — | $ | — | $ | 12,528,686 | ||||||||||||
| Event Driven and Distressed Strategies Fund | — | 70,795 | — | 49,018 | — | 119,813 | ||||||||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | — | 657,973 | — | 657,973 | ||||||||||||||||||
| Emerging Markets Bond Strategy Fund | — | 41,233 | — | — | — | 41,233 | ||||||||||||||||||
* Other financial instruments may include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end.
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.
For the year ended March 31, 2014, there were no transfers between levels.
56 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (continued)
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 U.S. Government Agencies. 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 March 31, 2014, the repurchase agreements in the joint account were as follows:
| Counterparty and | ||||||||||||||||||
| Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| HSBC Group | U.S. Treasury Strips | |||||||||||||||||
| 0.01% | 0.00% | |||||||||||||||||
| Due 04/01/14 | $ | 519,000,000 | $ | 519,000,144 | 11/15/39 - 05/15/40 | $ | 1,347,115,400 | $ | 529,380,006 | |||||||||
| RBC Capital Markets | U.S. TIP Notes | |||||||||||||||||
| 0.02% | 0.13% - 2.50% | |||||||||||||||||
| Due 04/01/14 | 219,000,000 | 219,000,091 | 07/15/16 - 07/15/22 | 156,009,700 | 175,640,035 | |||||||||||||
| U.S. Treasury Strips | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 11/15/26 - 02/15/36 | 81,000,000 | 47,740,000 | ||||||||||||||||
| Mizuho Financial Group, Inc. | U.S. Treasury Notes | |||||||||||||||||
| 0.01% | 1.25% - 7.88% | |||||||||||||||||
| Due 04/01/14 | 148,095,295 | 148,095,336 | 08/15/15 - 02/15/21 | 137,725,900 | 151,057,202 | |||||||||||||
| Deutsche Bank | U.S. Treasury Note | |||||||||||||||||
| 0.02% | 0.88% | |||||||||||||||||
| Due 04/01/14 | 69,000,000 | 69,000,038 | 09/15/16 | 70,039,600 | 70,380,047 | |||||||||||||
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Trustees, 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.
6. Disclosures about Credit Derivatives
In accordance with their principal investment strategies, the Event Driven and Distressed Strategies Fund and the Emerging Markets Bond Strategy Fund enter into credit default swaps as a seller of protection primarily 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 seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. If a credit event occurs, as defined under the terms of the swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The Notional Principal reflects the maximum potential amount the Fund could be required to make as a seller of credit protection if a credit event occurs. As the seller of protection, the Fund receives periodic premium payments from the counterparty and may also receive or pay an upfront premium adjustment to the stated periodic premium. In the event a credit event occurs, an adjustment will be made to any upfront premiums that were received by a reduction of 1.00% per credit event.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 57
NOTES TO FINANCIAL STATEMENTS (continued)
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The tables on pages 22 and 46 included in the Schedules of Investments summarize the information with regard to sold protection on credit default swap contracts as of March 31, 2014.
7. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations.
The following Funds utilized derivatives for the following purposes:
| Fund | Index Exposure | Liquidity | Leverage | |||||||||
| Long Short Equity Fund | — | x | — | |||||||||
| Event Driven and Distressed Strategies Fund | x | x | — | |||||||||
| Emerging Markets 2x Strategy Fund | x | x | x | |||||||||
| Inverse Emerging Markets 2x Strategy Fund | x | x | x | |||||||||
| Emerging Markets Bond Strategy Fund | x | x | — | |||||||||
The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Funds’ net assets on a daily basis.
| Approximate percentage of Fund’s | ||||||||
| net assets on a daily basis | ||||||||
| Fund | Long | Short | ||||||
| Long Short Equity Fund | — | — | ||||||
| Event Driven and Distressed Strategies Fund* | 170 | % | — | |||||
| Emerging Markets 2x Strategy Fund | 135 | % | — | |||||
| Inverse Emerging Markets 2x Strategy Fund | — | 200 | % | |||||
| Emerging Markets Bond Strategy Fund* | 135 | % | — | |||||
* These Funds utilize a combination of interest rate and/or financial-linked derivatives to obtain exposure to their benchmarks. The gross derivative instrument exposure is 220% and 265% for the Event Driven and Distressed Strategies Fund and the Emerging Markets Bond Strategy Fund, respectively.
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of March 31, 2014:
| Derivative Investment Type | Asset Derivatives | Liability Derivatives |
| Equity/Interest Rate contracts | Variation margin | |
| Equity/Credit contracts | Unrealized appreciation on swap agreements | Unrealized depreciation on swap agreements |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at March 31, 2014:
| Asset Derivative Investments Value | ||||||||||||||||||||
| Futures | Swaps | Futures | Swaps | Total Value at | ||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | March 31, | ||||||||||||||||
| Fund | Contracts* | Contracts | Contracts* | Contracts | 2014 | |||||||||||||||
| Event Driven and Distressed Strategies Fund | $ | — | $ | — | $ | — | $ | 23,910 | $ | 23,910 | ||||||||||
| Emerging Markets 2x Strategy Fund | — | 217,675 | — | — | 217,675 | |||||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | 914 | — | — | — | 914 | |||||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | — | 80,996 | 80,996 | |||||||||||||||
58 | THE GUGGENHEIM FUNDS ANNUAL REPORT
| NOTES TO FINANCIAL STATEMENTS (continued) |
| Liability Derivative Investments Value |
| Futures | Swaps | Futures | Swaps | Total Value at | |||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | March 31, | |||||||||||||||
| Fund | Contracts* | Contracts | Contracts* | Contracts | 2014 | ||||||||||||||
| Event Driven and Distressed Strategies Fund | $ | 28,405 | $ | 49,018 | $ | 42,390 | $ | — | $ | 119,813 | |||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | 657,973 | — | — | 657,973 | ||||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | 41,233 | — | 41,233 | ||||||||||||||
* Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended March 31, 2014:
| 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 March 31, 2014:
| Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations |
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Long Short Equity Fund | $ | 102,660 | $ | — | $ | — | $ | — | $ | 102,660 | ||||||||||
| Event Driven and Distressed Strategies Fund | 462,382 | 273,891 | 31,452 | 624,840 | 1,392,565 | |||||||||||||||
| Emerging Markets 2x Strategy Fund | 145,409 | (1,059,154 | ) | — | — | (913,745 | ) | |||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | 65,607 | (4,513,753 | ) | — | — | (4,448,146 | ) | |||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | 23,652 | 10,517 | 34,169 | |||||||||||||||
| Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations |
| Futures | Swaps | Futures | Swaps | |||||||||||||||||
| Equity | Equity | Interest Rate | Credit Default | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Long Short Equity Fund | $ | (7,093 | ) | $ | — | $ | — | $ | — | $ | (7,093 | ) | ||||||||
| Event Driven and Distressed Strategies Fund | (56,714 | ) | (49,638 | ) | (49,698 | ) | 12,477 | (143,573 | ) | |||||||||||
| Emerging Markets 2x Strategy Fund | (981 | ) | 201,112 | — | — | 200,131 | ||||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | 914 | (633,213 | ) | — | — | (632,299 | ) | |||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | (41,233 | ) | 80,996 | 39,763 | ||||||||||||||
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 distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 59
NOTES TO FINANCIAL STATEMENTS (continued)
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended March 31, 2014, the following capital loss carryforward amounts were expired or used:
| Fund | Amount | |||
| Long Short Equity Fund | $ | 7,558,083 | ||
The tax character of distributions paid during the year ended March 31, 2014 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| Long Short Equity Fund | $ | — | $ | — | $ | — | ||||||
| Event Driven and Distressed Strategies Fund | 384,859 | 284,989 | 669,848 | |||||||||
| Emerging Markets 2x Strategy Fund | — | — | — | |||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | — | |||||||||
| Emerging Markets Bond Strategy Fund* | — | — | — | |||||||||
| * Fund commenced operations on October 8, 2013. | ||||||||||||
The tax character of distributions paid during the year ended March 28, 2013 was as follows:
| Ordinary | Long-Term | Total | ||||||||||
| Fund | Income | Capital Gain | Distributions | |||||||||
| Long Short Equity Fund | $ | 248,478 | $ | — | $ | 248,478 | ||||||
| Event Driven and Distressed Strategies Fund | — | — | — | |||||||||
| Emerging Markets 2x Strategy Fund | — | — | — | |||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | — | |||||||||
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax character of distributable earnings/(accumulated losses) at March 31, 2014 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | Depreciation | Carryforward1 | ||||||||||||
| Long Short Equity Fund | $ | — | $ | — | $ | 2,757,069 | $ | (69,596,821 | ) | |||||||
| Event Driven and Distressed Strategies Fund | 430,325 | 10,067 | (25,108 | ) | — | |||||||||||
| Emerging Markets 2x Strategy Fund | — | — | (694,286 | ) | (2,245,854 | ) | ||||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | (657,973 | ) | (5,573,314 | ) | ||||||||||
| Emerging Markets Bond Strategy Fund | 73,498 | — | 80,996 | (118,622 | ) | |||||||||||
60 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (continued)
1A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Total | ||||||||||||||||||||
| Expires in | Expires in | Unlimited | Unlimited | Capital Loss | ||||||||||||||||
| Fund | 2017 | 2018 | Short-Term | Long-Term | Carryforward | |||||||||||||||
| Long Short Equity Fund | $ | (50,218,894 | ) | $ | (19,377,927 | ) | $ | — | $ | — | $ | (69,596,821 | ) | |||||||
| Emerging Markets 2x Strategy Fund | — | — | (2,002,590 | ) | (243,264 | ) | (2,245,854 | ) | ||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | (5,454,177 | ) | (119,137 | ) | (5,573,314 | ) | ||||||||||||
| Emerging Markets Bond Strategy Fund | — | — | (108,073 | ) | (10,549 | ) | (118,622 | ) | ||||||||||||
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 typically due to late year loss deferrals, losses deferred due to wash sales, tax treatment of payments from credit default swaps, utilization of earnings and profits on shareholder redemptions, foreign currency gains and losses, and the “mark-to-market” of certain passive foreign investment companies (PFICs) for tax purposes. Additional differences may result from tax treatment of net investment losses and expired capital loss carryforwards. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
On the Statements of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| Long Short Equity Fund | $ | (906,866 | ) | $ | 927,966 | $ | (21,100 | ) | ||||
| Event Driven and Distressed Strategies Fund | 64,105 | 244,985 | (309,090 | ) | ||||||||
| Emerging Markets 2x Strategy Fund | (23,247 | ) | 23,247 | — | ||||||||
| Inverse Emerging Markets 2x Strategy Fund | (50,234 | ) | 50,234 | — | ||||||||
| Emerging Markets Bond Strategy Fund | (4,509 | ) | 116,067 | (111,558 | ) | |||||||
At March 31, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| Long Short Equity Fund | $ | 61,361,194 | $ | 4,141,739 | $ | (1,130,245 | ) | $ | 3,011,494 | |||||||
| Event Driven and Distressed Strategies Fund | 10,723,342 | — | — | — | ||||||||||||
| Emerging Markets 2x Strategy Fund | 6,145,579 | — | (911,961 | ) | (911,961 | ) | ||||||||||
| Inverse Emerging Markets 2x Strategy Fund | 7,784,762 | — | — | — | ||||||||||||
| Emerging Markets Bond Strategy Fund | 4,566,556 | — | — | — | ||||||||||||
Pursuant to Federal income tax regulations applicable to investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and March 31 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and March 31 of each year as occurring on the first day of the following tax year. For the year ended March 31, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until April 1, 2014:
| Fund | Ordinary | Capital | ||||||
| Long Short Equity Fund | $ | (238,102 | ) | $ | — | |||
| Emerging Markets 2x Strategy Fund | (23,296 | ) | — | |||||
| Inverse Emerging Markets 2x Strategy Fund | (108,307 | ) | — | |||||
THE GUGGENHEIM FUNDS ANNUAL REPORT | 61
NOTES TO FINANCIAL STATEMENTS (continued)
9. Securities Transactions
For the period ended March 31, 2014, 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 | $ | 66,345,721 | $ | 71,769,675 | ||||
| Event Driven and Distressed Strategies Fund | 420,332 | 1,368,289 | ||||||
| Emerging Markets 2x Strategy Fund | 56,929,912 | 54,035,196 | ||||||
| Inverse Emerging Markets 2x Strategy Fund | — | — | ||||||
| Emerging Markets Bond Strategy Fund | — | — | ||||||
10. 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, Credit Suisse acts as the lending agent, and other approved registered broker dealers act as the borrowers. The Funds receive cash collateral, valued at 102% of the value of the securities on loan. Under the terms of the Funds’ securities lending agreement with Credit Suisse, cash collateral is invested in one or more joint repurchase agreements collateralized by obligations of the U.S. Treasury or Government Agencies and cash. The Funds bear the risk of loss on cash collateral investments. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the Funds the next business day. Although the collateral mitigates the risk, the Funds could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. The Funds have the right under the securities lending agreement to recover the securities from the borrower on demand.
At March 31, 2014, the Funds participated in securities lending as follows:
| Cash | ||||||||
| Value of | Collateral | |||||||
| Fund | Securities Loaned | Received | ||||||
| Long Short Equity Fund | $ | 1,097,049 | $ | 1,117,213 | ||||
Cash collateral received was invested in the following joint repurchase agreements at March 31, 2014:
| Counterparty and Terms of Agreement | Face Value | Repurchase Price | Collateral | Par Value | Fair Value | |||||||||||||
| BNP Paribas Securities Corp. | U.S. TIP Bond | |||||||||||||||||
| 0.05% | 0.75% | |||||||||||||||||
| Due 04/01/14 | $ | 542,198 | $ | 542,199 | 02/15/42 | $ | 610,194 | $ | 553,027 | |||||||||
| HSBC Securities, Inc. | Fannie Mae Strips | |||||||||||||||||
| 0.05% | 0.00% | |||||||||||||||||
| Due 04/01/14 | 483,808 | 483,809 | 07/15/14 - 01/15/30 | 610,448 | 493,471 | |||||||||||||
| Deutsche Bank Securities, Inc. | U.S. Treasury Note/Bond | |||||||||||||||||
| 0.05% - 0.08% | 1.75% - 8.75% | |||||||||||||||||
| Due 04/01/14 | 91,206 | 91,207 | 05/15/17 - 05/15/23 | 88,006 | 84,521 | |||||||||||||
| Fannie Mae Strip | ||||||||||||||||||
| 0.00% | ||||||||||||||||||
| 05/15/30 | 16,382 | 8,511 | ||||||||||||||||
11. 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 15, 2014. 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 1.25% for the year ended March 31, 2014. The Funds did not have any other borrowings under this agreement at March 31, 2014.
62 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (continued)
The average daily balances borrowed for the year ended March 31, 2014 were as follows:
| Fund | Average Daily Balance | |||
| Emerging Markets 2x Strategy Fund | $ | 15,658 | ||
12. Reverse Share Split
Effective at the close of business on February 21, 2014, Emerging Markets 2x Strategy Fund underwent a 1:5 reverse share split. The effect of this transaction was to divide the number of outstanding shares of the Fund by five, resulting in a corresponding increase in the net asset value per share. The share transactions presented in the statement of changes in net assets and the per share data in the financial highlights for each of the periods presented prior to February 21, 2014 have been restated to reflect this reverse share split. There were no changes in net assets, results of operations or total return as a result of this transaction.
13. Legal Proceedings
Tribune Company
Rydex Series Funds 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 Series Funds 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 the Tribune Company 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 Series Funds, 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 Series Funds has been named as a defendant in one or more of these suits. In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order.
On April 24, 2014, the District Court issued a “Phase Two Motion Protocol” in the FitzSimons action that directed the liaison counsel for the shareholder defendants to file a global motion to dismiss, i.e., a motion that applies to the claim against all shareholder defendants, with respect to the plaintiff’s claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law.
None of these lawsuits alleges any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds held shares of Tribune and tendered these shares as part of Tribune’s LBO: Nova Fund, S&P 500® Pure Value Fund, Multi-Cap Core Equity Fund, S&P 500® Fund, Multi-Hedge Strategies Fund and Hedged Equity Fund (the “Funds”). The value of the proceeds received by the foregoing Funds was $28,220, $109,242, $9,860, $3,400, $1,181,160, and $10,880, respectively. At this stage of the proceedings, Rydex Series Funds 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.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 63
NOTES TO FINANCIAL STATEMENTS (continued)
Lyondell Chemical Company
In December 2011, Rydex Series Funds was named as a defendant in Weisfelner, as Trustee of the LB Creditor Trust, v. Fund 1 (In re Lyondell Chemical Co.), Adv. Pro. No. 10-4609 (Bankr. S.D.N.Y.).
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
On April 7, 2014, the plaintiff filed a Third Amended Complaint. In the related action entitled Weisfelner, as Trustee of the LB Litigation Trust v. A. Holmes & H. Holmes TTEE (In re Lyondell Co.), Adversary Proceeding No. 10-5525 (Bankr. S.D.N.Y.), the plaintiff also filed a Second Amended Complaint that alleges a claim against the former Lyondell shareholders under federal law for intentional fraudulent transfer. The complaint identifies a putative defendant class comprised of all entities who received proceeds from the merger transaction in exchange for their shares.
The Court has ordered the parties to meet and confer on or before May 9, 2014 regarding a possible schedule for the defendants to respond to the amended complaints. The Court has scheduled a status conference for May 29, 2014 to address the parties’ proposed schedule.
These lawsuits do not allege any wrongdoing on the part of Rydex Series Funds. The following series of Rydex Series Funds received cash proceeds from the cash out merger in the following amounts: Basic Materials Fund - $1,725,168; U.S. Long Short Momentum Fund - $2,193,600; Global 130/30 Strategy Fund - $37,920; Hedged Equity Fund - $1,440; and Multi-Hedge Strategies Fund - $1,116,480. At this stage of the proceedings, Rydex Series Funds 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.
14. 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 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, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.
64 | THE GUGGENHEIM FUNDS ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (concluded)
For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP.
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of Assets | ||||||||||||||||||||||||||
| Gross Amounts Offset | Presented on the | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statements of | Statements of Assets | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Assets1 | Assets and Liabilities | and Liabilities | Instruments | Received2 | Amount | |||||||||||||||||||
| Emerging Markets 2x Strategy Fund | Swap equity contracts | $ | 217,675 | $ | — | $ | 217,675 | $ | — | $ | — | $ | 217,675 | |||||||||||||
| Gross Amounts Not Offset | ||||||||||||||||||||||||||
| in the Statements of Assets | ||||||||||||||||||||||||||
| and Liabilities | ||||||||||||||||||||||||||
| Net Amount of | ||||||||||||||||||||||||||
| Gross Amounts Offset | Liabilities Presented | Cash | ||||||||||||||||||||||||
| Gross Amounts of | in the Statements of | on the Statements of | Financial | Collateral | Net | |||||||||||||||||||||
| Fund | Instrument | Recognized Liabilities1 | Assets and Liabilities | Assets and Liabilities | Instruments | Pledged2 | Amount | |||||||||||||||||||
| Event Driven and Distressed Strategies Fund | Swap equity contracts | $ | 49,018 | $ | — | $ | 49,018 | $ | — | $ | — | $ | 49,018 | |||||||||||||
| Inverse Emerging Markets 2x Strategy Fund | Swap equity contracts | 657,973 | — | 657,973 | — | — | 657,973 | |||||||||||||||||||
1 Exchange traded futures and centrally cleared swaps are excluded from these reported amounts.
2 Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as Segregated cash with broker on the Statements of Assets and Liabilities.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 65
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders
of Rydex Series Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Long Short Equity Fund, Event Driven and Distressed Strategies Fund, Emerging Markets 2x Strategy Fund, Inverse Emerging Markets 2x Strategy Fund and Emerging Markets Bond Strategy Fund (five of the series constituting the Rydex Series Funds) (the “Funds”) as of March 31, 2014, and the related statements of operations, the statements of changes in net assets, and the financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2014, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds at March 31, 2014, and the results of their operations, the changes in their net assets, and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles.
McLean, Virginia
May 30, 2014
66 | THE GUGGENHEIM FUNDS ANNUAL REPORT
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.
Of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
| Fund | % Qualifying | ||
| Event Driven and Distressed Strategies Fund | 1.22% | ||
Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:
| Fund | % Qualifying | ||
| Event Driven and Distressed Strategies Fund | 1.22% | ||
Additionally, of the taxable ordinary income distributions paid during the fiscal year ending March 31, 2014, the following fund had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:
| Fund | % Qualifying | % STCG Qualifying | |||||
| Event Driven and Distressed Strategies Fund | 0.00 | % | 100.00% | ||||
With respect to the taxable year ended March 31, 2014, 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:
| Event Driven and | ||||
| Distressed Strategies Fund | ||||
| From long-term capital gains, subject to the 15% rate gains category: | $ | 284,989 | ||
| From long-term capital gains, using proceeds from shareholder redemptions: | 64,105 | |||
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.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 67
| OTHER INFORMATION (Unaudited)(concluded) |
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds will be consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD will serve as the Funds’ distributor.
GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.
The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.
68 | THE GUGGENHEIM 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 calling 800.820.0888.
All Trustees and Officers may be reached c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, MD 20850.
INTERESTED TRUSTEE
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Donald C. Cacciapaglia* (1951) | Trustee from 2012 to present. | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). Former: Chairman and Chief Executive Officer, Channel Capital Group, Inc. (200232010). | 214 | Delaware Life (2013–present); Guggenheim Life and Annuity Company (2011–present); Paragon Life Insurance Company of Indiana (2011– present). | ||||
| INDEPENDENT TRUSTEES | ||||||||
| Corey A. Colehour (1945) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Retired. | 131 | None. | ||||
| J. Kenneth Dalton (1941) | Trustee, Member and Chairman of the Audit Committee, and Member of the Governance and Nominating Committees from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | Trustee of Epiphany Funds (4) (2009 -present). | ||||
| John O. Demaret (1940) | Trustee from 1998 to present and Chairman of the Board from 2006 to present; Member and Chairman of the Audit Committee from 1998 to present; and Member of the Risk Oversight Committee from 2010 to present. | Retired. | 131 | None. | ||||
| Werner E. Keller (1940) | Vice Chairman of the Board of Trustees from 2010 to present; Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present; and Chairman and Member of the Risk Oversight Committee from 2010 to present. | Current: Founder and President, Keller Partners, LLC (investment research firm) (2005–present). | 131 | None. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 69
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued)
INDEPENDENT TRUSTEES - concluded
| Number of | Other | |||||||
| Position(s) Held with the | Portfolios in Fund | Directorships | ||||||
| Name, and Year of | Trust, Term of Office and | Principal Occupation(s) | Complex Overseen | Held by | ||||
| Birth of Trustee | Length of Time Served | During Past 5 Years | by Trustee** | Trustee | ||||
| Thomas F. Lydon, Jr. (1960) | Trustee and Member of the Audit, Governance, and Nominating Committees from 2005 to present. | Current: President, Global Trends Investments (registered investment adviser) (1996–present). | 131 | Board of Directors of US Global Investors (GROW) (1995–present). | ||||
| Patrick T. McCarville (1942) | Trustee, Member of the Audit Committee, and Chairman and Member of the Governance and Nominating Committees from 1998 to present. | Retired. Former: Chief Executive Officer, Par Industries, Inc., d/b/a Par Leasing (1977-2010). | 131 | None. | ||||
| Roger Somers (1944) | Trustee and Member of the Audit, Governance, and Nominating Committees from 1998 to present. | Current: Founder and Chief Executive Officer, Arrow Limousine (1962–present). | 131 | None. |
OFFICERS
| Position(s) Held with | ||||||
| Name, Address | the Trust, Term of | |||||
| and Year of Birth of | Office and Length of | Principal Occupation(s) | ||||
| Officer | Time Served | During Past 5 Years |
| Donald C. Cacciapaglia (1951) | President (2012–present). | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2012–present); Vice Chairman, Guggenheim Investments (2010–present). | ||
| Former: Chairman and Chief Executive Officer, Channel Capital Group Inc. (2002-2010). | ||||
| Michael P. Byrum (1970) | Vice President (1999–present). | Current: Senior Vice President, Security Investors, LLC (2010–present); President and Chief Investment Officer, Rydex Holdings, LLC (2008–present); Director and Chairman, Advisory Research Center, Inc. (2006–present); Manager, Guggenheim Specialized Products, LLC (2005–present). | ||
| Former: Vice President, Guggenheim Distributors, LLC (2009); Director (2009-2010) and Secretary (2002-2010), Rydex Fund Services, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors, LLC; Director (2008-2010), Chief Investment Officer (2006-2010), President (2004-2010) and Secretary (2002-2010), Rydex Advisors II, LLC. | ||||
| Nikolaos Bonos (1963) | Vice President and Treasurer (2003–present). | Current: Treasurer and Vice President, certain other funds in the Fund Complex (2003–present); Senior Vice President, Security Investors, LLC (2010–present); Chief Executive Officer, Guggenheim Specialized Products, LLC (2009–present); President and Chief Executive Officer, Rydex Fund Services, LLC (2009-present); Vice President, Rydex Holdings, LLC (2008–present). | ||
| Former: Senior Vice President, Security Global Investors, LLC (2010-2011); Senior Vice President, Rydex Advisors, LLC (2006-2011); Senior Vice President, Rydex Advisors II, LLC (2006-2011). |
| * | Mr. Cacciapaglia is an “interested” person of the Trust, as that term is defined in the 1940 Act by virtue of his affiliation with the Advisor’s parent company. |
| ** | The “Fund Complex” includes all closed-end and open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment adviser or servicing agent that is an affiliated person of the Advisor. Information provided is as of the date of this report. |
70 | THE GUGGENHEIM FUNDS ANNUAL REPORT
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded)
OFFICERS - concluded
| Position(s) Held with | ||||||
| Name, Address | the Trust, Term of | |||||
| and Year of Birth of | Office and Length of | Principal Occupation(s) | ||||
| Officer | Time Served | During Past 5 Years |
| Elisabeth Miller (1968) | Chief Compliance Officer (2012–present). | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012–present); Chief Compliance Officer, Security Investors, LLC (2012–present); Chief Compliance Officer, Guggenheim Funds Investment Advisors, LLC (2012–present); Vice President, Guggenheim Funds Distributors, LLC (2014–present). | ||
| Former: Chief Compliance Officer, Guggenheim Distributors, LLC (2009–2014); Senior Manager, Security Investors, LLC (2004–2009); Senior Manager, Guggenheim Distributors, LLC (2004–2009). | ||||
| Joseph M. Arruda (1966) | Assistant Treasurer (2006–present). | Current: Assistant Treasurer, certain other funds in the Fund Complex (2006–present); Vice President, Security Investors, LLC (2010–present); Chief Financial Officer and Manager, Guggenheim Specialized Products, LLC (2009–present). | ||
| Former: Vice President, Security Global Investors, LLC (2010–2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010). | ||||
| Amy J. Lee (1961) | Vice President (2009–present) and Secretary (2012–present). | Current: Chief Legal Officer, certain other funds in the Fund Complex (2013–present); Senior Managing Director, Guggenheim Investments (2012–present). | ||
| Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004–2012). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 71
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim
72 | THE GUGGENHEIM FUNDS ANNUAL REPORT
GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)(concluded)
Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 73
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Item 2. Code of Ethics.
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that Werner Keller, an "independent" Trustee serving on the registrant's audit committee, is an "audit committee financial expert," as defined in Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees: The aggregate Audit Fees billed by the registrant’s principal accountant, for the audit of the annual financial statements in connection with statutory and regulatory filings for the fiscal years ended March 31, 2014 and March 28, 2013 were $694,276 and $789,589, respectively.
(b) Audit Related Fees: The aggregate Audit Related Fees by the registrant’s principal accountant billed for the fiscal years ended March 31, 2014 and March 28, 2013 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 March 31, 2014 and March 28, 2013 were $35,000 and $35,000, 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 March 31, 2014 and March 28, 2013 were $339,662 and $0, respectively.
(d) All Other Fees: The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended March 31, 2014 and March 28, 2013 were $0 and $0, respectively.
(e) The audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment advisor, and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such service is required between regularly scheduled audit committee meetings, the chairman of the audit committee, J. Kenneth Dalton, is authorized to pre-approve the service with full committee approval at the next scheduled meeting. There shall be no waivers of the pre-approval process. No services described in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) 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 $374,662 and $35,000, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. As such, the audit committee has considered these services in maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. 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 Series Funds
By (Signature and Title)* /s/ Donald C. Cacciapaglia
Donald C. Cacciapaglia, President
Date June 6, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Donald C. Cacciapaglia
Donald C. Cacciapaglia, President
Date June 6, 2014
By (Signature and Title)* /s/ Nikolaos Bonos
Nikolaos Bonos, Vice President and Treasurer
Date June 6, 2014
* Print the name and title of each signing officer under his or her signature.