<Page>
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 811-21261
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Rydex ETF Trust
---------------------------------------------------------
(Exact name of registrant as specified in charter)
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
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(Address of principal executive offices) (Zip code)
Carl Verboncoeur
Rydex ETF Trust
9601 Blackwell Road, Suite 500
Rockville, Maryland 20850
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-301-296-5100
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Date of fiscal year end: October 31, 2003
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Date of reporting period: October 31, 2003
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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. Section 3507.
<Page>
Item 1. Reports to Stockholders.
<Page>
THE RYDEX ETF TRUST
RYDEX S&P EQUAL WEIGHT ETF
ANNUAL REPORT
OCTOBER 31, 2003
ETF-Ann-1003
[RYDEX INVESTMENTS ESSENTIAL FOR MODERN MARKETS (TM) LOGO]
<Page>
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 Rydex Distributors, Inc.
<Page>
1
TABLE OF CONTENTS
<Table>
LETTER FROM THE CEO 2
SCHEDULE OF INVESTMENTS 3
STATEMENT OF ASSETS AND LIABILITIES 13
FINANCIAL HIGHLIGHTS 16
NOTES TO FINANCIAL STATEMENTS 17
INDEPENDENT AUDITORS' REPORT 22
TRUSTEES AND OFFICERS 23
</Table>
<Page>
2
DEAR SHAREHOLDERS:
The period April 24 through October 31,2003 can be characterized by remarkable
resilience in the financial markets and cautious optimism on the economy. Having
started the period in a time of high geopolitical uncertainty and weak economic
activity, the markets returned double digit gains across the board. Most notable
in the rally was the solid outperformance of the technology sector and
small-capitalization stocks.
The mutual fund industry was rocked by revelations of trading abuses by
corporate executives and fund managers, as well as disclosure of special deals
for top customers. The charges and allegations as presented by New York Attorney
General Eliot Spitzer represent a serious breach of fiduciary duty and are
almost certain to bring regulatory changes to the industry.
Since inception, Rydex S&P Equal Weight ETF (RSP)--which tracks the S&P Equal
Weight Index (SPXEW)--has outperformed the S&P 500(R) Index by 9.4%. RSP
outperformed the S&P 500 in nine of 10 sectors. SPXEW differs from its
well-known counterpart in that the SPXEW is equally-weighted vs. the S&P 500,
which is capitalization-weighted. This may benefit shareholders by avoiding
domination by a few stocks and providing more exposure to smaller stocks in the
S&P 500. Over the long term, the SPXEW has outperformed the S&P 500. In fact,
for the 10-year period ending October 31, 2003, the SPXEW was up 11.8% versus
10.4% for the predominantly large-cap S&P 500 Index.
Due in large part to the broad market move and the strength in some of the
smaller stocks in the S&P 500, RSP outperformed during the six-month period
ended October 31, 2003. Two sectors in particular--information technology and
consumer discretionary--provided a significant amount of outperformance. This
was driven by less exposure in large-cap stocks such as Microsoft, International
Business Machines (IBM), Time Warner, Comcast and Viacom. These individual
securities have underperformed the market since inception.
While RSP outperformed the S&P 500 during the period, it also slightly bested
the SPXEW. During the period, RSP saw a 25.8% gain; the SPXEW saw a 25.3% gain.
During the period, RSP completed two successful rebalances. Transaction costs
were kept to a minimum while there was no capital gain exposure.
Times such as these can be challenging for investors. At Rydex, we acknowledge
and appreciate the trust you have placed in our firm's quality and integrity by
investing with us.
Sincerely,
/s/ Carl G. Verboncoeur
Carl G. Verboncoeur
Chief Executive Officer
Rydex Investments
<Page>
3
RYDEX S&P EQUAL WEIGHT ETF
SCHEDULE OF INVESTMENTS OCTOBER 31,2003
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 99.9%
ADVERTISING AND MARKETING SERVICES 0.6%
Monster Worldwide, Inc.* 11,825 $ 301,183
Omnicom Group, Inc. 4,358 347,768
The Interpublic Group of Cos., Inc. 22,965 341,719
------------
TOTAL ADVERTISING AND MARKETING SERVICES 990,670
------------
AEROSPACE AND DEFENSE 1.6%
General Dynamics Corp. 4,098 343,003
Goodrich Corp. 13,250 365,965
Lockheed Martin Corp. 7,088 328,600
Northrop Grumman Corp. 3,702 330,959
Raytheon Co. 11,335 300,151
Rockwell Collins, Inc. 13,030 357,674
The Boeing Co. 9,644 371,197
United Technologies Corp. 4,361 369,332
------------
TOTAL AEROSPACE AND DEFENSE 2,766,881
------------
AGRICULTURAL 0.2%
Monsanto Co. 13,670 342,434
------------
TOTAL AGRICULTURAL 342,434
------------
AIRLINES 0.4%
Delta Air Lines, Inc. 23,674 308,235
Southwest Airlines Co. 18,658 361,966
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TOTAL AIRLINES 670,201
------------
ALUMINUM, STEEL AND OTHER METALS 1.3%
Alcoa, Inc. 12,132 383,007
Allegheny Technologies, Inc. 48,547 371,385
Freeport-McMoRan Copper & Gold, Inc., Class B 10,245 396,994
Nucor Corp. 7,145 391,760
Phelps Dodge Corp.* 6,875 424,463
United States Steel Corp. 17,611 416,500
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TOTAL ALUMINUM, STEEL AND OTHER METALS 2,384,109
------------
AUTOMOTIVE 2.1%
AutoNation, Inc.* 18,458 $ 345,165
AutoZone, Inc.* 3,848 369,793
Dana Corp. 21,943 357,232
Delphi Corp. 36,105 321,335
Ford Motor Co. 29,988 363,754
General Motors Corp. 8,242 351,686
Harley-Davidson, Inc. 7,131 338,081
Johnson Controls, Inc. 3,453 371,300
Navistar International Corp.* 8,329 336,741
PACCAR, Inc. 4,286 338,423
Visteon Corp. 49,099 317,180
------------
TOTAL AUTOMOTIVE 3,810,690
------------
BANKING AND FINANCE 6.0%
AmSouth Bancorp. 15,826 373,810
Bank of America Corp. 4,357 329,956
Bank One Corp. 8,860 376,107
BB&T Corp. 9,242 357,388
Charter One Financial, Inc. 10,875 347,565
Comerica, Inc. 7,062 363,552
Fifth Third Bancorp. 5,886 341,153
First Tennessee National Corp. 8,313 377,078
FleetBoston Financial Corp. 11,170 451,155
Golden West Financial Corp. 3,865 388,162
Huntington Bancshares, Inc. 16,691 361,527
J.P. Morgan Chase & Co. 9,726 349,163
KeyCorp. 13,129 370,894
Marshall & Ilsley Corp. 10,543 377,650
Mellon Financial Corp. 10,453 312,231
National City Corp. 11,207 366,021
North Fork Bancorp., Inc. 9,764 380,601
Northern Trust Corp. 7,854 364,818
Regions Financial Corp. 9,862 362,429
SouthTrust Corp. 11,354 361,625
State Street Corp. 7,236 378,877
SunTrust Banks, Inc. 5,526 370,629
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
4
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
The Bank of New York Co., Inc. 10,975 $ 342,310
U.S. Bancorp. 13,952 379,773
Union Planters Corp. 10,425 346,840
Wachovia Corp. 8,141 373,428
Washington Mutual, Inc. 8,975 392,656
Wells Fargo & Co. 6,680 376,218
Zions Bancorp. 5,984 366,759
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TOTAL BANKING AND FINANCE 10,640,375
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BEVERAGES, FOOD AND TOBACCO 4.2%
Adolph Coors Co. 6,293 352,723
Altria Group, Inc. 7,741 359,957
Anheuser-Busch Cos., Inc. 6,755 332,751
Archer-Daniels-Midland Co. 26,409 378,968
Brown-Forman Corp., Class B 4,277 360,893
Campbell Soup Co. 12,398 321,356
Coca-Cola Enterprises, Inc. 18,129 365,481
ConAgra Foods, Inc. 15,647 373,024
General Mills, Inc. 7,322 328,392
H.J. Heinz Co. 10,078 356,056
Hershey Foods Corp. 4,725 364,298
Kellogg Co. 10,359 343,194
McCormick & Co., Inc. 12,690 376,132
McDonald's Corp. 14,430 360,894
PepsiCo, Inc. 7,543 360,706
R.J. Reynolds Tobacco Holdings, Inc. 8,655 415,699
SUPER VALU, INC. 13,801 348,061
The Coca-Cola Co. 7,994 370,922
The Pepsi Bottling Group, Inc. 16,289 363,082
UST, Inc. 9,885 336,288
Wm. Wrigley Jr. Co. 6,158 347,311
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TOTAL BEVERAGES, FOOD AND TOBACCO 7,516,188
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BIOSCIENCES 0.5%
Amgen, Inc.* 5,021 $ 310,097
Biogen, Inc.* 8,023 324,691
Chiron Corp.* 6,221 339,853
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TOTAL BIOSCIENCES 974,641
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BUILDING AND BUILDING PRODUCTS 1.5%
Ecolab, Inc. 12,879 346,316
Georgia-Pacific Group 13,834 363,558
Louisiana-Pacific Corp.* 23,723 451,211
Masco Corp. 13,812 379,830
The Home Depot, Inc. 10,428 386,566
The Sherwin-Williams Co. 11,321 379,706
Vulcan Materials Co. 8,415 372,869
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TOTAL BUILDING AND BUILDING PRODUCTS 2,680,056
------------
BUSINESS EQUIPMENT AND SERVICES 0.8%
Convergys Corp.* 17,728 284,712
Lexmark International, Inc.* 5,003 368,270
Pitney Bowes, Inc. 8,749 359,584
Xerox Corp.* 32,410 340,305
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TOTAL BUSINESS EQUIPMENT AND SERVICES 1,352,871
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CHEMICALS 2.2%
Air Products and Chemicals, Inc. 7,212 327,497
Ashland, Inc. 10,152 378,060
duPont (E.I.) de Nemours & Co. 8,168 329,987
Eastman Chemical Co. 10,028 325,509
Great Lakes Chemical Corp. 16,437 353,396
Hercules, Inc.* 28,597 298,839
PPG Industries, Inc. 6,292 362,734
Praxair, Inc. 5,496 382,411
Rohm and Haas Co. 9,690 380,817
Sigma-Aldrich Corp. 6,308 330,855
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
5
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
The Dow Chemical Co. 10,288 $ 387,754
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TOTAL CHEMICALS 3,857,859
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COMMUNICATIONS, MEDIA AND ENTERTAINMENT 1.6%
Clear Channel Communications, Inc. 8,218 335,459
Comcast Corp., Class A* 11,067 375,393
Gannett Co., Inc. 4,420 371,766
Meredith Corp. 7,196 349,150
The McGraw-Hill Cos., Inc. 5,757 385,431
Time Warner, Inc.* 21,202 324,179
Univision Communications, Inc.* 9,873 335,188
Viacom, Inc., Class B 8,207 327,213
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TOTAL COMMUNICATIONS, MEDIA AND ENTERTAINMENT 2,803,779
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COMPUTER SERVICES 1.8%
Computer Sciences Corp.* 8,785 348,062
Compuware Corp.* 56,678 318,530
eBay, Inc.* 6,284 351,527
Electronic Data Systems Corp. 16,359 350,901
Intuit, Inc.* 7,048 352,259
Network Appliance, Inc.* 15,106 372,816
SunGard Data Systems, Inc.* 12,240 343,332
Unisys Corp.* 24,779 380,605
Yahoo!, Inc.* 9,279 405,492
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TOTAL COMPUTER SERVICES 3,223,524
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COMPUTERS - MICRO 1.1%
Apple Computer, Inc.* 15,327 350,835
Dell Inc.* 9,930 358,672
Gateway, Inc.* 51,672 260,427
Hewlett-Packard Co. 16,320 364,098
International Business Machines Corp.(IBM) 3,700 $ 331,076
Sun Microsystems, Inc.* 84,187 333,381
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TOTAL COMPUTERS - MICRO 1,998,489
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COMPUTERS - SOFTWARE AND PERIPHERALS 3.6%
Adobe Systems, Inc. 8,349 366,020
Autodesk, Inc. 19,165 368,926
BMC Software, Inc.* 23,073 401,009
Cisco Systems, Inc.* 16,413 344,345
Citrix Systems, Inc.* 14,846 375,307
Computer Associates International, Inc. 12,648 297,481
Electronic Arts, Inc.* 3,641 360,605
EMC Corp.* 24,832 343,675
Mercury Interactive Corp.* 6,772 314,492
Microsoft Corp. 11,525 301,379
NCR Corp.* 11,243 404,073
NVIDIA Corp.* 17,459 308,675
Parametric Technology Corp.* 86,508 269,040
PeopleSoft, Inc.* 18,006 373,805
Siebel Systems, Inc.* 33,609 423,136
Symantec Corp.* 5,440 362,576
VERITAS Software Corp.* 9,865 356,620
Xilinx, Inc.* 10,923 346,259
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TOTAL COMPUTERS - SOFTWARE AND PERIPHERALS 6,317,423
------------
CONGLOMERATES 0.4%
General Electric Co. 10,810 313,598
Textron, Inc. 7,899 392,501
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TOTAL CONGLOMERATES 706,099
------------
CONSUMER GOODS AND SERVICES 2.0%
American Greetings Corp., Class A* 17,045 363,570
Avery Dennison Corp. 6,760 355,441
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
6
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
Brunswick Corp. 12,565 $ 372,804
Cendant Corp.* 18,205 371,928
Eastman Kodak Co. 12,416 303,323
Fortune Brands, Inc. 5,902 384,515
Hasbro, Inc. 18,263 398,133
Mattel, Inc. 17,620 341,123
Sara Lee Corp. 18,282 364,360
Tupperware Corp. 20,656 310,873
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TOTAL CONSUMER GOODS AND SERVICES 3,566,070
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CONTAINERS AND PACKAGING 0.8%
Ball Corp. 6,392 359,230
Bemis Co., Inc. 7,643 353,412
Pactiv Corp.* 17,003 374,916
Sealed Air Corp.* 6,907 367,660
------------
TOTAL CONTAINERS AND PACKAGING 1,455,218
------------
DATA PROCESSING SYSTEMS 0.7%
Automatic Data Processing, Inc. 8,850 333,999
First Data Corp. 8,116 289,741
Fiserv, Inc.* 9,036 319,152
Paychex, Inc. 9,834 382,739
------------
TOTAL DATA PROCESSING SYSTEMS 1,325,631
------------
EDUCATION 0.2%
Apollo Group, Inc., Class A* 5,065 321,779
------------
TOTAL EDUCATION 321,779
------------
ELECTRONIC EQUIPMENT AND COMPONENTS 6.3%
Advanced Micro Devices, Inc.* 27,221 413,759
Agilent Technologies, Inc.* 13,785 343,522
Altera Corp.* 16,114 325,986
American Power Conversion Corp.* 18,718 378,665
Analog Devices, Inc.* 8,376 371,308
Applied Materials, Inc.* 16,862 394,065
Applied Micro Circuits Corp.* 61,858 $ 360,014
Cooper Industries, Inc., Class A 6,868 363,317
Emerson Electric Co. 6,216 352,758
Intel Corp. 11,890 392,965
International Game Technology 12,253 401,286
Jabil Circuit, Inc.* 11,776 327,962
KLA-Tencor Corp.* 6,090 349,140
Linear Technology Corp. 8,889 378,760
LSI Logic Corp.* 28,860 266,666
Maxim Integrated Products, Inc. 7,971 396,238
Micron Technology, Inc.* 23,755 340,647
Molex, Inc. 11,203 351,662
National Semiconductor Corp.* 9,615 390,657
Novellus Systems, Inc.* 8,917 368,183
PMC - Sierra, Inc.* 24,445 444,167
Power-One, Inc.* 28,362 256,960
QLogic Corp.* 6,757 378,730
Rockwell Automation, Inc. 12,090 375,395
Sanmina-SCI Corp.* 32,904 347,137
Solectron Corp.* 51,517 285,404
Symbol Technologies, Inc. 28,292 353,367
Tektronix, Inc. 13,446 345,159
Teradyne, Inc.* 15,689 357,395
Texas Instruments, Inc. 14,281 413,007
Thomas & Betts Corp. 19,724 351,087
------------
TOTAL ELECTRONIC EQUIPMENT AND COMPONENTS 11,175,368
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FINANCIAL SERVICES 6.1%
Ambac Financial Group, Inc. 5,198 367,707
American Express Co. 7,336 344,278
Capital One Financial Corp. 5,603 340,662
Citigroup, Inc. 7,346 348,200
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
7
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
Concord EFS, Inc.* 24,138 $ 258,035
Countrywide Financial Corp. 4,465 469,362
Deluxe Corp. 8,191 330,671
Equifax, Inc. 14,910 364,400
Fannie Mae 4,966 356,013
Federated Investors, Inc., Class B 11,618 321,238
Franklin Resources, Inc. 7,404 351,098
Freddie Mac 6,280 352,496
H&R Block, Inc. 8,168 384,631
Janus Capital Group, Inc. 22,889 323,650
John Hancock Financial Services, Inc. 10,830 382,841
Lehman Brothers Holdings, Inc. 4,886 351,792
Marsh & McLennan Cos., Inc. 6,959 297,497
MBIA, Inc. 6,061 361,296
MBNA Corp. 14,216 351,846
Merrill Lynch & Co., Inc. 6,014 356,029
MGIC Investment Corp. 6,256 320,995
Moody's Corp. 6,374 368,608
Morgan Stanley 6,590 361,593
PNC Financial Services Group 7,056 377,990
Providian Financial Corp.* 29,128 323,612
SLM Corp. 8,705 340,888
Synovus Financial Corp. 12,932 356,923
T. Rowe Price Group, Inc. 7,825 321,999
The Bear Stearns Cos., Inc. 4,530 345,413
The Charles Schwab Corp. 27,503 372,941
The Goldman Sachs Group, Inc. 3,683 345,834
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TOTAL FINANCIAL SERVICES 10,850,538
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FOREST AND PAPER PRODUCTS 1.0%
Boise Cascade Corp. 11,968 335,702
International Paper Co. 8,427 $ 331,602
Mead Westvaco Corp. 12,620 327,110
Temple-Inland, Inc. 6,679 360,867
Weyerhaeuser Co. 5,672 341,625
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TOTAL FOREST AND PAPER PRODUCTS 1,696,906
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HEALTH AND MEDICAL FACILITIES 0.2%
Quest Diagnostics, Inc.* 5,393 364,836
------------
TOTAL HEALTH AND MEDICAL FACILITIES 364,836
------------
HEALTH CARE PRODUCTS AND SERVICES 5.6%
Abbott Laboratories 7,942 338,488
Allergan, Inc. 4,309 325,847
Anthem, Inc.* 4,621 316,215
Applera Corp.- Applied Biosystems Group 16,297 376,135
Bausch & Lomb, Inc. 7,762 373,818
Baxter International, Inc. 11,452 304,394
Becton, Dickinson & Co. 9,083 332,074
Biomet, Inc. 9,887 354,548
Boston Scientific Corp.* 5,045 341,647
C.R. Bard, Inc. 4,791 383,520
Cardinal Health, Inc. 5,890 349,513
Genzyme Corp.* 6,979 320,336
Guidant Corp. 7,198 367,170
HCA, Inc. 9,559 365,632
Health Management Associates, Inc., Class A 15,739 348,619
Humana, Inc.* 19,294 391,475
IMS Health, Inc. 16,437 386,763
Johnson & Johnson 6,861 345,314
Manor Care, Inc. 11,985 398,861
McKesson Corp. 9,759 295,405
Medtronic, Inc. 7,127 324,777
St. Jude Medical, Inc.* 5,950 346,052
Stryker Corp. 4,534 367,753
Tenet Healthcare Corp.* 22,326 308,099
UnitedHealth Group, Inc. 6,909 351,530
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
8
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
WellPoint Health Networks, Inc.* 4,454 $ 395,961
Wyeth 7,274 321,074
Zimmer Holdings, Inc.* 6,429 410,233
------------
TOTAL HEALTH CARE PRODUCTS AND SERVICES 9,841,253
------------
HOMEBUILDERS 0.7%
Centex Corp. 4,517 440,408
KB HOME 5,860 401,351
Pulte Homes, Inc. 5,035 435,578
------------
TOTAL HOMEBUILDERS 1,277,337
------------
HOTELS AND GAMING 0.8%
Harrah's Entertainment, Inc.* 8,070 351,045
Hilton Hotels Corp. 21,307 337,503
Marriott International, Inc., Class A 8,050 347,760
Starwood Hotels & Resorts Worldwide, Inc. 10,022 338,042
------------
TOTAL HOTELS AND GAMING 1,374,350
------------
HOUSEHOLD AND PERSONAL CARE PRODUCTS 2.2%
Alberto-Culver Co., Class B 5,908 374,566
Avon Products, Inc. 5,300 360,188
Colgate-Palmolive Co. 6,236 331,693
International Flavors & Fragrances, Inc. 10,415 344,737
Kimberly-Clark Corp. 6,760 356,996
Leggett & Platt, Inc. 15,206 317,653
Maytag Corp. 13,109 332,969
The Clorox Co. 7,510 340,203
The Gillette Co. 10,653 339,831
The Procter & Gamble Co. 3,725 366,130
Whirlpool Corp. 4,973 350,447
------------
TOTAL HOUSEHOLD AND PERSONAL CARE PRODUCTS 3,815,413
------------
HUMAN RESOURCES 0.2%
Robert Half International, Inc.* 15,790 $ 372,802
------------
TOTAL HUMAN RESOURCES 372,802
------------
INSURANCE 4.6%
ACE Ltd. 10,297 370,692
Aetna US Healthcare 5,700 327,237
AFLAC, Inc. 11,384 415,288
American International Group, Inc. 5,719 347,887
Aon Corp. 15,812 346,283
CIGNA Corp. 7,321 417,662
Cincinnati Financial Corp. 8,317 340,332
Jefferson-Pilot Corp. 7,484 357,286
Lincoln National Corp. 9,400 375,342
Loews Corp. 8,171 351,353
MetLife, Inc. 12,048 378,307
Principal Financial Group, Inc. 10,770 337,640
Prudential Financial, Inc. 9,156 353,788
SAFECO Corp. 9,561 350,889
The Allstate Corp. 9,209 363,756
The Chubb Corp. 5,338 356,632
The Hartford Financial Services Group, Inc. 6,247 342,960
The Progressive Corp. 4,783 352,985
The St. Paul Cos., Inc. 8,982 342,484
Torchmark Corp. 8,285 363,546
Travelers Property Casualty Corp., Class B 21,412 350,514
UnumProvident Corp. 22,768 372,712
XL Capital Ltd., Class A 4,468 310,526
------------
TOTAL INSURANCE 8,226,101
------------
MACHINERY AND ENGINEERING 1.2%
Caterpillar, Inc. 4,849 355,335
Cummins, Inc. 7,218 342,133
Deere & Co. 6,199 375,783
Eaton Corp. 3,633 364,172
Fluor Corp. 9,192 340,839
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
9
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
Ingersoll-Rand Co., Class A 6,084 $ 367,474
------------
TOTAL MACHINERY AND ENGINEERING 2,145,736
------------
MANUFACTURING 3.1%
3M Co. 4,862 383,466
American Standard Cos., Inc.* 4,073 389,785
Cintas Corp. 8,497 362,482
Crane Co. 13,763 386,740
Danaher Corp. 4,548 376,802
Dover Corp. 9,286 362,340
Honeywell International, Inc. 12,341 377,758
Illinois Tool Works, Inc. 4,785 351,937
ITT Industries, Inc. 5,427 368,982
Newell Rubbermaid, Inc. 15,389 350,869
Pall Corp. 15,689 367,123
Parker-Hannifin Corp. 7,352 374,731
Tyco International Ltd. 15,761 329,090
Waters Corp.* 11,817 371,408
Worthington Industries, Inc. 26,470 385,933
------------
TOTAL MANUFACTURING 5,539,446
------------
MINING 0.2%
Newmont Mining Corp. 8,489 371,648
------------
TOTAL MINING 371,648
------------
NETWORKING PRODUCTS 0.6%
CIENA Corp.* 50,775 325,468
Novell, Inc.* 61,747 362,455
Oracle Corp.* 28,503 340,896
------------
TOTAL NETWORKING PRODUCTS 1,028,819
------------
OIL AND GAS 5.6%
Amerada Hess Corp. 7,018 362,269
Anadarko Petroleum Corp. 7,917 345,340
Apache Corp. 5,114 356,548
Baker Hughes, Inc. 10,909 308,288
BJ Services Co.* 10,101 331,414
Burlington Resources, Inc. 7,294 $ 354,780
ChevronTexaco Corp. 4,770 354,411
ConocoPhillips 6,163 352,215
Devon Energy Corp. 7,066 342,701
Dynegy, Inc., Class A* 88,732 355,815
El Paso Corp. 43,692 320,699
Engelhard Corp. 12,060 344,675
EOG Resources, Inc. 8,337 351,321
Exxon Mobil Corp. 9,331 341,328
Halliburton Co. 14,164 338,236
Kerr-McGee Corp. 7,769 322,414
Marathon Oil Corp. 12,175 360,015
Nabors Industries, Ltd.* 9,354 353,581
NICOR, Inc. 9,639 330,329
Noble Corp.* 10,384 356,483
Occidental Petroleum Corp. 9,865 347,840
Peoples Energy Corp. 8,174 330,638
Rowan Cos., Inc.* 14,263 341,599
Schlumberger Ltd. 6,769 317,940
Sempra Energy 11,614 322,869
Sunoco, Inc. 8,736 382,288
The Williams Cos., Inc. 37,195 379,389
Transocean, Inc. 17,801 341,601
Unocal Corp. 10,827 342,999
------------
TOTAL OIL AND GAS 9,990,025
------------
PHARMACEUTICALS 2.3%
AmerisourceBergen Corp. 6,295 357,367
Bristol-Myers Squibb Co. 12,667 321,362
Eli Lilly & Co. 5,733 381,932
Express Scripts, Inc., Class A* 5,792 318,097
Forest Laboratories, Inc.* 7,054 352,771
King Pharmaceuticals, Inc.* 20,970 280,998
Medco Health Solutions, Inc.* 14,263 473,532
MedImmune, Inc.* 9,599 255,909
Merck & Co., Inc. 6,601 292,094
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
10
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
Pfizer, Inc. 10,975 $ 346,810
Schering-Plough Corp. 20,731 316,562
Watson Pharmaceuticals, Inc.* 7,818 307,013
------------
TOTAL PHARMACEUTICALS 4,004,447
------------
PUBLISHING 1.0%
Dow Jones & Co., Inc. 7,172 372,729
Knight-Ridder, Inc. 5,017 367,846
R.R. Donnelley & Sons Co. 13,946 362,596
The New York Times Co., Class A 7,863 373,729
Tribune Co. 7,423 364,098
------------
TOTAL PUBLISHING 1,840,998
------------
REAL ESTATE INVESTMENT TRUSTS 1.2%
Apartment Investment & Management Co., Class A 8,850 361,965
Equity Office Properties Trust 12,502 350,181
Equity Residential 11,732 343,161
Plum Creek Timber Co., Inc. 13,174 347,135
ProLogis 11,486 339,296
Simon Property Group, Inc. 8,031 362,038
------------
TOTAL REAL ESTATE INVESTMENT TRUSTS 2,103,776
------------
RESORTS AND ENTERTAINMENT 0.2%
The Walt Disney Co. 16,854 381,575
------------
TOTAL RESORTS AND ENTERTAINMENT 381,575
------------
RETAIL - APPAREL AND SHOES 1.7%
Jones Apparel Group, Inc. 10,760 371,220
Limited Brands 21,294 374,774
Liz Claiborne, Inc. 9,803 361,633
NIKE, Inc., Class B 5,612 358,607
Nordstrom, Inc. 13,368 407,591
Reebok International Ltd. 10,051 391,486
The GAP, Inc. 18,800 $ 358,704
V.F. Corp. 8,612 365,579
------------
TOTAL RETAIL - APPAREL AND SHOES 2,989,594
------------
RETAIL - DEPARTMENT STORES 1.2%
Dillard's, Inc., Class A 22,384 361,949
Federated Department Stores, Inc. 7,744 368,227
J.C. Penney Co., Inc. (Holding Co.) 15,226 360,095
Kohl's Corp.* 6,005 336,700
Sears, Roebuck & Co. 7,530 396,305
The May Department Stores Co. 13,291 371,616
------------
TOTAL RETAIL - DEPARTMENT STORES 2,194,892
------------
RETAIL - DISCOUNT STORES 1.4%
Big Lots, Inc.* 19,803 297,243
Costco Wholesale Corp.* 10,588 374,497
Dollar General Corp. 16,114 362,082
Family Dollar Stores, Inc. 8,273 360,786
Target Corp. 8,796 349,553
The TJX Cos., Inc. 16,837 353,409
Wal-Mart Stores, Inc. 5,937 349,986
------------
TOTAL RETAIL - DISCOUNT STORES 2,447,556
------------
RETAIL - FOOD STORES 0.7%
Albertson's, Inc. 16,343 331,599
Safeway, Inc.* 14,222 300,084
The Kroger Co.* 19,007 332,433
Winn-Dixie Stores, Inc. 33,840 273,766
------------
TOTAL RETAIL - FOOD STORES 1,237,882
------------
RETAIL - RESTAURANTS 0.8%
Darden Restaurants, Inc. 15,409 322,819
Starbucks Corp.* 11,825 373,670
Wendy's International, Inc. 10,543 390,618
Yum! Brands, Inc.* 11,317 386,362
------------
TOTAL RETAIL - RESTAURANTS 1,473,469
------------
</Table>
* NON-INCOME PRODUCING SECURITY.
See Notes to Financial Statements.
<Page>
11
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL - SPECIALTY STORES 2.3%
Bed Bath & Beyond, Inc.* 8,331 $ 351,901
Best Buy Co., Inc. 6,710 391,260
Circuit City Stores-Circuit City Group 30,411 290,121
CVS Corp. 11,000 386,980
Lowe's Cos., Inc. 6,404 377,388
Office Depot, Inc.* 23,228 346,794
RadioShack Corp. 11,780 353,282
Staples, Inc.* 14,234 381,756
Tiffany & Co. 8,629 409,446
Toys "R" Us, Inc.* 26,288 341,744
Walgreen Co. 10,585 368,570
------------
TOTAL RETAIL - SPECIALTY STORES 3,999,242
------------
RETAIL AND WHOLESALE DISTRIBUTION 0.6%
Genuine Parts Co. 10,479 333,442
SYSCO Corp. 10,288 346,294
W.W. Grainger, Inc. 6,835 312,906
------------
TOTAL RETAIL AND WHOLESALE DISTRIBUTION 992,642
------------
TELECOMMUNICATIONS 4.8%
ADC Telecommunications, Inc.* 127,840 325,992
ALLTEL Corp. 7,276 343,937
Andrew Corp.* 24,994 326,922
AT&T Corp. 15,341 285,189
AT&T Wireless Services, Inc.* 39,268 284,693
Avaya, Inc.* 32,563 421,364
BellSouth Corp. 13,573 357,106
Broadcom Corp., Class A* 13,050 416,947
CenturyTel, Inc. 10,013 357,965
Citizens Communications Co.* 29,859 371,745
Comverse Technology, Inc.* 21,791 393,110
Corning, Inc.* 34,517 378,997
JDS Uniphase Corp.* 83,982 298,136
Lucent Technologies, Inc.* 149,423 478,153
Motorola, Inc. 31,124 $ 421,107
Nextel Communications, Inc.* 17,241 417,231
QUALCOMM, Inc. 7,647 363,233
Qwest Communications International, Inc.* 85,437 301,593
SBC Communications, Inc. 14,466 346,895
Scientific-Atlanta, Inc. 10,140 300,144
Sprint Corp. (FON Group) 21,426 342,816
Sprint Corp. (PCS Group)* 56,585 246,145
Tellabs, Inc.* 46,022 346,546
Verizon Communications, Inc. 9,792 329,011
------------
TOTAL TELECOMMUNICATIONS 8,454,977
------------
TIRE AND RUBBER 0.4%
Cooper Tire & Rubber Co. 19,038 374,287
The Goodyear Tire & Rubber Co.* 42,931 294,507
------------
TOTAL TIRE AND RUBBER 668,794
------------
TOOLS AND INSTRUMENTS 1.2%
Millipore Corp.* 7,057 309,449
Perkin Elmer, Inc. 20,388 367,188
Snap-on, Inc. 11,805 346,359
The Black & Decker Corp. 8,179 391,039
The Stanley Works 11,595 386,577
Thermo Electron Corp.* 15,033 330,425
------------
TOTAL TOOLS AND INSTRUMENTS 2,131,037
------------
TRANSPORTATION 1.4%
Burlington Northern Santa Fe Corp. 11,740 339,756
CSX Corp. 10,996 349,893
FedEx Corp. 5,210 394,709
Norfolk Southern Corp. 17,611 354,862
Ryder System, Inc. 11,116 333,480
Union Pacific Corp. 5,701 356,883
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
12
<Table>
<Caption>
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
United Parcel Service, Inc., Class B 5,350 $ 387,981
------------
TOTAL TRANSPORTATION 2,517,564
------------
TRAVEL SERVICES 0.4%
Carnival Corp. 9,834 343,305
Sabre Holdings Corp. 13,589 297,735
------------
TOTAL TRAVEL SERVICES 641,040
------------
UTILITIES - GAS AND ELECTRIC 5.9%
Allegheny Energy, Inc. 36,295 384,001
Ameren Corp. 8,106 361,933
American Electric Power Co., Inc. 11,634 327,962
Calpine Corp.* 64,039 295,220
CenterPoint Energy, Inc. 38,140 374,153
Cinergy Corp. 9,704 352,352
CMS Energy Corp.* 44,538 361,649
Consolidated Edison, Inc. 8,415 340,555
Constellation Energy Group, Inc. 9,359 340,387
Dominion Resources, Inc. 5,574 343,358
DTE Energy Co. 9,601 354,085
Duke Energy Corp. 18,607 337,717
Edison International* 18,167 358,072
Entergy Corp. 6,312 340,217
Exelon Corp. 5,470 347,072
FirstEnergy Corp. 10,871 373,854
FPL Group, Inc. 5,518 351,717
KeySpan Corp. 9,862 344,874
Kinder Morgan, Inc. 6,550 350,753
NiSource, Inc. 17,258 357,413
PG&E Corp.* 14,675 358,804
Pinnacle West Capital Corp. 9,439 345,090
PPL Corp. 8,323 332,254
Progress Energy, Inc. 7,953 342,774
Public Service Enterprise Group, Inc. 8,228 336,278
TECO Energy, Inc. 26,511 348,089
The AES Corp.* 46,145 403,769
The Southern Co. 11,797 $ 351,551
TXU Corp. 14,776 337,188
Xcel Energy, Inc. 22,413 367,573
------------
TOTAL UTILITIES - GAS AND ELECTRIC 10,520,714
------------
WASTE MANAGEMENT 0.4%
Allied Waste Industries, Inc.* 29,376 331,361
Waste Management, Inc. 12,942 335,457
------------
TOTAL WASTE MANAGEMENT 666,818
------------
TOTAL INVESTMENTS
(Cost $158,842,584)--99.9% 177,042,582
Other assets less liabilities--0.1% 92,716
------------
NET ASSETS 100.0% $177,135,298
============
</Table>
* NON-INCOME PRODUCING SECURITY
See Notes to Financial Statements.
<Page>
13
STATEMENT OF ASSETS AND LIABILITIES October 31, 2003
<Table>
ASSETS
Investments at Market Value, (Cost $158,842,584) $ 177,042,582
Cash 10,387
Receivables:
Dividends 156,958
Investments Sold 1,174
----------------
TOTAL ASSETS 177,211,101
----------------
LIABILITIES
Payables:
Accrued Management Fees 75,803
----------------
NET ASSETS $ 177,135,298
================
NET ASSETS CONSIST OF
Paid-in Capital $ 159,129,282
Undistributed Net Investment Income 153,264
Accumulated Net Realized Loss on Investments (347,246)
Net Unrealized Appreciation on Investments 18,199,998
----------------
NET ASSETS $ 177,135,298
================
Shares Outstanding (Unlimited Shares Authorized) 1,401,000
----------------
Net Asset Value, Offering Price and Repurchase Price Per Share $ 126.43
================
</Table>
See Notes to Financial Statements.
<Page>
14
STATEMENT OF OPERATIONS
<Table>
<Caption>
FOR THE PERIOD
APRIL 24, 2003*
THROUGH
OCTOBER 31, 2003
----------------
INVESTMENT INCOME
Dividends $ 1,144,540
Interest 63
----------------
Total Income 1,144,603
----------------
EXPENSES
Advisory Fee 298,200
----------------
Net Investment Income 846,403
----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) From:
Investments (360,183)
In-kind Redemptions 11,214,201
----------------
Net Realized gain 10,854,018
Net Unrealized Appreciation on Investments 18,199,998
----------------
Net Realized and Unrealized Gain on Investments 29,054,016
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 29,900,419
================
</Table>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
See Notes to Financial Statements.
<Page>
15
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD
APRIL 24, 2003*
THROUGH
OCTOBER 31, 2003
----------------
OPERATIONS
Net Investment Income $ 846,403
Net Realized Gain 10,854,018
Net Unrealized Appreciation on Investments 18,199,998
----------------
Net Increase in Net Assets Resulting From Operations 29,900,419
----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (679,052)
----------------
CAPITAL STOCK TRANSACTIONS
Proceeds From Capital Stock Sold 202,657,673
Value of Capital Stock Repurchased (54,743,742)
----------------
Net Increase in Net Assets Resulting From Capital Stock Transactions 147,913,931
----------------
Increase in Net Assets 177,135,298
NET ASSETS--BEGINNING OF PERIOD --
----------------
NET ASSETS--END OF PERIOD $ 177,135,298
----------------
CHANGES IN CAPITAL STOCK OUTSTANDING
Shares Sold 1,851,000
Shares Repurchased (450,000)
Shares Outstanding, Beginning of Period --
----------------
Shares Outstanding, End of Period 1,401,000
================
</Table>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
16
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
FOR THE PERIOD
APRIL 24, 2003*
THROUGH
OCTOBER 31, 2003
----------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE AT BEGINNING OF PERIOD $ 101.03
----------------
Net Investment Income** 0.70
Net Realized and Unrealized Gain on Investments 25.32
----------------
TOTAL FROM INVESTMENT OPERATIONS 26.02
----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (0.62)
----------------
Net Asset Value at End of Period $ 126.43
================
TOTAL RETURN 25.77%***
RATIOS/SUPPLEMENTAL DATA:
Net Assets at End of Period (000's omitted) $ 177,135
RATIO TO AVERAGE NET ASSETS OF:
Expenses 0.40%****
Net Investment Income 1.13%****
Portfolio Turnover Rate 42%
</Table>
* COMMENCMENT OF INVESTMENT OPERATIONS.
** BASED ON AVERAGE SHARES OUTSTANDING.
*** TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING AN INITIAL INVESTMENT MADE
AT THE NET ASSETS VALUE AT THE BEGINNING OF THE PERIOD,REINVESTMENT OF ALL
DIVIDENDS AND DISTRIBUTIONS AT NET ASSET VALUE DURING THE PERIOD,AND
REDEMPTION ON THE LAST DAY OF THE PERIOD.TOTAL INVESTMENT RETURN
CALCULATED FOR A PERIOD OF LESS THAN ONE YEAR IS NOT ANNUALIZED AND DO NOT
INCLUDE TRANSACTION FEES.
**** ANNUALIZED.
See Notes to Financial Statements.
<Page>
17
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Rydex ETF Trust (the "Trust"), which is registered under the Investment Company
Act of 1940, as amended, is an open-end management investment company that was
organized as a Delaware statutory trust on November 22, 2002. The Trust
currently consists of one series, Rydex S&P Equal Weight ETF (the "Fund"). The
Fund commenced operations on April 24, 2003.
The Fund's investment objective is to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
S&P Equal Weight Index (the "Underlying Index"), an index representing publicly
traded equity securities. The Fund seeks to achieve its objective by investing
in common stocks that comprise the Underlying Index. The Fund uses a
"replication" strategy to track the Underlying Index. "Replication" refers to
investing in substantially all of the securities in the Underlying Index in
approximately the same proportions as in the Underlying Index.
The Fund operates as an index fund and will not be actively managed. Adverse
performance of a security in the Fund's portfolio will ordinarily not result in
the elimination of the security from the Fund's portfolio.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosures at the date of the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
the Fund's financial statements are reasonable and prudent; however, actual
results could differ from these estimates.
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liabilities that may arise out of the performance of
their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts with services providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
A. SECURITY VALUATION
Securities listed on a domestic securities exchange are valued based on the last
sale price as of the close of regular trading hours on the New York Stock
Exchange or, in the absence of recorded sales, at the average of readily
available closing bid and asked prices on such exchange. Securities for which
the primary market is the National Association of Securities Dealers Automated
Quotations National Market System ("NASDAQ") are valued at the NASDAQ Official
Closing Price.
<Page>
18
The market value of a written call option or a purchased put option is the last
reported sale price on the principal exchange on which such option is traded or,
if no sales are reported, the average between the last reported bid and asked
prices.
Securities for which market quotations are not readily available, including
investments that are subject to limitations as to their sale, are valued at fair
value as determined in good faith by the Board of Trustees. In determining fair
value, consideration is given to cost, operating and other financial data.
B. INCOME RECOGNITION
Interest income is recorded on the accrual basis. Realized gains and losses from
portfolio fund transactions are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date.
C. FUTURES AND PURCHASED OPTIONS
The Fund may buy and sell stock index futures contracts with respect to any
stock index traded on a recognized stock exchange or board of trade. A stock
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur up
on the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract. The Fund may enter into futures and option contracts
for the purpose of either hedging its exposure to the market fluctuations of the
portfolio or an individual security position. As of October 31, 2003, the Fund
had not entered into any futures or options transactions.
The risk associated with purchasing option is limited to the premium originally
paid. Options written by a fund involve, to varying degrees, risk of loss in
excess of the option value reflected in the Statement of Assets and Liabilities.
The risk in writing a covered call option is that fund may forego the
opportunity for profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a covered put option is that it
may incur a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is the risk that a fund may not be
able to enter into a closing transaction because of an illiquid secondary market
or, for over-the-counter options, because of the counterparty's inability to
perform. The Fund has established counterparty credit guidelines and enters into
transactions only with financial institutions of investment grade or better.
There are several risks in connection with the use of futures contracts. Futures
contracts involve, in varying degrees, risk of loss in excess of amounts
reflected in the financial statements. Risks may be caused by an imperfect
correlation between movements in the price of the instruments and the price of
the underlying securities. In addition, there is the risk that a fund may not be
able to enter into a closing transaction because of an illiquid secondary
market.
<Page>
19
D. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with financial institutions. The
Fund follows certain procedures designed to minimize the risks inherent in such
agreements. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
condition will be continually monitored by the Advisor. In addition, the value
of the collateral underlying the repurchase agreement will always be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral. However,
the exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 15% of the Fund's net assets. The investments of the Fund in
repurchase agreements, at times, may be substantial when, in the view of the
Advisor, liquidity or other considerations so warrant.
E. FEDERAL INCOME TAXES
The Fund intends to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies and will distribute all net
investment income and net capital gains to its shareholders. Therefore, no
provision for Federal income taxes is required.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from accounting principles generally
accepted in the United States. These differences are primarily due to differing
treatments for in-kind redemptions, futures and options, losses deferred due to
wash sales, losses deferred due to post-October losses, and excise tax
regulations.
For the period ended October 31, 2003, the Fund realized net capital gains
resulting from in-kind redemptions of large block of 50,000 or more or
multiples thereof ("Creation Units"). Because such gains are not taxable to the
Fund, and are not distributed to existing Fund shareholders, the gains are
reclassified from accumulated net realized gains to paid-in-capital at the end
of the Fund's tax year. These reclassifications have no effect on net assets or
net assets values per shares. The in-kind gains for the period ended October 31,
2003 are disclosed in the Fund's Statement of Operations.
Permanent book and tax basis differences, if any, relating to shareholder
distributions will result in reclassifications to paid-in capital. This includes
the utilization of earnings and profits distributed to shareholders on
redemption of shares as part of the dividends paid deduction for income tax
purposes, net operating losses not utilized during the current year and
differences in the treatment of certain swap contracts. These reclassifications
have no effect on net assets or net asset values per share. Any taxable gain
remaining at fiscal year end is distributed in the following year.
<Page>
20
The tax character of distributable earnings at October 31, 2003 were as follows:
<Table>
Net Unrealized Appreciation 18,185,439
Undistributed Ordinary Income 149,629
Undistributed Long-term Capital Gains --
Capital Loss Carryforwards (329,052)
Paid-in Capital 159,129,282
----------------
Net Assets 177,135,298
</Table>
The tax character of distributions paid during 2003 were as follows:
<Table>
Ordinary Income 679,052
Long-term Capital Gain --
Return of Capital --
----------------
Total Distributions 679,052
Tax Cost Basis of Securities 158,857,143
================
</Table>
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Fund declares and pays income dividends and capital gain distributions, if
any, quarterly and are recorded on the ex-dividend date.
3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES
Rydex Global Advisors (the "Advisor"), has agreed to bear the initial costs of
organization of the Trust. The Advisor is responsible for determining the
composition of the portfolio of securities that must be delivered in exchange
for the issuance of Creation Units and for periodically adjusting the
composition of the portfolio of the Trust to conform to changes in the
composition of the relevant index. For these services, the Advisor receives an
advisory fee at the annual rate of 0.40% of the average daily net assets of the
Fund.
Under an Administration Agreement with the Trust, The Bank of New York (the
"Administrator") provides necessary administrative and accounting services for
the maintenance and operations of the Trust and the Fund. In addition, the
Administrator makes available the office space, equipment, personnel and
facilities required to provide such services. Under a Custodian Agreement with
the Trust, the Administrator maintains in separate accounts cash, securities and
other assets of the Trust and the Fund, keeps all necessary accounts and
records, and provides other services. The Administrator is required, upon the
order of the Trust, to deliver securities held by the Custodian and to make
payments for securities purchased by the Trust for the Fund. Pursuant to a
Transfer Agency and Service Agreement with the Trust, the Administrator acts as
a transfer agent for the Trust's authorized and issued shares of beneficial
interest, and as dividend disbursing agent of the Trust. The Advisor compensates
the Administrator directly for the foregoing services.
The Advisor has contractually agreed to pay all operating expenses of the Fund,
excluding interest expense and takes (expected to be deminimus), brokerage
commissions and other
<Page>
21
expenses connected with the execution of portfolio transactions, any future
distribution fees or expenses and extraordinary expenses.
The Fund has adopted a Distribution Plan (the "Plan") that allows the Fund to
pay distribution fees to Rydex Distributors, Inc. (the "Distributor") and other
firms that provide distribution services ("Service Providers"). If a Service
Provider provides distribution services, the Fund will pay distribution fees to
the Distributor at an annual rate not to exceed 0.25% of average daily net
assets, pursuant to Rule 12b-1 of the Investment Company Act of 1940. The
Distributor will, in turn, pay the Service Provider out of its fees. No such fee
is currently charged to the fund and no such fee will be charged prior to
January 1, 2005.
4. CAPITAL
At October 31, 2003, there were an unlimited number of no par value shares of
beneficial interest authorized. Shares are issued and redeemed by the Fund only
in Creation Unit size aggregations of 50, 000. There is a minimum transaction
fee of $2,000 per transaction to those persons purchasing or redeeming Creation
Units. An additional charge of up to three times the standard transaction fee
may be imposed for purchases and redemptions effected outside the National
Securities Clearing Corporation usual clearing process or for cash. Such
transactions are generally permitted on an in-kind basis, with a balancing cash
component to equate the transaction to the net asset value per unit of the Fund
on the transaction date.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments,
U.S government and government agency obligations) aggregated $207,701,556 and
$59,712,990, respectively, for the period ended October 31, 2003. There were no
purchases or sales of U.S. government or government agency obligations for the
period ended October 31, 2003.
At October 31, 2003, gross unrealized appreciation of investments was
$20,044,038 and gross unrealized depreciation of investments was $1,844,040,
resulting in net unrealized appreciation of $18,199,998.
<Page>
22
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
Rydex S&P Equal Weight ETF:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Rydex S&P Equal Weight ETF (the
"Fund") at October 31, 2003, the results of its operations for the year then
ended, the changes in its net assets and the financial highlights for the fiscal
period presented, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit, which included confirmation of securities at October 31,
2003 by correspondence with the custodian, provides a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 12, 2003
<Page>
23
TRUSTEES AND OFFICERS
MEMBERS OF THE BOARD. Set forth below are the names, ages, position with the
Trust, length of term of office, and the principal occupations for a minimum of
the last five years of each of the persons currently serving as Trustees of the
Trust. Unless otherwise noted, the business address of each Trustee is 9601
Blackwell Road, Suite 500, Rockville, Maryland 20850.
ALBERT P. VIRAGH, JR. (61)
Chairman of the Board of Trustees and President of Rydex ETF Trust, a registered
mutual fund, 2002 to present; Chairman of the Board of Trustees and President of
Rydex Series Funds, a registered mutual fund, 1993 to present; Chairman of the
Board of Trustees and President of Rydex Variable Trust, a registered mutual
fund, 1998 to present; Chairman of the Board of Trustees and President of Rydex
Dynamic Funds, a registered mutual fund, 1999 to present; Chairman of the Board
of Directors, President, and Treasurer of PADCO Advisors, Inc., investment
advisor, 1993 to present; Chairman of the Board of Directors, President, and
Treasurer of Rydex Fund Services, Inc., shareholder and transfer agent servicer,
1993 to present; Chairman of the Board of Directors, President, and Treasurer of
PADCO Advisors II, Inc., investment advisor, 1998 to present; Chairman of the
Board of Directors, President, and Treasurer of Rydex Distributors, Inc., a
registered broker-dealer firm, 1996 to present; Vice President of Rushmore
Investment Advisors Ltd., a registered investment advisor, 1985 to 1993.
COREY A. COLEHOUR (57)
Trustee of Rydex ETF Funds, 2003 to present; Trustee of Rydex Series Funds, 1993
to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex
Dynamic Funds, 1999 to present; Senior Vice President of Marketing of Schield
Management Company, a registered investment advisor, 1985 to present. This
trustee is deemed to be an "interested person" of the Trust, within the meaning
of Section 2(a)(19) of the 1940 Act, in as much as this person is affiliated
with the Advisor, as described herein.
J. KENNETH DALTON (61)
Trustee of Rydex ETF Funds, 2003 to present; Trustee of Rydex Series Funds, 1995
to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex
Dynamic Funds, 1999 to present; Mortgage Banking Consultant and Investor, The
Dalton Group, a real estate company, 1995 to present; President, CRAM Mortgage
Group, Inc., 1966 to 1995.
JOHN O. DEMARET (62)
Trustee of Rydex ETF Funds, 2003 to present; Trustee of Rydex Series Funds, 1997
to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex
Dynamic Funds, 1999 to present; Founder and Chief Executive Officer, Health Cost
Controls America, Chicago, Illinois, 1987 to 1996; sole practitioner, Chicago,
Illinois, 1984 to 1987; General Counsel for the Chicago Transit Authority, 1981
to 1984; Senior Partner, O'Halloran, LaVarre & Demaret, Northbrook, Illinois,
1978 to 1981.
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24
PATRICK T. MCCARVILLE (60)
Trustee of Rydex ETF Funds, 2003 to present; Trustee of Rydex Series Funds, 1997
to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex
Dynamic Funds, 1999 to present; Founder and Chief Executive Officer, Par
Industries, Inc., Northbrook, Illinois, 1977 to present; President and Chief
Executive Officer, American Health Resources, Northbrook, Illinois, 1984 to
1986.
ROGER SOMERS (58)
Trustee of Rydex ETF Funds, 2003 to present; Trustee of Rydex Series Funds, 1993
to present; Trustee of Rydex Variable Trust, 1998 to present; Trustee of Rydex
Dynamic Funds, 1999 to present; President, Arrow Limousine, 1963 to present.
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25
The Fund's Statement of Additional Information contains additional information
about the Trustees and Officers and is available, without charge, upon request,
by calling (800) 207-3390.
INVESTMENT ADVISOR
Rydex Global Advisors
ADMINISTRATOR
The Bank of New York
CUSTODIAN
The Bank of New York
TRANSFER AGENT
The Bank of New York
DISTRIBUTOR
Rydex Distributors, Inc.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
<Page>
26
PROXY VOTING INFORMATION
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to securities held in the Funds' portfolios is
available, without charge and upon request, by calling 800-820-0888. This
information is also be available from the EDGAR database on the SEC's website at
http://www.sec.gov.
<Page>
[RYDEX INVESTMENTS ESSENTIAL FOR MODERN MARKETS (TM) LOGO]
9601 Blackwell Road
Suite 500
Rockville, MD 20850
800.820.0888
www.rydexfunds.com
<Page>
Item 2. Code of Ethics.
The Board of Trustees of the Trust has adopted a Combined Code of Ethics (the
"Code") pursuant to Rule 17j-1 under the 1940 Act. The Advisor and Distributor
are also covered by the Code. The Code applies to the personal investing
activities of trustees, directors, officers and certain employees ("access
persons"). Rule 17j-1 and the Code is designed to prevent unlawful practices in
connection with the purchase or sale of securities by access persons. Under the
Code, access persons are permitted to engage in personal securities
transactions, but are required to report their personal securities transactions
for monitoring purposes. In addition, certain access persons are required to
obtain approval before investing in initial public offerings or private
placements. The Code is on file with the Securities and Exchange Commission, and
is available to the public.
Item 3. Audit Committee Financial Expert.
Although the audit committee has not determined that any of its members is an
"audit committee financial expert" as defined by the rule, the audit committee
members collectively have many years of experience in business and finance,
including working with fund financial statements and auditors.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Items 5. Audit Committee of Listed Registrants.
The Rydex S&P Equal Weight ETF has a separately designated Audit Committee,
which consists of the independent trustees. The audit committee members are J.
Kenneth Dalton, John O. Demaret, Patrick T. McCarville, Corey A. Colehour, and
Roger Somers.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
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Item 9. Controls and Procedures.
a) Based on their evaluation on December 20, 2003, the President (principal
executive officer) and the Treasurer (principal financial officer) of the
Rydex S&P Equal Weight ETF (the "Fund") believe that there were no
significant deficiencies in the design or operation of the internal
controls of the Fund or Rydex Global Advisors ("RGA"), the investment
adviser, and The Bank of New York ("BNY"), administrator of the Fund, or
Rydex Distributors, Inc. ("RD"), which acts as distributor for the Fund,
including disclosure controls and procedures (as defined in Rule 30a-2(c)
under the Investment Company Act of 1940) that adversely affected the
ability of the Fund, or RGA, or BNY, on behalf of the Fund, to record,
process, summarize, and report the subject matter contained in this Report,
and the President and Treasurer of the Fund have identified no material
weaknesses in such internal controls on behalf of the Fund. There was no
fraud, whether or not material, involving officers or employees of RGA, or
BNY, or RD, or the Fund who have a significant role in the Fund's internal
controls, including disclosure controls and procedures (as defined in Rule
30a-2(c) under the Investment Company Act of 1940) that has come to the
attention of the Adviser or the officers of the Fund, including its
President and Treasurer.
b) There were no significant changes in the Fund and the RGA's internal
controls, including disclosure controls and procedures (as defined in Rule
30a-2(c) under the Investment Company Act of 1940) that apply to the Fund
or in other factors with respect to the Fund that could have significantly
affected the Fund's or the RGA's internal controls during the period
covered by this Form N-CSR, and no corrective actions with regard to
significant deficiencies or material weaknesses were taken by the Fund or
the RGA during such period.
Item 10. Exhibits.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2) in the exact form set forth below: Attached hereto.