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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
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(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, 2004
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Date of reporting period: October 31, 2004
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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.
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ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
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THE RYDEX ETF TRUST
RYDEX S&P EQUAL
WEIGHT ETF
ANNUAL REPORT
OCTOBER 31, 2004
[RYDEXINVESTMENTS LOGO]
ESSENTIAL FOR MODERN MARKETS(TM)
ETF-ANN 1004
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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.
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ANNUAL REPORT
TABLE OF CONTENTS
<Table>
LETTER FROM THE CEO 2
MANAGER'S ANALYSIS 4
FEES & EXPENSES 6
PORTFOLIO SUMMARY 7
SCHEDULE OF INVESTMENTS 8
STATEMENT OF ASSETS AND LIABILITIES 18
FINANCIAL HIGHLIGHTS 21
NOTES TO FINANCIAL STATEMENTS 22
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM'S REPORT 27
SUPPLEMENTAL INFORMATION 28
</Table>
1
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DEAR SHAREHOLDERS:
The U.S. economy reached a more mature phase of the business cycle from November
1, 2003 to October 31, 2004. This was marked by lower realized and forecasted
gross domestic product (GDP) growth rates and reduced forecasts for future
corporate earnings growth. The trade gap widened during the period, factory
orders continued to slow and oil prices moved significantly higher. The Federal
Reserve (Fed), observing these changes, raised the Fed Funds rate .75% during
the period. Inflation, as measured both by the Consumer Price Index and Producer
Price Index, rose during this time period. Overall equity markets, which showed
strong gains in 2003 and the early months of 2004, were flat during the
remainder of the period prior to the election.
There was good news, though. The unemployment rate declined, and housing starts
continued to rise, although at a much slower pace.
During the middle of the year, political and economic uncertainty led investors
to return to the relative safety of large-cap stocks. But large-cap fallouts had
an impact on the broad market, including Merck & Co.'s recall of arthritis drug
Vioxx due to concern that it could increase risk of strokes and heart problems;
the effect of the recall on Pfizer, Inc., which produces two arthritis drugs -
one of which has been shown to predispose certain heart bypass surgery patients
to increased risks; and allegations of "bid rigging" and under-the-table payoffs
at big insurance companies like American International Group (AIG) and Marsh &
McLennan.
OUTPERFORMING THE CAP-WEIGHTED INDEX
Since inception (4/22/03), the annualized returns of Rydex S&P Equal Weight ETF
(RSP) - which tracks the S&P Equal Weight Index (SPXEW) - is 26.9% versus the
annualized returns of S&P 500(R) Index's 17.3%. For the one-year reporting
period, RSP returned 14.1% versus the S&P 500's 9.4%. RSP outperformed the
cap-weighted index in eight out of 12 months. The SPXEW, the index on which the
fund is based, returned 14.5% for the same period.
SPXEW differs from its well-known counterpart in that the SPXEW is
equally-weighted versus the S&P 500, which is capitalization-weighted. That
means that instead of several giants dominating the SPXEW, each stock-no matter
what its market capitalization-represents an equal 0.2% position in the index.
This may benefit shareholders by avoiding domination by a few stocks and
providing more exposure to smaller stocks in the S&P 500. This may especially be
the case in the event of large-cap fallouts like those mentioned above.
Over the long term, the SPXEW has outperformed the S&P 500. In fact, for the
three- and five-year periods ending October 31, 2004, the SPXEW was up 11.5% and
7.0% respectively versus 3.9% and 2.2% for the predominantly large-cap S&P 500.
Investors should note that both indices are unmanaged and not available for
direct investment.
TURNOVER, PERFORMANCE AND CAPITAL GAINS
Due to the constant portfolio rebalancing required to meet the benchmark, Rydex
S&P Equal Weight ETF will have significant turnover. Therefore, it will be very
important to
2
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continue to monitor the impact of all transactions on potential capital gains to
the shareholder. Despite the significant turnover and favorable returns, we were
fortunate to be able to manage the portfolio without any capital gain
distributions during the first full year under management.
We appreciate the trust you have placed in our firm by investing with us.
Sincerely,
/s/ Carl G. Verboncoeur
Carl G. Verboncoeur
Chief Executive Officer
Rydex Investments
3
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MANAGER'S ANALYSIS
The U.S. economy reached a more mature phase of the business cycle from November
1, 2003 to October 31, 2004. Because of this, overall equity markets, which
showed strong gains in 2003 and the early months of 2004, were flat during the
remainder of the period prior to the election. This was due to political and
economic uncertainty as investors started to return to the relative safety of
large-cap stocks.
Over the one-year reporting period, broad based performance with strong
performance in smaller companies has helped drive outperformance versus the S&P
500. During this reporting period, the Rydex S&P Equal Weight ETF (RSP) returned
14.1% versus the S&P 500's 9.4%. RSP outperformed the cap-weighted index in
eight out of 12 months. The S&P Equal Weight Index (SPXEW), the index on which
the fund is based, returned 14.5% for the same period.
[CHART]
CUMULATIVE FUND PERFORMANCE: APRIL 24, 2003 - OCTOBER 31, 2004
<Table>
<Caption>
RYDEX S&P EQUAL S&P EQUAL WEIGHT INDEX S&P 500 TOTAL
WEIGHT ETF TOTAL RETURN INDEX RETURN INDEX
4/24/2003 $ 10,000.00 $ 10,000.00 $ 10,000.00
4/25/2003 $ 9,845.59 $ 9,845.01 $ 9,861.64
4/28/2003 $ 10,040.58 $ 10,041.17 $ 10,038.84
4/29/2003 $ 10,112.84 $ 10,113.44 $ 10,072.38
4/30/2003 $ 10,113.83 $ 10,114.38 $ 10,063.32
5/1/2003 $ 10,090.07 $ 10,091.72 $ 10,058.17
5/2/2003 $ 10,280.11 $ 10,281.74 $ 10,209.54
5/5/2003 $ 10,300.90 $ 10,303.04 $ 10,171.17
5/6/2003 $ 10,397.90 $ 10,399.44 $ 10,257.24
5/7/2003 $ 10,341.48 $ 10,343.12 $ 10,206.45
5/8/2003 $ 10,240.52 $ 10,242.40 $ 10,104.04
5/9/2003 $ 10,405.82 $ 10,408.41 $ 10,250.69
5/12/2003 $ 10,566.17 $ 10,568.99 $ 10,379.50
5/13/2003 $ 10,566.17 $ 10,569.29 $ 10,350.09
5/14/2003 $ 10,565.18 $ 10,567.74 $ 10,319.80
5/15/2003 $ 10,687.91 $ 10,691.34 $ 10,402.18
5/16/2003 $ 10,723.55 $ 10,727.15 $ 10,377.31
5/19/2003 $ 10,417.70 $ 10,420.74 $ 10,118.98
5/20/2003 $ 10,402.85 $ 10,406.08 $ 10,107.51
5/21/2003 $ 10,457.29 $ 10,461.12 $ 10,149.04
5/22/2003 $ 10,582.01 $ 10,585.66 $ 10,241.93
5/23/2003 $ 10,646.34 $ 10,650.58 $ 10,256.86
5/27/2003 $ 10,878.95 $ 10,883.97 $ 10,457.58
5/28/2003 $ 10,899.73 $ 10,905.24 $ 10,478.22
5/29/2003 $ 10,882.91 $ 10,888.31 $ 10,439.67
5/30/2003 $ 11,089.78 $ 11,095.75 $ 10,593.53
6/2/2003 $ 11,146.19 $ 11,152.37 $ 10,631.40
6/3/2003 $ 11,141.25 $ 11,147.82 $ 10,681.60
6/4/2003 $ 11,363.95 $ 11,371.26 $ 10,846.10
6/5/2003 $ 11,455.01 $ 11,461.88 $ 10,889.71
6/6/2003 $ 11,410.47 $ 11,417.98 $ 10,864.14
6/9/2003 $ 11,217.46 $ 11,224.52 $ 10,734.23
6/10/2003 $ 11,309.51 $ 11,317.39 $ 10,832.41
6/11/2003 $ 11,492.63 $ 11,501.17 $ 10,975.15
6/12/2003 $ 11,522.32 $ 11,530.74 $ 10,986.98
6/13/2003 $ 11,359.99 $ 11,367.74 $ 10,878.13
6/16/2003 $ 11,593.59 $ 11,602.41 $ 11,121.96
6/17/2003 $ 11,588.64 $ 11,596.93 $ 11,132.12
6/18/2003 $ 11,576.76 $ 11,585.91 $ 11,115.64
6/19/2003 $ 11,409.48 $ 11,417.85 $ 10,946.43
6/20/2003 $ 11,390.68 $ 11,399.30 $ 10,957.47
6/23/2003 $ 11,185.79 $ 11,194.72 $ 10,802.98
6/24/2003 $ 11,199.64 $ 11,208.93 $ 10,822.90
6/25/2003 $ 11,137.29 $ 11,145.96 $ 10,733.37
6/26/2003 $ 11,260.02 $ 11,269.02 $ 10,853.09
6/27/2003 $ 11,176.88 $ 11,185.89 $ 10,747.61
6/30/2003 $ 11,168.96 $ 11,178.74 $ 10,728.67
7/1/2003 $ 11,229.34 $ 11,239.44 $ 10,816.57
7/2/2003 $ 11,374.84 $ 11,384.43 $ 10,942.84
7/3/2003 $ 11,287.74 $ 11,298.19 $ 10,854.17
7/7/2003 $ 11,504.50 $ 11,514.81 $ 11,060.50
7/8/2003 $ 11,601.50 $ 11,612.92 $ 11,101.91
7/9/2003 $ 11,573.79 $ 11,585.45 $ 11,040.97
7/10/2003 $ 11,386.72 $ 11,397.90 $ 10,892.19
7/11/2003 $ 11,474.81 $ 11,485.72 $ 10,996.77
7/14/2003 $ 11,544.10 $ 11,555.21 $ 11,059.96
7/15/2003 $ 11,471.84 $ 11,496.13 $ 11,022.06
7/16/2003 $ 11,389.69 $ 11,398.58 $ 10,952.28
7/17/2003 $ 11,232.31 $ 11,241.24 $ 10,817.22
7/18/2003 $ 11,367.91 $ 11,377.01 $ 10,944.90
7/21/2003 $ 11,218.45 $ 11,227.59 $ 10,785.00
7/22/2003 $ 11,359.00 $ 11,367.95 $ 10,887.54
7/23/2003 $ 11,361.97 $ 11,372.16 $ 10,893.27
7/24/2003 $ 11,313.47 $ 11,323.40 $ 10,816.03
7/25/2003 $ 11,498.56 $ 11,508.67 $ 11,004.39
7/28/2003 $ 11,503.51 $ 11,514.57 $ 10,980.61
7/29/2003 $ 11,427.30 $ 11,438.14 $ 10,902.43
7/30/2003 $ 11,387.71 $ 11,398.38 $ 10,884.16
7/31/2003 $ 11,456.99 $ 11,468.29 $ 10,917.83
8/1/2003 $ 11,368.90 $ 11,380.23 $ 10,806.01
8/4/2003 $ 11,363.95 $ 11,374.92 $ 10,835.47
8/5/2003 $ 11,163.02 $ 11,173.81 $ 10,644.51
8/6/2003 $ 11,158.07 $ 11,169.43 $ 10,664.23
8/7/2003 $ 11,225.38 $ 11,236.38 $ 10,742.27
8/8/2003 $ 11,261.01 $ 11,272.57 $ 10,780.63
8/11/2003 $ 11,311.49 $ 11,323.30 $ 10,816.45
8/12/2003 $ 11,440.17 $ 11,451.64 $ 10,924.23
8/13/2003 $ 11,422.35 $ 11,433.90 $ 10,858.65
8/14/2003 $ 11,518.36 $ 11,530.48 $ 10,930.21
8/15/2003 $ 11,517.37 $ 11,530.61 $ 10,933.79
8/18/2003 $ 11,656.93 $ 11,670.62 $ 11,034.45
8/19/2003 $ 11,737.11 $ 11,751.01 $ 11,063.38
8/20/2003 $ 11,749.98 $ 11,765.49 $ 11,041.76
8/21/2003 $ 11,844.01 $ 11,859.49 $ 11,075.02
8/22/2003 $ 11,714.34 $ 11,729.74 $ 10,962.29
8/25/2003 $ 11,692.57 $ 11,707.88 $ 10,969.45
8/26/2003 $ 11,728.20 $ 11,743.19 $ 11,002.94
8/27/2003 $ 11,767.79 $ 11,783.72 $ 11,005.45
8/28/2003 $ 11,873.70 $ 11,890.12 $ 11,072.58
8/29/2003 $ 11,959.81 $ 11,976.45 $ 11,130.16
9/2/2003 $ 12,124.12 $ 12,142.63 $ 11,285.34
9/3/2003 $ 12,153.82 $ 12,173.62 $ 11,335.88
9/4/2003 $ 12,158.76 $ 12,177.51 $ 11,355.06
9/5/2003 $ 12,086.51 $ 12,105.23 $ 11,282.52
9/8/2003 $ 12,215.18 $ 12,234.68 $ 11,396.55
9/9/2003 $ 12,100.37 $ 12,119.04 $ 11,303.00
9/10/2003 $ 11,893.50 $ 11,909.39 $ 11,168.72
9/11/2003 $ 11,969.71 $ 11,988.09 $ 11,232.89
9/12/2003 $ 12,009.30 $ 12,027.83 $ 11,257.40
9/15/2003 $ 11,966.74 $ 11,986.02 $ 11,215.46
9/16/2003 $ 12,145.90 $ 12,165.65 $ 11,375.92
9/17/2003 $ 12,113.23 $ 12,132.98 $ 11,339.30
9/18/2003 $ 12,263.68 $ 12,285.12 $ 11,489.79
9/19/2003 $ 12,250.50 $ 12,271.67 $ 11,453.76
9/22/2003 $ 12,090.34 $ 12,112.28 $ 11,304.75
9/23/2003 $ 12,170.91 $ 12,192.90 $ 11,373.48
9/24/2003 $ 11,948.09 $ 11,969.73 $ 11,156.32
9/25/2003 $ 11,834.69 $ 11,856.73 $ 11,091.08
9/26/2003 $ 11,731.23 $ 11,753.77 $ 11,022.12
9/29/2003 $ 11,847.62 $ 11,870.50 $ 11,129.98
9/30/2003 $ 11,751.13 $ 11,773.46 $ 11,012.53
10/1/2003 $ 11,988.87 $ 12,011.74 $ 11,259.61
10/2/2003 $ 12,035.63 $ 12,058.65 $ 11,283.43
10/3/2003 $ 12,191.80 $ 12,214.84 $ 11,389.69
10/6/2003 $ 12,257.46 $ 12,281.42 $ 11,439.48
10/7/2003 $ 12,312.17 $ 12,340.84 $ 11,494.20
10/8/2003 $ 12,277.35 $ 12,300.88 $ 11,437.88
10/9/2003 $ 12,356.94 $ 12,381.18 $ 11,492.76
10/10/2003 $ 12,352.96 $ 12,377.26 $ 11,486.21
10/13/2003 $ 12,463.37 $ 12,488.49 $ 11,566.90
10/14/2003 $ 12,512.12 $ 12,537.52 $ 11,612.57
10/15/2003 $ 12,466.36 $ 12,490.96 $ 11,584.79
10/16/2003 $ 12,503.17 $ 12,528.73 $ 11,621.70
10/17/2003 $ 12,352.96 $ 12,378.49 $ 11,502.81
10/20/2003 $ 12,403.69 $ 12,429.02 $ 11,577.25
10/21/2003 $ 12,418.61 $ 12,444.31 $ 11,577.02
10/22/2003 $ 12,240.55 $ 12,265.87 $ 11,404.61
10/23/2003 $ 12,247.51 $ 12,272.98 $ 11,442.52
10/24/2003 $ 12,208.72 $ 12,234.86 $ 11,388.74
10/27/2003 $ 12,288.30 $ 12,314.90 $ 11,413.37
10/28/2003 $ 12,469.34 $ 12,495.97 $ 11,586.76
10/29/2003 $ 12,528.03 $ 12,555.11 $ 11,603.51
10/30/2003 $ 12,541.96 $ 12,569.51 $ 11,593.69
10/31/2003 $ 12,576.78 $ 12,604.75 $ 11,635.56
11/3/2003 $ 12,697.14 $ 12,725.49 $ 11,727.58
11/4/2003 $ 12,643.43 $ 12,672.01 $ 11,663.87
11/5/2003 $ 12,645.42 $ 12,673.41 $ 11,650.17
11/6/2003 $ 12,723.01 $ 12,752.02 $ 11,720.28
11/7/2003 $ 12,708.09 $ 12,737.24 $ 11,669.05
11/10/2003 $ 12,590.70 $ 12,619.96 $ 11,602.37
11/11/2003 $ 12,577.77 $ 12,606.57 $ 11,596.36
11/12/2003 $ 12,748.87 $ 12,779.16 $ 11,733.52
11/13/2003 $ 12,770.76 $ 12,800.65 $ 11,732.07
11/14/2003 $ 12,648.40 $ 12,678.32 $ 11,644.84
11/17/2003 $ 12,526.05 $ 12,556.01 $ 11,570.48
11/18/2003 $ 12,399.71 $ 12,429.05 $ 11,465.81
11/19/2003 $ 12,472.33 $ 12,502.19 $ 11,558.60
11/20/2003 $ 12,384.79 $ 12,414.84 $ 11,461.55
11/21/2003 $ 12,442.48 $ 12,472.74 $ 11,480.20
11/24/2003 $ 12,676.25 $ 12,707.58 $ 11,666.54
11/25/2003 $ 12,748.87 $ 12,780.98 $ 11,687.85
11/26/2003 $ 12,827.46 $ 12,859.73 $ 11,740.45
11/28/2003 $ 12,842.38 $ 12,875.49 $ 11,738.10
12/1/2003 $ 13,000.55 $ 13,034.87 $ 11,870.62
12/2/2003 $ 12,950.81 $ 12,984.12 $ 11,831.94
12/3/2003 $ 12,928.92 $ 12,962.37 $ 11,814.23
12/4/2003 $ 12,953.79 $ 12,988.32 $ 11,870.38
12/5/2003 $ 12,843.37 $ 12,877.27 $ 11,779.39
12/8/2003 $ 12,933.90 $ 12,968.65 $ 11,866.52
12/9/2003 $ 12,811.54 $ 12,845.92 $ 11,765.41
12/10/2003 $ 12,747.88 $ 12,781.55 $ 11,755.02
12/11/2003 $ 12,941.86 $ 12,976.74 $ 11,891.40
12/12/2003 $ 12,987.61 $ 13,022.86 $ 11,923.89
12/15/2003 $ 12,883.16 $ 12,918.23 $ 11,856.60
12/16/2003 $ 12,937.88 $ 12,973.89 $ 11,935.46
12/17/2003 $ 12,972.69 $ 13,008.53 $ 11,951.67
12/18/2003 $ 13,168.66 $ 13,206.13 $ 12,094.40
12/19/2003 $ 13,166.70 $ 13,204.76 $ 12,089.02
12/22/2003 $ 13,247.51 $ 13,286.15 $ 12,136.50
12/23/2003 $ 13,307.36 $ 13,345.73 $ 12,170.77
12/24/2003 $ 13,285.42 $ 13,324.25 $ 12,148.83
12/26/2003 $ 13,314.35 $ 13,353.90 $ 12,169.33
12/29/2003 $ 13,483.94 $ 13,524.18 $ 12,324.71
12/30/2003 $ 13,494.92 $ 13,534.88 $ 12,328.02
12/31/2003 $ 13,502.42 $ 13,542.99 $ 12,353.49
1/2/2004 $ 13,450.03 $ 13,490.85 $ 12,316.29
1/5/2004 $ 13,618.62 $ 13,659.90 $ 12,468.91
1/6/2004 $ 13,642.57 $ 13,684.30 $ 12,485.68
1/7/2004 $ 13,665.51 $ 13,707.12 $ 12,518.39
1/8/2004 $ 13,766.27 $ 13,809.31 $ 12,580.99
1/9/2004 $ 13,684.47 $ 13,727.49 $ 12,469.17
1/12/2004 $ 13,753.30 $ 13,796.32 $ 12,529.29
1/13/2004 $ 13,685.47 $ 13,728.54 $ 12,463.04
1/14/2004 $ 13,816.15 $ 13,859.20 $ 12,566.80
1/15/2004 $ 13,847.08 $ 13,891.29 $ 12,583.87
1/16/2004 $ 13,977.77 $ 14,022.36 $ 12,670.35
1/20/2004 $ 14,011.69 $ 14,057.12 $ 12,658.65
1/21/2004 $ 14,085.51 $ 14,131.46 $ 12,757.92
1/22/2004 $ 14,012.69 $ 14,058.28 $ 12,717.28
1/23/2004 $ 13,978.77 $ 14,024.15 $ 12,690.83
1/26/2004 $ 14,106.46 $ 14,148.44 $ 12,844.47
1/27/2004 $ 13,987.75 $ 14,033.46 $ 12,718.63
1/28/2004 $ 13,801.19 $ 13,847.28 $ 12,547.60
1/29/2004 $ 13,812.16 $ 13,858.10 $ 12,613.44
1/30/2004 $ 13,825.13 $ 13,871.75 $ 12,580.26
2/2/2004 $ 13,853.07 $ 13,900.16 $ 12,626.38
2/3/2004 $ 13,855.06 $ 13,901.83 $ 12,634.99
2/4/2004 $ 13,694.44 $ 13,741.17 $ 12,531.24
2/5/2004 $ 13,737.34 $ 13,784.32 $ 12,554.53
2/6/2004 $ 13,955.82 $ 14,003.87 $ 12,712.78
2/9/2004 $ 13,952.83 $ 14,000.91 $ 12,682.48
2/10/2004 $ 14,032.64 $ 14,081.41 $ 12,746.35
2/11/2004 $ 14,198.25 $ 14,247.85 $ 12,887.01
2/12/2004 $ 14,147.37 $ 14,196.94 $ 12,825.28
2/13/2004 $ 14,047.60 $ 14,097.34 $ 12,756.32
2/17/2004 $ 14,210.22 $ 14,260.41 $ 12,887.04
2/18/2004 $ 14,159.34 $ 14,210.23 $ 12,825.09
2/19/2004 $ 14,084.52 $ 14,134.66 $ 12,772.68
2/20/2004 $ 14,013.69 $ 14,064.10 $ 12,739.97
2/23/2004 $ 13,918.91 $ 13,968.77 $ 12,705.60
2/24/2004 $ 13,886.99 $ 13,937.50 $ 12,684.49
2/25/2004 $ 13,972.78 $ 14,023.79 $ 12,737.11
2/26/2004 $ 14,035.63 $ 14,086.75 $ 12,754.60
2/27/2004 $ 14,099.43 $ 14,151.41 $ 12,755.10
3/1/2004 $ 14,270.08 $ 14,323.32 $ 12,878.41
3/2/2004 $ 14,200.24 $ 14,252.78 $ 12,802.16
3/3/2004 $ 14,218.20 $ 14,271.31 $ 12,827.19
3/4/2004 $ 14,277.06 $ 14,330.20 $ 12,870.27
3/5/2004 $ 14,312.97 $ 14,367.71 $ 12,892.58
3/8/2004 $ 14,175.30 $ 14,228.45 $ 12,785.84
3/9/2004 $ 14,052.59 $ 14,106.02 $ 12,712.24
3/10/2004 $ 13,821.14 $ 13,873.36 $ 12,527.43
3/11/2004 $ 13,617.63 $ 13,668.16 $ 12,340.41
3/12/2004 $ 13,825.13 $ 13,877.16 $ 12,494.20
3/15/2004 $ 13,599.67 $ 13,650.67 $ 12,315.20
3/16/2004 $ 13,659.53 $ 13,711.26 $ 12,384.63
3/17/2004 $ 13,870.03 $ 13,923.08 $ 12,531.24
3/18/2004 $ 13,844.09 $ 13,897.33 $ 12,515.40
3/19/2004 $ 13,722.75 $ 13,777.05 $ 12,375.58
3/22/2004 $ 13,526.26 $ 13,580.26 $ 12,215.42
3/23/2004 $ 13,516.26 $ 13,570.14 $ 12,199.21
3/24/2004 $ 13,479.26 $ 13,533.60 $ 12,170.13
3/25/2004 $ 13,723.28 $ 13,778.54 $ 12,369.26
3/26/2004 $ 13,721.28 $ 13,776.83 $ 12,356.70
3/29/2004 $ 13,905.30 $ 13,961.11 $ 12,519.51
3/30/2004 $ 13,981.30 $ 14,038.14 $ 12,570.36
3/31/2004 $ 14,004.31 $ 14,060.99 $ 12,562.67
4/1/2004 $ 14,079.31 $ 14,136.98 $ 12,629.24
4/2/2004 $ 14,226.33 $ 14,284.94 $ 12,737.63
4/5/2004 $ 14,321.34 $ 14,381.10 $ 12,835.34
4/6/2004 $ 14,296.33 $ 14,355.43 $ 12,812.41
4/7/2004 $ 14,219.33 $ 14,278.47 $ 12,727.98
4/8/2004 $ 14,201.32 $ 14,261.42 $ 12,714.42
4/12/2004 $ 14,256.33 $ 14,316.43 $ 12,780.36
4/13/2004 $ 14,030.31 $ 14,089.57 $ 12,605.08
4/14/2004 $ 13,987.30 $ 14,046.25 $ 12,591.25
4/15/2004 $ 13,976.30 $ 14,036.06 $ 12,598.68
4/16/2004 $ 14,061.31 $ 14,121.65 $ 12,663.14
4/19/2004 $ 14,068.31 $ 14,128.65 $ 12,676.66
4/20/2004 $ 13,858.29 $ 13,918.02 $ 12,479.51
4/21/2004 $ 13,951.30 $ 14,033.75 $ 12,546.72
4/22/2004 $ 14,203.32 $ 14,265.29 $ 12,724.09
4/23/2004 $ 14,179.32 $ 14,241.25 $ 12,731.67
4/26/2004 $ 14,096.31 $ 14,157.97 $ 12,675.14
4/27/2004 $ 14,119.32 $ 14,180.89 $ 12,703.99
4/28/2004 $ 13,907.30 $ 13,968.11 $ 12,530.52
4/29/2004 $ 13,734.28 $ 13,794.62 $ 12,438.90
4/30/2004 $ 13,647.27 $ 13,707.24 $ 12,365.45
5/3/2004 $ 13,760.28 $ 13,820.96 $ 12,479.25
5/4/2004 $ 13,793.29 $ 13,855.20 $ 12,502.39
5/5/2004 $ 13,836.29 $ 13,925.38 $ 12,526.37
5/6/2004 $ 13,706.28 $ 13,773.40 $ 12,443.40
5/7/2004 $ 13,467.26 $ 13,527.94 $ 12,272.59
5/10/2004 $ 13,283.24 $ 13,342.32 $ 12,143.72
5/11/2004 $ 13,418.25 $ 13,478.22 $ 12,239.32
5/12/2004 $ 13,423.25 $ 13,483.81 $ 12,263.76
5/13/2004 $ 13,448.25 $ 13,509.33 $ 12,255.39
5/14/2004 $ 13,440.25 $ 13,501.67 $ 12,248.30
5/17/2004 $ 13,265.24 $ 13,328.55 $ 12,119.77
5/18/2004 $ 13,387.25 $ 13,448.60 $ 12,202.80
5/19/2004 $ 13,376.25 $ 13,437.07 $ 12,173.46
5/20/2004 $ 13,352.25 $ 13,413.99 $ 12,179.31
5/21/2004 $ 13,434.25 $ 13,496.16 $ 12,228.29
5/24/2004 $ 13,510.26 $ 13,573.27 $ 12,249.07
5/25/2004 $ 13,753.28 $ 13,817.54 $ 12,446.37
5/26/2004 $ 13,797.29 $ 13,861.97 $ 12,469.35
5/27/2004 $ 13,870.29 $ 13,936.47 $ 12,541.59
5/28/2004 $ 13,897.30 $ 13,963.34 $ 12,535.12
6/1/2004 $ 13,900.30 $ 13,967.06 $ 12,540.98
6/2/2004 $ 13,943.30 $ 14,010.16 $ 12,587.41
6/3/2004 $ 13,805.29 $ 13,871.57 $ 12,494.24
6/4/2004 $ 13,892.30 $ 13,959.32 $ 12,560.09
6/7/2004 $ 14,135.32 $ 14,204.34 $ 12,761.04
6/8/2004 $ 14,156.32 $ 14,226.15 $ 12,781.82
6/9/2004 $ 13,993.30 $ 14,062.18 $ 12,661.32
6/10/2004 $ 14,056.31 $ 14,125.52 $ 12,719.48
6/14/2004 $ 13,888.30 $ 13,956.87 $ 12,597.54
6/15/2004 $ 14,013.31 $ 14,082.50 $ 12,673.04
6/16/2004 $ 14,035.31 $ 14,104.98 $ 12,690.65
6/17/2004 $ 14,021.31 $ 14,090.61 $ 12,673.81
6/18/2004 $ 14,056.98 $ 14,126.93 $ 12,707.07
6/21/2004 $ 14,015.87 $ 14,086.59 $ 12,654.32
6/22/2004 $ 14,114.13 $ 14,185.21 $ 12,700.68
6/23/2004 $ 14,269.54 $ 14,342.10 $ 12,808.76
6/24/2004 $ 14,231.44 $ 14,303.25 $ 12,773.14
6/25/2004 $ 14,248.49 $ 14,322.31 $ 12,703.57
6/28/2004 $ 14,193.34 $ 14,266.11 $ 12,693.52
6/29/2004 $ 14,232.44 $ 14,305.63 $ 12,725.72
6/30/2004 $ 14,320.68 $ 14,394.50 $ 12,778.89
7/1/2004 $ 14,127.17 $ 14,206.72 $ 12,647.21
7/2/2004 $ 14,080.04 $ 14,153.06 $ 12,607.67
7/6/2004 $ 13,921.63 $ 13,993.49 $ 12,504.94
7/7/2004 $ 13,952.71 $ 14,025.49 $ 12,531.78
7/8/2004 $ 13,791.28 $ 13,862.42 $ 12,429.20
7/9/2004 $ 13,846.43 $ 13,919.21 $ 12,471.32
7/12/2004 $ 13,843.42 $ 13,915.56 $ 12,488.92
7/13/2004 $ 13,847.43 $ 13,920.62 $ 12,498.32
7/14/2004 $ 13,807.33 $ 13,880.06 $ 12,457.62
7/15/2004 $ 13,803.31 $ 13,875.74 $ 12,404.01
7/16/2004 $ 13,718.09 $ 13,790.67 $ 12,344.90
7/19/2004 $ 13,718.09 $ 13,791.27 $ 12,339.42
7/20/2004 $ 13,835.40 $ 13,908.79 $ 12,426.42
7/21/2004 $ 13,616.82 $ 13,689.30 $ 12,261.78
7/22/2004 $ 13,609.81 $ 13,682.08 $ 12,295.19
7/23/2004 $ 13,481.47 $ 13,554.21 $ 12,175.99
7/26/2004 $ 13,405.27 $ 13,477.26 $ 12,152.17
7/27/2004 $ 13,531.60 $ 13,604.60 $ 12,272.74
7/28/2004 $ 13,532.60 $ 13,605.35 $ 12,281.65
7/29/2004 $ 13,655.93 $ 13,729.49 $ 12,341.40
7/30/2004 $ 13,687.01 $ 13,761.20 $ 12,355.94
8/2/2004 $ 13,724.11 $ 13,799.16 $ 12,410.89
8/3/2004 $ 13,592.76 $ 13,667.20 $ 12,333.25
8/4/2004 $ 13,562.68 $ 13,637.20 $ 12,323.51
8/5/2004 $ 13,338.09 $ 13,411.24 $ 12,122.86
8/6/2004 $ 13,104.48 $ 13,172.33 $ 11,935.84
8/9/2004 $ 13,134.56 $ 13,199.49 $ 11,950.23
8/10/2004 $ 13,334.08 $ 13,400.89 $ 12,105.43
8/11/2004 $ 13,272.92 $ 13,338.30 $ 12,075.59
8/12/2004 $ 13,111.49 $ 13,173.15 $ 11,934.93
8/13/2004 $ 13,110.49 $ 13,171.88 $ 11,953.96
8/16/2004 $ 13,324.05 $ 13,389.80 $ 12,117.54
8/17/2004 $ 13,367.17 $ 13,435.20 $ 12,145.17
8/18/2004 $ 13,554.66 $ 13,630.20 $ 12,298.54
8/19/2004 $ 13,494.50 $ 13,569.70 $ 12,254.78
8/20/2004 $ 13,607.80 $ 13,684.02 $ 12,334.70
8/23/2004 $ 13,564.69 $ 13,640.33 $ 12,305.85
8/24/2004 $ 13,565.69 $ 13,639.73 $ 12,311.79
8/25/2004 $ 13,679.99 $ 13,756.36 $ 12,410.97
8/26/2004 $ 13,683.00 $ 13,757.62 $ 12,412.42
8/27/2004 $ 13,714.08 $ 13,787.84 $ 12,444.01
8/30/2004 $ 13,602.79 $ 13,671.29 $ 12,348.48
8/31/2004 $ 13,665.95 $ 13,732.25 $ 12,405.95
9/1/2004 $ 13,709.07 $ 13,776.83 $ 12,428.71
9/2/2004 $ 13,821.36 $ 13,945.41 $ 12,568.15
9/3/2004 $ 13,821.36 $ 13,889.96 $ 12,515.71
9/7/2004 $ 13,924.63 $ 13,997.95 $ 12,602.48
9/8/2004 $ 13,827.38 $ 13,903.28 $ 12,548.21
9/9/2004 $ 13,885.53 $ 13,958.65 $ 12,572.04
9/10/2004 $ 13,966.74 $ 14,041.27 $ 12,634.38
9/13/2004 $ 14,024.90 $ 14,099.47 $ 12,659.19
9/14/2004 $ 14,035.93 $ 14,111.30 $ 12,687.51
9/15/2004 $ 13,931.65 $ 14,005.62 $ 12,598.30
9/16/2004 $ 14,006.85 $ 14,081.91 $ 12,633.92
9/17/2004 $ 14,062.90 $ 14,138.54 $ 12,690.78
9/20/2004 $ 14,009.62 $ 14,085.63 $ 12,619.46
9/21/2004 $ 14,116.17 $ 14,192.80 $ 12,699.46
9/22/2004 $ 13,935.24 $ 14,011.72 $ 12,522.71
9/23/2004 $ 13,882.98 $ 13,958.65 $ 12,466.76
9/24/2004 $ 13,900.06 $ 13,976.00 $ 12,486.40
9/27/2004 $ 13,792.51 $ 13,868.30 $ 12,412.34
9/28/2004 $ 13,875.94 $ 13,952.85 $ 12,488.08
9/29/2004 $ 13,938.26 $ 14,015.59 $ 12,542.65
9/30/2004 $ 14,021.68 $ 14,099.40 $ 12,540.29
10/1/2004 $ 14,242.82 $ 14,322.98 $ 12,730.67
10/4/2004 $ 14,308.15 $ 14,388.84 $ 12,773.37
10/5/2004 $ 14,278.00 $ 14,358.03 $ 12,765.68
10/6/2004 $ 14,381.52 $ 14,462.45 $ 12,855.04
10/7/2004 $ 14,236.78 $ 14,316.80 $ 12,727.55
10/8/2004 $ 14,110.14 $ 14,189.97 $ 12,631.86
10/11/2004 $ 14,119.18 $ 14,199.65 $ 12,657.21
10/12/2004 $ 14,068.93 $ 14,149.26 $ 12,628.52
10/13/2004 $ 13,958.36 $ 14,037.17 $ 12,537.63
10/14/2004 $ 13,852.82 $ 13,931.86 $ 12,421.02
10/15/2004 $ 13,924.19 $ 14,003.61 $ 12,476.36
10/18/2004 $ 13,975.45 $ 14,055.26 $ 12,541.97
10/19/2004 $ 13,830.71 $ 13,909.90 $ 12,420.49
10/20/2004 $ 13,853.83 $ 13,933.20 $ 12,426.19
10/21/2004 $ 13,962.38 $ 14,042.61 $ 12,458.70
10/22/2004 $ 13,851.82 $ 13,931.79 $ 12,337.59
10/25/2004 $ 13,866.89 $ 13,947.12 $ 12,327.16
10/26/2004 $ 14,075.96 $ 14,157.97 $ 12,510.53
10/27/2004 $ 14,271.96 $ 14,355.80 $ 12,673.73
10/28/2004 $ 14,293.07 $ 14,377.46 $ 12,700.68
10/29/2004 $ 14,352.38 $ 14,437.37 $ 12,731.88
</Table>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIOD ENDED OCTOBER 31, 2004
<Table>
<Caption>
SINCE INCEPTION
ONE YEAR (04/24/03)
-------- ---------------
RYDEX S&P EQUAL WEIGHT ETF 14.11% 26.88%
S&P EQUAL WEIGHT TOTAL RETURN INDEX 14.54% 27.37%
S&P 500 INDEX 9.42% 17.25%
</Table>
THE RETURNS PRESENTED ABOVE DO NOT REFLECT THE EFFECT OF TAXES. INDEX RETURNS
REPRESENT TOTAL RETURNS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. THE
S&P EQUAL WEIGHT TOTAL RETURN INDEX AND THE S&P 500 INDEX ARE UNMANAGED STOCK
INDICES AND, UNLIKE THE FUND, HAS NO MANAGEMENT FEES OR OTHER OPERATING EXPENSES
TO REDUCE ITS REPORTED RETURNS. RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN
PRINCIPAL AND REINVESTED DIVIDENDS AND CAPITAL GAINS.
4
<Page>
TOP TEN HOLDINGS AS OF OCTOBER 31, 2004
<Table>
<Caption>
STOCK %
- ----------------------------------------
APPLE COMPUTER INC 0.28%
DELTA AIR LINES INC 0.27%
CITRIX SYSTMES INC 0.26%
TXU CORPORATION 0.26%
ADVANCED MICRO DEVICES 0.26%
CIENA CORP 0.25%
GATEWAY INC 0.25%
BMC SOFTWARE INC 0.24%
VERITAS SOFTWARE CO 0.24%
TERADYNE INC. 0.24%
</Table>
[CHART]
SECTOR ALLOCATION AS OF OCTOBER 31, 2004
<Table>
Consumer Discretionary 16%
Information Technology 17%
Financials 16%
Industrials 12%
Health Care 10%
Consumer Staples 7%
Utilities 7%
Materials 7%
Energy 6%
Telecom 2%
</Table>
5
<Page>
FEES AND EXPENSES
As a shareholder of the Rydex ETF Trust, you incur advisory fees and
distribution fees. All other Trust expenses are paid by the advisor. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these cost with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held through the six months ended October 31, 2004.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your 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
in the first line under the heading "Expenses Paid During the Six-Month Period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Portfolio's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Portfolio's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the tables are meant to highlight your
ongoing costs only, and do not reflect any transactional costs such as sales
charges (loads). Therefore the second line in the 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.
<Table>
<Caption>
BEGINNING ENDING ANNUALIZED
ACCOUNT ACCOUNT EXPENSE RATIO EXPENSES PAID
VALUE VALUE BASED ON THE DURING THE
05/01/04 10/31/04 SIX-MONTH PERIOD SIX-MONTH PERIOD*
--------- -------- ---------------- -----------------
RYDEX S&P EQUAL WEIGHT ETF
Actual $ 1,000.00 $ 1,051.70 0.40% $ 2.06
Hypothetical
(5% return before expenses) $ 1,000.00 $ 1,023.13 0.40% $ 2.03
</Table>
* EXPENSES ARE CALCULATED USING THE ANNUALIZED EXPENSE RATIO, WHICH REPRESENTS
THE ONGOING EXPENSES AS A PERCENTAGE OF NET ASSETS FOR THE SIX-MONTHS ENDED
10/31/04. EXPENSES ARE CALCULATED BY MULTIPLYING THE ANNUALIZED EXPENSE RATIO BY
THE AVERAGE ACCOUNT VALUE FOR THE PERIOD; THEN MULTIPLYING THE RESULT BY THE
NUMBER OF DAYS IN THE MOST RECENT FISCAL HALF-YEAR; AND THEN DIVIDING THE RESULT
BY THE NUMBER OF DAYS IN THE CALENDAR YEAR. EXPENSE RATIOS FOR THE MOST RECENT
FISCAL HALF-YEAR MAY DIFFER FROM EXPENSE RATIOS BASED ON THE ONE-YEAR DATA IN
THE FINANCIAL HIGHLIGHTS.
6
<Page>
RYDEX S&P EQUAL WEIGHT ETF
PORTFOLIO SUMMARY October 31, 2004
<Table>
<Caption>
INCEPTION DATE PORTFOLIO STATISTICS
-------------- --------------------
4/24/03 Net Assets ($million):$485.6
<Caption>
SECTOR BREAKDOWN
----------------
0.7% Advertising and Marketing Services
1.5% Aerospace and Defense
0.2% Agricultural
0.5% Airlines
1.1% Aluminum, Steel and Other Metals
2.1% Automotive
5.4% Banking and Finance
4.0% Beverages, Food and Tobacco
0.7% Biosciences
1.4% Building and Building Products
0.8% Business Equipment and Services
2.2% Chemicals
1.6% Communications, Media and Entertainment
2.1% Computer Services
1.4% Computers - Micro
3.9% Computers - Software and Peripherals
0.4% Conglomerates
1.5% Consumer Goods and Services
0.8% Containers and Packaging
0.8% Data Processing Systems
0.2% Education
6.3% Electronic Equipment and Components
6.1% Financial Services
0.9% Forest and Paper Products
0.2% Health and Medical Facilities
5.6% Health Care Products and Services
0.6% Homebuilders
0.8% Hotels and Gaming
2.0% Household and Personal Care Products
0.2% Human Resources
4.1% Insurance
1.2% Machinery and Engineering
2.9% Manufacturing
0.2% Mining
0.7% Networking Products
6.1% Oil and Gas
2.8% Pharmaceuticals
1.0% Publishing
1.2% Real Estate Investment Trusts
0.2% Resorts and Entertainment
1.9% Retail - Apparel and Shoes
1.2% Retail - Department Stores
1.4% Retail - Discount Stores
0.7% Retail - Food Stores
0.8% Retail - Restaurants
2.2% Retail - Specialty Stores
0.6% Retail and Wholesale Distribution
4.4% Telecommunications
0.4% Tire and Rubber
0.2% Tobacco
1.2% Tools and Instruments
1.5% Transportation
0.4% Travel Services
6.1% Utilities - Gas and Electric
0.4% Waste Management.
</Table>
7
<Page>
RYDEX S&P EQUAL WEIGHT ETF
SCHEDULE OF INVESTMENTS October 31, 2004
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS--99.8%
ADVERTISING AND MARKETING SERVICES 0.7%
Monster Worldwide,
Inc.* 39,953 $ 1,120,682
Omnicom Group, Inc. 13,547 1,068,858
The Interpublic Group of
Cos., Inc. 86,926 1,065,713
---------------
TOTAL ADVERTISING AND
MARKETING SERVICES 3,255,253
---------------
AEROSPACE AND DEFENSE 1.5%
General Dynamics
Corp. 9,572 977,492
Goodrich Corp. 29,124 897,893
Lockheed Martin Corp. 17,397 958,401
Northrop Grumman
Corp. 17,883 925,445
Raytheon Co. 25,785 940,637
Rockwell Collins, Inc. 25,733 912,750
The Boeing Co. 17,248 860,675
United Technologies
Corp. 9,941 922,724
---------------
TOTAL AEROSPACE AND DEFENSE 7,396,017
---------------
AGRICULTURAL 0.2%
Monsanto Co. 26,851 1,147,880
---------------
TOTAL AGRICULTURAL 1,147,880
---------------
AIRLINES 0.5%
Delta Air Lines, Inc.* 240,139 1,308,757
Southwest Airlines Co. 65,544 1,033,629
---------------
TOTAL AIRLINES 2,342,386
---------------
ALUMINUM, STEEL AND OTHER METALS 1.1%
Alcoa, Inc. 31,025 1,008,312
Allegheny Technologies,
Inc. 48,422 813,974
Freeport-McMoRan
Copper & Gold, Inc.,
Class B 25,554 925,566
Nucor Corp. 21,212 895,783
Phelps Dodge Corp. 11,435 1,001,020
United States Steel Corp. 25,027 918,991
---------------
TOTAL ALUMINUM, STEEL AND
OTHER METALS 5,563,646
---------------
AUTOMOTIVE 2.1%
AutoNation, Inc.* 55,804 $ 961,503
AutoZone, Inc.* 12,506 1,023,115
Dana Corp. 52,980 789,932
Delphi Corp. 104,499 878,837
Ford Motor Co. 66,874 871,368
General Motors Corp. 22,610 871,616
Harley-Davidson, Inc. 15,740 906,152
Johnson Controls, Inc. 16,965 972,943
Navistar International
Corp.* 25,232 871,766
PACCAR, Inc. 14,639 1,014,628
Visteon Corp. 115,972 824,561
---------------
TOTAL AUTOMOTIVE 9,986,421
---------------
BANKING AND FINANCE 5.4%
AmSouth Bancorp. 38,085 1,005,063
Bank of America Corp. 21,293 953,713
BB&T Corp. 23,623 971,142
Comerica, Inc. 15,704 965,953
Fifth Third Bancorp. 19,125 940,759
First Horizon National
Corp. 21,419 927,014
Golden West Financial
Corp. 8,283 968,448
Huntington Bancshares,
Inc. 38,577 923,919
J.P. Morgan
Chase & Co. 23,988 925,937
KeyCorp 29,784 1,000,445
M&T Bank Corp. 9,870 1,016,610
Marshall & Ilsley Corp. 23,548 988,310
Mellon Financial Corp. 33,342 963,584
National City Corp. 24,226 944,087
North Fork Bancorp.,
Inc. 21,672 955,735
Northern Trust Corp. 22,458 955,363
Regions Financial Corp. 28,643 1,004,796
SouthTrust Corp. 22,667 987,601
Sovereign Bancorp, Inc. 42,304 915,882
State Street Corp. 21,251 957,358
SunTrust Banks, Inc. 13,887 977,367
The Bank of New York
Co., Inc. 31,708 1,029,242
</Table>
See Notes to Financial Statements.
8
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
U.S. Bancorp 32,521 $ 930,426
Wachovia Corp. 20,049 986,611
Washington Mutual, Inc. 23,734 918,743
Wells Fargo & Co. 16,030 957,312
Zions Bancorp. 15,666 1,036,619
---------------
TOTAL BANKING AND FINANCE 26,108,039
---------------
BEVERAGES, FOOD AND TOBACCO 4.0%
Adolph Coors Co. 13,735 916,125
Altria Group, Inc. 19,612 950,398
Anheuser-Busch Cos.,
Inc. 18,542 926,173
Archer-Daniels-Midland
Co. 57,050 1,105,058
Brown-Forman Corp.,
Class B 20,352 913,805
Campbell Soup Co. 35,300 947,452
Coca-Cola Enterprises,
Inc. 50,185 1,049,367
ConAgra Foods, Inc. 35,300 931,920
General Mills, Inc. 20,135 890,974
H.J. Heinz Co. 25,417 923,908
Hershey Foods Corp. 19,736 1,000,418
Kellogg Co. 22,262 957,266
McCormick & Co., Inc. 27,113 960,614
McDonald's Corp. 34,365 1,001,740
PepsiCo, Inc. 19,131 948,515
SUPER VALU, INC. 34,598 1,020,294
The Coca-Cola Co. 23,598 959,495
The Pepsi Bottling
Group, Inc. 34,641 971,334
UST, Inc. 23,891 983,354
Wm. Wrigley Jr. Co. 14,936 976,814
---------------
TOTAL BEVERAGES, FOOD AND
TOBACCO 19,335,024
---------------
BIOSCIENCES 0.7%
Amgen, Inc.* 16,379 930,327
Biogen Idec, Inc.* 15,412 896,362
Chiron Corp.* 20,996 680,690
Gilead Sciences, Inc.* 25,709 890,303
---------------
TOTAL BIOSCIENCES 3,397,682
---------------
BUILDING AND BUILDING PRODUCTS 1.4%
Ecolab, Inc. 30,394 $ 1,028,837
Georgia-Pacific Group 26,946 932,062
Louisiana-Pacific Corp. 37,290 913,978
Masco Corp. 27,764 951,195
The Home Depot, Inc. 24,824 1,019,770
The Sherwin-Williams
Co. 22,372 955,732
Vulcan Materials Co. 19,458 968,619
---------------
TOTAL BUILDING AND
BUILDING PRODUCTS 6,770,193
---------------
BUSINESS EQUIPMENT AND SERVICES 0.8%
Convergys Corp.* 74,292 966,539
Lexmark International,
Inc.* 11,361 944,213
Pitney Bowes, Inc. 21,749 951,519
Xerox Corp.* 66,874 987,728
---------------
TOTAL BUSINESS EQUIPMENT
AND SERVICES 3,849,999
---------------
CHEMICALS 2.2%
Air Products and Chemicals,
Inc. 17,697 941,126
Ashland, Inc. 17,339 999,073
duPont (E.I.) de
Nemours & Co. 22,294 955,744
Eastman Chemical Co. 20,312 964,211
Great Lakes Chemical
Corp. 36,451 933,875
Hercules, Inc.* 68,963 984,792
PPG Industries, Inc. 15,995 1,019,681
Praxair, Inc. 22,505 949,711
Rohm and Haas Co. 23,479 995,275
Sigma-Aldrich Corp. 16,466 916,168
The Dow Chemical Co. 22,431 1,008,049
---------------
TOTAL CHEMICALS 10,667,705
---------------
COMMUNICATIONS, MEDIA AND
ENTERTAINMENT 1.6%
Clear Channel
Communications, Inc. 28,690 958,246
Comcast Corp., Class A* 33,532 989,194
Gannett Co., Inc. 11,027 914,690
</Table>
See Notes to Financial Statements.
9
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Meredith Corp. 18,150 $ 889,350
The McGraw-Hill
Cos., Inc. 12,226 1,054,492
Time Warner, Inc.* 56,306 936,932
Univision
Communications, Inc.* 29,719 920,100
Viacom, Inc., Class B 27,599 1,007,088
---------------
TOTAL COMMUNICATIONS,
MEDIA AND ENTERTAINMENT 7,670,092
---------------
COMPUTER SERVICES 2.1%
Affiliated Computer
Services, Inc.,
Class A* 17,272 942,188
Computer Sciences Corp.* 20,013 994,046
Compuware Corp.* 192,111 1,112,322
eBay, Inc.* 10,213 996,891
Electronic Data
Systems Corp. 47,792 1,016,536
Intuit, Inc.* 21,348 968,345
Network Appliance,
Inc.* 41,404 1,013,156
SunGard Data
Systems, Inc.* 40,126 1,062,938
Unisys Corp.* 94,253 1,000,967
Yahoo!, Inc.* 28,423 1,028,628
---------------
TOTAL COMPUTER SERVICES 10,136,017
---------------
COMPUTERS - MICRO 1.4%
Apple Computer, Inc.* 25,601 1,344,821
Dell, Inc.* 26,754 937,995
Gateway, Inc.* 204,514 1,196,407
Hewlett-Packard Co. 52,511 979,855
International Business
Machines Corp. (IBM) 11,091 995,417
Sun Microsystems, Inc.* 241,359 1,093,356
---------------
TOTAL COMPUTERS - MICRO 6,547,851
---------------
COMPUTERS - SOFTWARE AND
PERIPHERALS 3.9%
Adobe Systems, Inc. 19,750 1,106,593
Autodesk, Inc. 19,537 1,030,577
BMC Software, Inc.* 62,033 $ 1,173,664
Cisco Systems, Inc.* 49,636 953,508
Citrix Systems, Inc.* 52,249 1,260,769
Computer Associates
International, Inc. 37,003 1,025,353
Electronic Arts, Inc.* 19,712 885,463
EMC Corp.* 88,058 1,133,306
Mercury Interactive
Corp.* 25,785 1,119,843
Microsoft Corp. 34,566 967,502
NCR Corp.* 19,414 1,093,979
NVIDIA Corp.* 64,739 936,773
Parametric Technology
Corp.* 192,111 997,056
PeopleSoft, Inc.* 48,224 1,001,612
Siebel Systems, Inc.* 117,404 1,115,338
Symantec Corp.* 18,234 1,038,244
VERITAS Software
Corp.* 53,309 1,166,401
Xilinx, Inc.* 33,322 1,019,653
---------------
TOTAL COMPUTERS - SOFTWARE
AND PERIPHERALS 19,025,634
---------------
CONGLOMERATES 0.4%
General Electric Co. 27,794 948,331
Textron, Inc. 15,035 1,024,636
---------------
TOTAL CONGLOMERATES 1,972,967
---------------
CONSUMER GOODS AND SERVICES 1.5%
Avery Dennison Corp. 14,922 907,854
Brunswick Corp. 22,574 1,059,172
Cendant Corp.* 41,236 849,049
Eastman Kodak Co. 29,842 903,616
Fortune Brands, Inc. 12,707 925,324
Hasbro, Inc. 51,685 914,308
Mattel, Inc. 52,392 917,384
Sara Lee Corp. 41,579 967,959
---------------
TOTAL CONSUMER GOODS AND
SERVICES 7,444,666
---------------
</Table>
See Notes to Financial Statements.
10
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
CONTAINERS AND PACKAGING 0.8%
Ball Corp. 26,106 $ 1,040,324
Bemis Co., Inc. 36,789 973,805
Pactiv Corp.* 40,155 951,272
Sealed Air Corp.* 20,902 1,035,485
---------------
TOTAL CONTAINERS AND
PACKAGING 4,000,886
---------------
DATA PROCESSING SYSTEMS 0.8%
Automatic Data Processing,
Inc. 22,308 967,944
First Data Corp. 21,547 889,460
Fiserv, Inc.* 26,822 953,254
Paychex, Inc. 30,275 992,839
---------------
TOTAL DATA PROCESSING SYSTEMS 3,803,497
---------------
EDUCATION 0.2%
Apollo Group, Inc.,
Class A* 12,133 800,778
---------------
TOTAL EDUCATION 800,778
---------------
ELECTRONIC EQUIPMENT AND
COMPONENTS 6.3%
Advanced Micro Devices,
Inc.* 74,881 1,259,498
Agilent Technologies,
Inc.* 41,532 1,040,792
Altera Corp.* 47,833 1,087,244
American Power
Conversion Corp.* 53,728 1,035,876
Analog Devices, Inc.* 25,311 1,019,021
Applied Materials, Inc.* 56,268 905,915
Applied Micro Circuits
Corp.* 293,509 1,068,373
Cooper Industries, Inc.,
Class A 16,189 1,034,477
Emerson Electric Co. 15,161 971,062
Intel Corp. 46,273 1,030,037
International Game
Technology 29,086 961,001
Jabil Circuit, Inc.* 44,562 1,083,302
KLA-Tencor Corp.* 23,835 1,085,208
Linear Technology Corp. 25,634 971,016
LSI Logic Corp.* 214,667 $ 976,735
Maxim Integrated
Products, Inc. 22,431 986,740
Micron Technology, Inc.* 74,531 907,788
Molex, Inc. 31,580 933,821
National Semiconductor
Corp.* 63,270 1,056,609
Novellus Systems, Inc.* 36,743 952,011
PMC - Sierra, Inc.* 100,416 1,030,268
Power-One, Inc.* 129,212 907,068
QLogic Corp.* 31,318 1,017,835
Rockwell
Automation, Inc. 24,221 1,009,773
Sanmina-SCI Corp.* 134,503 1,076,024
Solectron Corp.* 192,111 1,002,819
Symbol Technologies,
Inc. 71,398 1,048,837
Tektronix, Inc. 28,596 867,317
Teradyne, Inc.* 69,924 1,157,941
Texas Instruments, Inc. 43,068 1,053,013
---------------
TOTAL ELECTRONIC EQUIPMENT AND
COMPONENTS 30,537,421
---------------
FINANCIAL SERVICES 6.1%
Ambac Financial Group,
Inc. 12,013 937,735
American Express Co. 18,502 981,901
Capital One Financial
Corp. 12,995 958,511
CIT Group, Inc. 24,150 975,660
Citigroup, Inc. 20,257 898,803
Countrywide Financial
Corp. 25,361 809,777
Deluxe Corp. 23,155 881,974
E*TRADE Financial
Corp.* 79,982 1,031,768
Equifax, Inc. 37,181 972,283
Fannie Mae 12,316 863,967
Federated Investors,
Inc., Class B 32,190 933,188
Franklin Resources, Inc. 17,331 1,050,604
Freddie Mac 13,944 928,670
H&R Block, Inc. 19,701 936,783
</Table>
See Notes to Financial Statements.
11
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Janus Capital Group,
Inc. 67,930 $ 1,035,933
Lehman Brothers
Holdings, Inc. 12,450 1,022,768
Marsh & McLennan Cos.,
Inc. 20,403 564,347
MBIA, Inc. 16,337 945,259
MBNA Corp. 38,451 985,499
Merrill Lynch & Co.,
Inc. 18,486 997,135
MGIC Investment
Corp. 14,570 936,997
Moody's Corp. 13,395 1,042,265
Morgan Stanley 18,486 944,450
PNC Financial Services
Group 17,733 927,436
Providian Financial
Corp.* 63,234 983,289
SLM Corp. 22,509 1,018,757
Synovus Financial Corp. 36,073 980,825
T. Rowe Price Group,
Inc. 18,564 1,035,314
The Bear Stearns Cos.,
Inc. 10,772 1,020,647
The Charles Schwab
Corp. 102,918 941,700
The Goldman Sachs
Group, Inc. 10,332 1,016,462
---------------
TOTAL FINANCIAL SERVICES 29,560,707
---------------
FOREST AND PAPER PRODUCTS 0.9%
Boise Cascade Corp. 29,638 874,914
International Paper Co. 23,830 917,693
MeadWestvaco Corp. 31,337 988,056
Temple-Inland, Inc. 14,460 854,875
Weyerhaeuser Co. 14,782 925,944
---------------
TOTAL FOREST AND PAPER PRODUCTS 4,561,482
---------------
HEALTH AND MEDICAL FACILITIES 0.2%
Quest Diagnostics, Inc.* 11,288 988,152
---------------
TOTAL HEALTH AND MEDICAL
FACILITIES 988,152
---------------
HEALTH CARE PRODUCTS AND SERVICES 5.6%
Abbott Laboratories 22,159 $ 944,638
Allergan, Inc. 12,334 882,621
Anthem, Inc.* 11,040 887,616
Applera Corp. - Applied
Biosystems Group 52,249 996,911
Bausch & Lomb, Inc. 14,024 854,903
Baxter International, Inc. 29,516 907,912
Becton, Dickinson & Co. 18,687 981,068
Biomet, Inc. 20,038 935,374
Boston Scientific Corp.* 24,807 875,687
C. R. Bard, Inc. 16,736 950,605
Cardinal Health, Inc. 19,862 928,549
Fisher Scientific
International Inc.* 15,988 917,072
Genzyme Corp.* 17,400 912,978
Guidant Corp. 15,173 1,010,825
HCA, Inc. 24,416 896,800
Health Management
Associates, Inc.,
Class A 47,863 988,850
Humana, Inc.* 48,895 936,339
IMS Health, Inc. 39,790 842,752
Johnson & Johnson 16,251 948,733
Manor Care, Inc. 30,876 1,010,880
McKesson Corp. 34,460 918,704
Medtronic, Inc. 19,072 974,770
St. Jude Medical, Inc.* 13,449 1,029,790
Stryker Corp. 19,747 850,898
Tenet Healthcare Corp.* 92,324 989,713
UnitedHealth Group,
Inc. 13,618 985,943
WellPoint Health
Networks, Inc.* 9,191 897,593
Wyeth 24,426 968,491
Zimmer Holdings, Inc.* 12,375 960,176
---------------
TOTAL HEALTH CARE
PRODUCTS AND SERVICES 27,187,191
---------------
HOMEBUILDERS 0.6%
Centex Corp. 18,881 980,679
KB HOME 12,316 1,012,991
Pulte Homes, Inc. 15,165 832,255
---------------
TOTAL HOMEBUILDERS 2,825,925
---------------
</Table>
See Notes to Financial Statements.
12
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
HOTELS AND GAMING 0.8%
Harrah's Entertainment,
Inc. 18,237 $ 1,067,229
Hilton Hotels Corp. 50,689 1,008,711
Marriott International,
Inc., Class A 19,118 1,041,740
Starwood Hotels &
Resorts Worldwide, Inc. 20,810 993,261
---------------
TOTAL HOTELS AND GAMING 4,110,941
---------------
HOUSEHOLD AND PERSONAL
CARE PRODUCTS 2.0%
Alberto-Culver Co.,
Class B 20,540 921,424
Avon Products, Inc. 21,893 865,868
Colgate-Palmolive Co. 17,500 780,850
International Flavors &
Fragrances, Inc. 24,570 959,459
Kimberly-Clark Corp. 14,276 851,849
Leggett & Platt, Inc. 34,577 972,651
Maytag Corp. 47,477 826,100
The Clorox Co. 17,395 949,767
The Gillette Co. 22,431 930,438
The Procter & Gamble
Co. 16,908 865,351
Whirlpool Corp. 15,381 903,634
---------------
TOTAL HOUSEHOLD AND PERSONAL
CARE PRODUCTS 9,827,391
---------------
HUMAN RESOURCES 0.2%
Robert Half International,
Inc.* 34,683 920,140
---------------
TOTAL HUMAN RESOURCES 920,140
---------------
INSURANCE 4.1%
ACE Ltd. 23,799 905,790
Aetna, Inc. 9,957 945,915
AFLAC, Inc. 23,865 856,276
American International
Group, Inc. 13,267 805,440
Aon Corp. 34,407 702,247
CIGNA Corp. 13,686 868,514
Cincinnati Financial
Corp. 23,204 $ 968,767
Jefferson-Pilot Corp. 19,260 930,065
Lincoln National Corp. 20,229 886,030
Loews Corp. 15,981 957,262
MetLife, Inc. 25,293 969,987
Principal Financial
Group, Inc. 26,340 994,598
Prudential Financial, Inc. 19,809 920,524
SAFECO Corp. 19,411 897,565
The Allstate Corp. 19,469 936,264
The Chubb Corp. 13,392 965,965
The Hartford Financial
Services Group, Inc. 14,974 875,680
The Progressive Corp. 11,114 1,039,714
The St. Paul Cos., Inc. 27,027 917,837
Torchmark Corp. 18,255 986,135
UnumProvident Corp. 59,323 810,352
XL Capital Ltd., Class A 12,997 942,283
---------------
TOTAL INSURANCE 20,083,210
---------------
MACHINERY AND ENGINEERING 1.2%
Caterpillar, Inc. 12,496 1,006,427
Cummins, Inc. 13,396 938,792
Deere & Co. 14,627 874,402
Eaton Corp. 15,171 970,185
Fluor Corp. 21,156 982,485
Ingersoll-Rand Co.,
Class A 14,354 982,388
---------------
TOTAL MACHINERY AND
ENGINEERING 5,754,679
---------------
MANUFACTURING 2.9%
3M Co. 11,554 896,244
American Standard Cos.,
Inc.* 24,737 904,632
Cintas Corp. 21,603 931,953
Crane Co. 33,143 923,695
Danaher Corp. 18,081 996,806
Dover Corp. 24,358 956,539
Honeywell International,
Inc. 25,889 871,942
Illinois Tool Works, Inc. 10,337 953,898
ITT Industries, Inc. 11,756 953,882
</Table>
See Notes to Financial Statements.
13
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Newell Rubbermaid,
Inc. 43,848 $ 945,363
Pall Corp. 39,039 1,009,549
Parker-Hannifin Corp. 16,275 1,149,502
Tyco International Ltd. 30,972 964,778
Waters Corp.* 20,738 856,272
Worthington Industries,
Inc. 45,851 910,142
---------------
TOTAL MANUFACTURING 14,225,197
---------------
MINING 0.2%
Newmont Mining Corp. 22,883 1,087,400
---------------
TOTAL MINING 1,087,400
---------------
NETWORKING PRODUCTS 0.7%
CIENA Corp.* 500,508 1,236,254
Novell, Inc.* 136,242 979,580
Oracle Corp.* 82,625 1,046,033
---------------
TOTAL NETWORKING PRODUCTS 3,261,867
---------------
OIL AND GAS 6.1%
Amerada Hess Corp. 11,318 913,476
Anadarko Petroleum
Corp. 15,175 1,023,554
Apache Corp. 19,816 1,004,671
Baker Hughes, Inc. 22,458 961,876
BJ Services Co.* 18,903 964,053
Burlington Resources, Inc. 24,416 1,013,264
ChevronTexaco Corp. 18,307 971,369
ConocoPhillips 12,021 1,013,491
Devon Energy Corp. 13,588 1,005,104
Dynegy, Inc., Class A* 212,273 1,046,506
El Paso Corp. 112,545 1,006,152
Engelhard Corp. 34,672 981,218
EOG Resources, Inc. 14,958 995,604
Exxon Mobil Corp. 19,660 967,665
Halliburton Co. 30,175 1,117,682
Kerr-McGee Corp. 17,099 1,012,603
Marathon Oil Corp. 24,570 936,363
Nabors Industries, Ltd.* 20,678 1,015,703
NICOR, Inc. 25,486 956,235
Noble Corp.* 21,285 972,299
Occidental Petroleum
Corp. 17,392 $ 970,995
Peoples Energy Corp. 21,710 928,754
Rowan Cos., Inc.* 37,826 965,698
Schlumberger Ltd. 14,416 907,343
Sempra Energy 25,983 871,470
Sunoco, Inc. 14,211 1,056,730
The Williams Cos., Inc. 79,247 991,380
Transocean, Inc. 28,139 991,900
Unocal Corp. 23,613 985,843
Valero Energy Corp. 26,380 1,133,548
---------------
TOTAL OIL AND GAS 29,682,549
---------------
PHARMACEUTICALS 2.8%
AmerisourceBergen
Corp. 17,275 950,816
Bristol-Myers Squibb Co. 38,527 902,688
Caremark Rx, Inc.* 31,717 950,558
Eli Lilly & Co. 14,328 786,750
Express Scripts, Inc.,
Class A* 14,966 957,824
Forest Laboratories,
Inc.* 21,090 940,614
Hospira, Inc.* 32,331 1,031,682
King Pharmaceuticals,
Inc.* 77,191 842,154
Medco Health Solutions,
Inc.* 30,487 1,033,814
MedImmune, Inc.* 39,605 1,125,574
Merck & Co., Inc. 21,148 662,144
Mylan Laboratories,
Inc. 48,790 840,164
Pfizer, Inc. 29,983 868,008
Schering-Plough
Corp. 48,079 870,711
Watson Pharmaceuticals,
Inc.* 31,672 887,766
---------------
TOTAL PHARMACEUTICALS 13,651,267
---------------
PUBLISHING 1.0%
Dow Jones & Co., Inc. 22,560 998,280
Knight-Ridder, Inc. 14,974 1,026,167
</Table>
See Notes to Financial Statements.
14
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
R. R. Donnelley & Sons
Co. 29,735 $ 935,166
The New York Times Co.,
Class A 23,312 933,646
Tribune Co. 22,949 991,397
---------------
TOTAL PUBLISHING 4,884,656
---------------
REAL ESTATE INVESTMENT TRUSTS 1.2%
Apartment Investment &
Management Co.,
Class A 27,209 998,298
Equity Office Properties
Trust 34,208 961,929
Equity Residential 30,411 1,014,207
Plum Creek Timber Co.,
Inc. 28,027 1,017,100
ProLogis 26,479 1,032,151
Simon Property Group,
Inc. 17,438 1,016,984
---------------
TOTAL REAL ESTATE INVESTMENT
TRUSTS 6,040,669
---------------
RESORTS AND ENTERTAINMENT 0.2%
The Walt Disney Co. 40,605 1,024,058
---------------
TOTAL RESORTS AND
ENTERTAINMENT 1,024,058
---------------
RETAIL - APPAREL AND SHOES 1.9%
Coach, Inc.* 21,857 1,019,192
Jones Apparel Group,
Inc. 26,982 952,465
Limited Brands 43,602 1,080,457
Liz Claiborne, Inc. 24,737 1,011,249
NIKE, Inc., Class B 12,425 1,010,277
Nordstrom, Inc. 24,040 1,038,047
Reebok International
Ltd. 26,661 986,457
The GAP, Inc. 47,528 949,609
V.F. Corp. 19,257 1,036,604
---------------
TOTAL RETAIL - APPAREL AND
SHOES 9,084,357
---------------
RETAIL - DEPARTMENT STORES 1.2%
Dillard's, Inc., Class A 46,938 $ 961,760
Federated Department
Stores, Inc. 20,626 1,040,582
J. C. Penney Co., Inc.
(Holding Co.) 26,007 899,582
Kohl's Corp.* 19,224 975,810
Sears, Roebuck & Co. 23,593 825,755
The May Department
Stores Co. 37,703 982,540
---------------
TOTAL RETAIL - DEPARTMENT
STORES 5,686,029
---------------
RETAIL - DISCOUNT STORES 1.4%
Big Lots, Inc.* 73,263 907,729
Costco Wholesale Corp.* 23,050 1,105,016
Dollar General Corp. 47,007 904,885
Family Dollar Stores, Inc. 33,796 998,672
Target Corp. 20,979 1,049,369
The TJX Cos., Inc. 42,974 1,030,517
Wal-Mart Stores, Inc. 18,117 976,869
---------------
TOTAL RETAIL - DISCOUNT STORES 6,973,057
---------------
RETAIL - FOOD STORES 0.7%
Albertson's, Inc. 39,628 903,915
Safeway, Inc.* 48,224 879,606
The Kroger Co.* 60,491 914,018
Winn-Dixie Stores, Inc. 251,584 865,449
---------------
TOTAL RETAIL - FOOD STORES 3,562,988
---------------
RETAIL - RESTAURANTS 0.8%
Darden Restaurants, Inc. 45,193 1,107,228
Starbucks Corp.* 20,655 1,092,236
Wendy's International,
Inc. 26,527 885,206
Yum! Brands, Inc. 23,385 1,017,248
---------------
TOTAL RETAIL - RESTAURANTS 4,101,918
---------------
RETAIL - SPECIALTY STORES 2.2%
Bed Bath & Beyond, Inc.* 24,206 987,363
Best Buy Co., Inc. 17,816 1,055,063
Circuit City Stores-Circuit
City Group 64,606 1,049,848
CVS Corp. 23,151 1,006,142
</Table>
See Notes to Financial Statements.
15
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
Lowe's Cos., Inc. 17,760 $ 999,533
Office Depot, Inc.* 63,784 1,032,663
RadioShack Corp. 33,725 1,009,389
Staples, Inc. 32,521 967,175
Tiffany & Co. 30,057 881,572
Toys "R" Us, Inc.* 55,486 999,303
Walgreen Co. 25,652 920,650
---------------
TOTAL RETAIL - SPECIALTY STORES 10,908,701
---------------
RETAIL AND WHOLESALE DISTRIBUTION 0.6%
Genuine Parts Co. 25,010 997,649
SYSCO Corp. 30,359 979,685
W.W. Grainger, Inc. 16,931 991,987
---------------
TOTAL RETAIL AND WHOLESALE
DISTRIBUTION 2,969,321
---------------
TELECOMMUNICATIONS 4.4%
ADC Telecommunications,
Inc.* 495,301 1,094,616
ALLTEL Corp. 17,185 943,972
Andrew Corp.* 79,848 1,116,276
AT&T Corp. 60,567 1,036,301
Avaya, Inc.* 66,129 952,258
BellSouth Corp. 34,292 914,568
Broadcom Corp.,
Class A* 32,947 891,216
CenturyTel, Inc. 27,933 896,370
Citizens Communications
Co.* 72,705 974,247
Comverse Technology,
Inc.* 51,292 1,058,667
Corning, Inc.* 84,385 966,208
JDS Uniphase Corp.* 272,485 863,777
Lucent Technologies,
Inc.* 290,812 1,032,383
Motorola, Inc. 55,907 964,955
Nextel Communications,
Inc.* 39,709 1,051,891
QUALCOMM, Inc. 24,490 1,023,927
Qwest Communications
International, Inc.* 299,043 1,022,727
SBC Communications,
Inc. 35,913 907,162
Scientific-Atlanta, Inc. 36,439 $ 998,064
Sprint Corp.
(FON Group) 46,613 976,542
Tellabs, Inc.* 98,035 784,280
Verizon Communications,
Inc. 23,444 916,660
---------------
TOTAL TELECOMMUNICATIONS 21,387,067
---------------
TIRE AND RUBBER 0.4%
Cooper Tire & Rubber Co. 45,586 888,015
The Goodyear Tire &
Rubber Co.* 86,684 873,775
---------------
TOTAL TIRE AND RUBBER 1,761,790
---------------
TOBACCO 0.2%
Reynolds American, Inc. 13,137 904,614
---------------
TOTAL TOBACCO 904,614
---------------
TOOLS AND INSTRUMENTS 1.2%
Millipore Corp.* 19,428 893,494
PerkinElmer, Inc. 52,132 1,070,791
Snap-on, Inc. 29,379 863,155
The Black & Decker
Corp. 12,872 1,033,364
The Stanley Works 21,942 976,858
Thermo Electron Corp.* 33,745 978,605
---------------
TOTAL TOOLS AND INSTRUMENTS 5,816,267
---------------
TRANSPORTATION 1.5%
Burlington Northern
Santa Fe Corp. 25,299 1,057,751
CSX Corp. 28,234 1,030,541
FedEx Corp. 10,796 983,732
Norfolk Southern Corp. 32,303 1,096,686
Ryder System, Inc. 20,312 1,017,631
Union Pacific Corp. 16,048 1,010,543
United Parcel Service,
Inc., Class B 12,670 1,003,211
---------------
TOTAL TRANSPORTATION 7,200,095
---------------
TRAVEL SERVICES 0.4%
Carnival Corp. 19,681 995,071
Sabre Holdings Corp. 40,635 874,059
---------------
TOTAL TRAVEL SERVICES 1,869,130
---------------
</Table>
See Notes to Financial Statements.
16
<Page>
<Table>
<Caption>
MARKET
SHARES VALUE
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
UTILITIES - GAS AND ELECTRIC 6.1%
Allegheny Energy, Inc. 62,441 $ 1,143,295
Ameren Corp. 20,348 976,704
American Electric Power
Co., Inc. 28,960 953,653
Calpine Corp.* 253,590 631,439
CenterPoint Energy, Inc. 89,123 936,683
Cinergy Corp. 23,603 932,791
CMS Energy Corp.* 99,470 931,039
Consolidated Edison,
Inc. 22,372 972,063
Constellation Energy
Group, Inc. 23,479 953,717
Dominion Resources,
Inc. 14,637 941,452
DTE Energy Co. 23,117 987,327
Duke Energy Corp. 42,872 1,051,650
Edison International* 35,599 1,085,770
Entergy Corp. 15,670 1,024,191
Exelon Corp. 25,571 1,013,123
FirstEnergy Corp. 22,826 943,399
FPL Group, Inc. 13,996 964,324
KeySpan Corp. 24,164 965,352
Kinder Morgan, Inc. 15,302 984,990
NiSource, Inc. 44,024 944,315
PG&E Corp.* 31,837 1,020,057
Pinnacle West Capital
Corp. 22,760 970,031
PPL Corp. 20,218 1,051,336
Progress Energy, Inc. 21,884 903,809
Public Service Enterprise
Group, Inc. 22,850 973,182
TECO Energy, Inc. 70,130 981,820
The AES Corp.* 91,702 999,552
The Southern Co. 31,247 987,093
TXU Corp. 20,584 1,260,151
Xcel Energy, Inc. 54,877 938,397
---------------
TOTAL UTILITIES - GAS AND
ELECTRIC 29,422,705
---------------
WASTE MANAGEMENT 0.4%
Allied Waste Industries,
Inc.* 99,371 $ 810,867
Waste Management,
Inc. 34,683 987,772
---------------
TOTAL WASTE MANAGEMENT 1,798,639
---------------
TOTAL INVESTMENTS
(Cost $463,947,681)--99.8% 484,884,213
Other Assets Less
Liabilities--0.2% 752,077
---------------
NET ASSETS--100.0% $ 485,636,290
===============
</Table>
* Non-Income Producing Security
See Notes to Financial Statements.
17
<Page>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004
<Table>
ASSETS
Investments at Market Value, (Cost $463,947,681) $ 484,884,213
Cash 431,547
Receivables:
Capital Stock Sold 14,220,396
Dividends 454,711
---------------
TOTAL ASSETS 499,990,867
---------------
LIABILITIES
Payables:
Investments Purchased 14,206,578
Accrued Management Fees 147,999
---------------
TOTAL LIABILITIES 14,354,577
---------------
NET ASSETS $ 485,636,290
===============
NET ASSETS CONSIST OF
Paid-in Capital $ 465,111,307
Undistributed Net Investment Income 314,137
Accumulated Net Realized Loss on Investments (725,686)
Net Unrealized Appreciation on Investments 20,936,532
---------------
NET ASSETS $ 485,636,290
===============
Shares Outstanding (Unlimited Shares Authorized), No Par Value 3,401,000
===============
Net Asset Value, Offering Price and Repurchase Price Per Share $ 142.79
===============
</Table>
See Notes to Financial Statements.
18
<Page>
STATEMENT OF OPERATIONS
<Table>
<Caption>
YEAR ENDED
OCTOBER 31, 2004
----------------
INVESTMENT INCOME
Dividends $ 4,588,321
Interest 92
---------------
Total Income 4,588,413
---------------
EXPENSES
Management Fee 1,230,944
---------------
Net Investment Income 3,357,469
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) From:
Investments (390,877)
In-kind Redemptions 26,958,645
---------------
Net Realized Gain 26,567,768
Net Change in Unrealized Appreciation/Depreciation on Investments 2,736,534
---------------
Net Realized and Unrealized Gain on Investments 29,304,302
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 32,661,771
===============
</Table>
See Notes to Financial Statements.
19
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD
APRIL 24, 2003*
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS
Net Investment Income $ 3,357,469 $ 846,403
Net Realized Gain 26,567,768 10,854,018
Net Change in Unrealized Appreciation/
Depreciation on Investments 2,736,534 18,199,998
--------------- ---------------
Net Increase in Net Assets Resulting From Operations 32,661,771 29,900,419
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (3,196,596) (679,052)
--------------- ---------------
SHAREHOLDER TRANSACTIONS
Proceeds From Shares Sold 423,777,066 202,657,673
Value of Shares Repurchased (144,741,249) (54,743,742)
--------------- ---------------
Net Increase in Net Assets Resulting From
Share Transactions 279,035,817 147,913,931
--------------- ---------------
Increase in Net Assets 308,500,992 177,135,298
NET ASSETS--BEGINNING OF PERIOD 177,135,298 --
--------------- ---------------
NET ASSETS--END OF PERIOD $ 485,636,290 $ 177,135,298
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares Sold 3,050,000 1,851,000
Shares Repurchased (1,050,000) (450,000)
Shares Outstanding, Beginning of Period 1,401,000 --
--------------- ---------------
Shares Outstanding, End of Period 3,401,000 1,401,000
=============== ===============
</Table>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
See Notes to Financial Statements.
20
<Page>
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
FOR THE PERIOD
APRIL 24, 2003*
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE AT BEGINNING OF PERIOD $ 126.43 $ 101.03
--------------- ---------------
Net Investment Income** 1.48 0.70
Net Realized and Unrealized Gain on Investments 16.30 25.32
--------------- ---------------
TOTAL FROM INVESTMENT OPERATIONS 17.78 26.02
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (1.42) (0.62)
--------------- ---------------
NET ASSET VALUE AT END OF PERIOD $ 142.79 $ 126.43
=============== ===============
TOTAL RETURN*** 14.11% 25.77%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at End of Period (000's omitted) $ 485,636 $ 177,135
RATIO TO AVERAGE NET ASSETS OF:
Expenses 0.40% 0.40%****
Net Investment Income 1.09% 1.13%****
Portfolio Turnover Rate+ 55% 42%
</Table>
* COMMENCEMENT OF INVESTMENT OPERATIONS.
** BASED ON AVERAGE SHARES OUTSTANDING.
*** TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING AN INITIAL INVESTMENT MADE
AT THE NET ASSET 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. TRANSACTION FEES ARE NOT
REFLECTED IN THE CALCULATION OF TOTAL INVESTMENT RETURN. TOTAL INVESTMENT
RETURN CALCULATED FOR A PERIOD OF LESS THAN ONE YEAR IS NOT ANNUALIZED.
**** ANNUALIZED.
+ PORTFOLIO TURNOVER IS NOT ANNUALIZED AND DOES NOT INCLUDE SECURITIES
RECEIVED OR DELIVERED FROM PROCESSING CREATIONS OR REDEMPTIONS.
See Notes to Financial Statements.
21
<Page>
NOTES TO FINANCIAL STATEMENTS October 31, 2004
1. ORGANIZATION
Rydex ETF Trust (the "Trust") is an open-end, diversified, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Trust was organized as a Delaware statutory trust on November
22, 2002 and commenced operations on April 24, 2003. The Trust currently
consists of one series, Rydex S&P Equal Weight ETF (the "Fund").
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 is not 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.
The Fund issues and redeems shares on a continuous basis, at net asset value,
only in aggregations of 50,000 shares called a "Creation Unit". Creation Units
are issued and redeemed principally in-kind for securities included in the
Underlying Index.
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 service 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
22
<Page>
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.
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. SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are recorded on the trade date. Realized gains and losses
from portfolio fund transactions are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
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 upon
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, 2004, the Fund
had not entered into any futures or options transactions.
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.
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 Rydex Investments, which acts as the
Fund's investment adviser (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
23
<Page>
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. For the year ended October 31, 2004, the Fund had not engaged in
repurchase transactions.
E. FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute all of the
taxable income to the shareholders within the allowable time limits. 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, income reclassifications from real estate
investment trusts, futures and options, losses deferred due to wash sales and
excise tax regulations.
For the year ended October 31, 2004, the Fund realized net capital gains
resulting from in-kind redemptions and other transactions. Because gains from
in-kind redemptions 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 asset value per share. The
in-kind gains for the year ended October 31, 2004 are disclosed in the Fund's
Statement of Operations.
In order to present paid-in-capital, undistributed net investment income and
accumulated net realized losses on investments on the statement of assets and
liabilities that more closely represent their tax character, certain adjustments
have been made to paid-in-capital, undistributed net investment income and
accumulated net realized losses on investments. For the year ended October 31,
2004, the adjustments were to increase paid-in capital by $26,946,208, and to
decrease accumulated net realized gain on investments by $26,946,208 due to the
difference in the treatment for book and tax purposes of in-kind redemptions.
For federal income tax purposes, the Fund has a capital loss carryforward of
$272,281, which expires October 31, 2011. Capital loss carryforwards are
available to offset future capital gains, if any. During the current fiscal year
the Fund utilized capital loss carryforwards of $56,771, to offset current year
realized gains.
24
<Page>
The tax character of distributable earnings at October 31, 2004 were as follows:
<Table>
Net Unrealized Appreciation 20,483,127
Undistributed Ordinary Income 314,137
Undistributed Long-term Capital Gains --
Capital Loss Carryforwards (272,281)
Paid-in Capital 465,111,307
-----------
Net Assets 485,636,290
===========
</Table>
The tax character of distributions paid during 2004 were as follows:
<Table>
Ordinary Income 3,196,596
Long-term Capital Gain --
Return of Capital --
-----------
Total Distributions 3,196,596
===========
Tax Cost Basis of Securities 464,401,086
===========
Gross Tax Unrealized Appreciation 34,531,004
Gross Tax Unrealized Depreciation (14,047,877)
-----------
Net Tax Unrealized Appreciation on Investments 20,483,127
===========
</Table>
F. DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends from net investment income and distributes
from net realized capital gains at least annually.
3. ADVISORY, ADMINISTRATION AND OTHER TRANSACTIONS WITH AFFILIATES
The Advisor determines the composition of the portfolio of securities that must
be delivered in exchange for the issuance of Creation Units and periodically
adjusts the composition of the portfolio of the Fund 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, The Bank of New York (the "Administrator")
provides various administrative and accounting services for the maintenance and
operations of the Fund. 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 pays all expenses of the Fund, including the cost of transfer
agency, custody, fund administration, legal, audit and other services except
interest, taxes, brokerage
25
<Page>
commissions, and other 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 1940 Act. The Distributor will, in turn,
pay the Service Provider out of its fees. No such fee is currently charged to
the Fund.
4. CAPITAL
At October 31, 2004, there were an unlimited number of no par value shares of
beneficial interest authorized. 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 $449,781,434 and
$171,136,355, respectively, for the year ended October 31, 2004. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended October 31, 2004.
At October 31, 2004, gross unrealized appreciation of investments was
$34,531,004 and gross unrealized depreciation of investments was $14,047,877,
resulting in net unrealized appreciation of $20,483,127 based on cost for U.S.
Federal income tax purposes.
26
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 The Rydex S&P Equal Weight ETF (the
"Fund") at October 31, 2004, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods indicated, 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 audits. We conducted our
audits of these financial statements 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 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 audits, which included
confirmation of securities at October 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 28, 2004
27
<Page>
SUPPLEMENTAL INFORMATION (Unaudited)
FEDERAL INCOME TAX INFORMATION
100% of investment income (dividend income plus short-term gains, if any)
qualifies for the dividends-received deduction and as qualified dividend income.
In January 2005, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV
as to the federal tax status of the distributions received by you in the
calendar year 2004.
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.
TRUSTEES
CARL G. VERBONCOEUR (51)
Trustee of Rydex Series Funds, 2004 to present; Trustee of Rydex Variable
Trust, 2004 to present; Trustee of Rydex Dynamic Funds, 2004 to present;
Trustee of Rydex ETF Trust, 2004 to present; President, Chief Executive
Officer and Treasurer of Rydex Variable Trust, 2003 to present; President and
Chief Executive Officer of Rydex Series Funds, 2003 to present; Treasurer of
Rydex Series Funds, 1997 to present; Vice President of Rydex Series Funds,
1997 to 2003; President and Chief Executive Officer of Rydex Variable Trust,
2003 to present; Treasurer of Rydex Variable Trust, 1998 to present; Vice
President Rydex Variable Trust, 1998 to 2003; Treasurer of Rydex Dynamic
Funds, 1999 to present; Vice President of Rydex Dynamic Funds, 1999 to 2003;
President and Chief Executive Officer of Rydex ETF Trust, 2003 to present.
Treasurer of Rydex ETF Trust, 2002 to 2003; Vice President of Rydex ETF
Trust, 2002 to 2003. Treasurer of Rydex Capital Partners SPhinX Fund, 2003 to
present. President and Chief Executive Officer of Rydex Fund Services, Inc.,
2003 to present; Executive Vice President of Rydex Fund Services, Inc., 2000
to 2003; President and Chief Executive Officer of Rydex Distributors, Inc.,
2003 to present; Executive Vice President of Rydex Distributors, Inc., 1997
to 2003; Executive Vice President of Rydex Capital Partners I, LLC.,
investment advisor, 2003 to present; Executive Vice President of Rydex
Capital Partners II, LLC., investment advisor, 2003 to present; Senior Vice
President, Crestar Bank, 1995 to 1997; Senior Vice President, Crestar Asset
Management Company, a registered investment advisor, 1993 to 1995; Vice
President of Perpetual Savings Bank, 1987 to 1993.
COREY A. COLEHOUR (58)
Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Trustee of Rydex ETF Trust, 2003 to present; Senior Vice President of
Marketing of Schield Management Company, a registered investment advisor,
1985 to present.
28
<Page>
J. KENNETH DALTON (63)
Trustee of Rydex Series Funds, 1995 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Trustee of Rydex ETF Trust, 2003 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 (64)
Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Trustee of Rydex ETF Trust, 2003 to present; Trustee, Rydex Capital Partners
SPhinX Fund, 2003 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.
PATRICK T. MCCARVILLE (61)
Trustee of Rydex Series Funds, 1997 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Trustee of Rydex ETF Trust, 2003 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 (59)
Trustee of Rydex Series Funds, 1993 to present; Trustee of Rydex Variable
Trust, 1998 to present; Trustee of Rydex Dynamic Funds, 1999 to present;
Trustee of Rydex ETF Trust, 2003 to present; President, Arrow Limousine, 1963
to present.
29
<Page>
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 Investments
ADMINISTRATOR
The Bank of New York
CUSTODIAN
The Bank of New York
TRANSFER AGENT
The Bank of New York
DISTRIBUTOR
Rydex Distributors, Inc.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
30
<Page>
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund's proxy voting policies and procedures is available,
without charge and upon request, by calling (800) 820-0888. This information is
also available on the Securities and Exchange Commission's ("Commission")
website at www.sec.gov.
Information regarding how the Fund voted proxies for portfolio securities, if
applicable, during the most recent 12-month period ended June 30, is also
available, without charge and upon request, by (i) calling (800) 820-0888; or
(ii) accessing the Fund's Form N-PX on the SEC's website at www.sec.gov.
QUARTERLY PORTFOLIOS
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's website at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
31
<Page>
This page intentionally left blank.
<Page>
[RYDEXINVESTMENTS LOGO]
ESSENTIAL FOR MODERN MARKETS(TM)
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 are 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.
While the members of the audit committee have many years of experience in
business and finance, including working with fund financial statements and
auditors, they do not feel that the background and experience of any single
member would meet the qualifications necessary to be a "financial expert" as
that term is defined by the Securities and Exchange Commission. Nonetheless, the
committee has determined that, together, its collective financial experience and
expertise makes an individual financial expert unnecessary at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)-(d) The aggregate Audit Fees billed by PricewaterhouseCoopers LLP ("PWC"),
the Trust's principal accountant, for the audit of the annual financial
statements in connection with statutory and regulatory filings for the fiscal
years ended October 31, 2004 and October 31, 2003 were $21,200 and $20,000,
respectively. The aggregate Tax Fees billed by PWC 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 October
31, 2004 and October 31, 2003 were $14,840 and $14,000, 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.
<Page>
(f)-(h) Not applicable
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. SCHEDULE OF INVESTMENTS.
The Schedule of Investments is included as a 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable
ITEM 10. CONTROLS AND PROCEDURES.
a) Based on their evaluation on December 28, 2004, 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 Investments ("RI"), 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 RI,
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 RI, 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 RI'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 RI's internal controls during the period covered
by this Form N-CSR, and
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no corrective actions with regard to significant deficiencies or material
weaknesses were taken by the Fund or the RI during such period.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics.
(a)(2) Certification of principal executive officer and principal financial
officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Certification of principal executive officer and principal financial
officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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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 ETF Trust
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By: /s/ Carl Verboncoeur
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Name: Carl Verboncoeur
Title: President
Date: December 28, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Carl Verboncoeur
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Name: Carl Verboncoeur
Title: President
Date: December 28, 2004
By: /s/ Nick Bonos
-----------------------------------------
Name: Nick Bonos
Title: Treasurer
Date: December 28, 2004