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- 02753 |
SBL Fund
(Exact name of registrant as specified in charter)
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Donald C. Cacciapaglia
SBL Fund
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
(Name and address of agent for service)
| Registrant's telephone number, including area code: | 1-301-296-5100 |
Date of fiscal year end: December 31
Date of reporting period: December 31, 2012
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.
Item 1. Reports to Stockholders.
SERIES A (LARGE CAP CORE SERIES)
SERIES B (LARGE CAP VALUE SERIES)
SERIES C (MONEY MARKET SERIES)
SERIES D (MSCI EAFE EQUAL WEIGHT SERIES)
SERIES E (U.S. INTERMEDIATE BOND SERIES)
SERIES J (MID CAP GROWTH SERIES)
SERIES N (MANAGED ASSET ALLOCATION SERIES)
SERIES O (ALL CAP VALUE SERIES)
SERIES P (HIGH YIELD SERIES)
SERIES Q (SMALL CAP VALUE SERIES)
SERIES V (MID CAP VALUE SERIES)
SERIES X (SMALL CAP GROWTH SERIES)
SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
460425800
This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Distributed by Guggenheim Distributors, LLC.
| TABLE OF CONTENTS |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 1 |
| December 31, 2012 |
Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for 14 of our variable insurance funds.
The Investment Adviser is a part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.
This report covers performance of the following Funds for the annual period ended December 31, 2012:
– Series A (Large Cap Core Series)
– Series B (Large Cap Value Series)
– Series C (Money Market Series)
– Series D (MSCI EAFE Equal Weight Series)
– Series E (U.S. Intermediate Bond Series)
– Series J (Mid Cap Growth Series)
– Series N (Managed Asset Allocation Series)
– Series O (All Cap Value Series)
– Series P (High Yield Series)
– Series Q (Small Cap Value Series)
– Series V (Mid Cap Value Series)
– Series X (Small Cap Growth Series)
– Series Y (Large Cap Concentrated Growth Series)
– Series Z (Alpha Opportunity Series)
Guggenheim Distributors, LLC is the distributor of the Funds. Guggenheim Distributors, LLC is affiliated with Guggenheim Partners, LLC and Security Investors, LLC.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Manager’s Commentary for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Donald C. Cacciapaglia
President
January 31, 2013
| 2 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| December 31, 2012 |
Read each fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
The Series Value and Growth Funds may not be suitable for all investors. • An investment in the Funds will fluctuate and is subject to investment risks, which means investors could lose money. • Value stocks are subject to the risk that the intrinsic value of the underlying stocks may never be realized by the market or that the stock’s price will decline in value. • Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing company. • Investments in small- and/or mid-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies.
The Series C (Money Market Series) may not be suitable for all investors. • An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. • It is possible to lose money by investing in the Fund. The principal risks of investing in the Fund are listed below. • The Fund could lose money if the issuer of a bond is unable to repay interest and principal on time or defaults. • The issuer of a bond could also suffer a decrease in quality rating, which would affect the volatility and liquidity of the bond. • Investments in fixed-income securities are subject to the possibility that interest rates could rise sharply, causing the value of the Fund’s securities and share price to decline. • Fixed income securities with longer durations are subject to more volatility than those with shorter durations. • Regulations of money market funds are evolving. • New regulations may affect negatively the Fund’s performance, yield and cost.
The Series D (MSCI EAFE Equal Weight Series) may not be suitable for all investors. • Investments in securities, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the fund may lose money. • Unlike many investment companies, the Fund is not actively “managed.” This means that, based on market and economic conditions, the Fund’s performance could be lower than other types of mutual funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline. • Noncorrelation risk refers to the risk that the advisor may not be able to cause the Fund’s performance to match or correlate to that of the Fund’s underlying index, either on a daily or aggregate basis. Noncorrelation risk may cause the Fund’s performance to be less than you expect. • The Fund’s investment in foreign instruments may be volatile due to the impact of diplomatic, political or economic developments on the country in question. Additionally, the Fund’s exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar. • The Fund’s use of futures contracts may be more volatile than direct investments in underlying securities, involve additional expenses and may involve a small initial investment relative to the risk assumed. • The Fund’s underlying index may be composed primarily of, or have significant exposure to, securities in a particular capitalization range, e.g., large-, mid- or small-cap securities. As a result, the Fund may be subject to the risk that the predominant capitalization range represented in the underlying index may underperform other segments of the equity market or the equity market as a whole. See the prospectus for more details.
The Series E (U.S. Intermediate Bond Series) may not be suitable for all investors. • The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. • The Fund’s exposure to high yield securities may subject the Fund to greater volatility. • The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. • The Fund may invest in foreign securities which carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • The Fund’s investments in restricted securities may involve financial and liquidity risk. • You may have a gain or loss when you sell your shares. • It is important to note that the Fund is not guaranteed by the U.S. government.
The Series N (Managed Asset Allocation Series) may not be suitable for all investors. • The value of an investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. The Fund could lose money if the issuer of a bond or a counterparty to a derivatives transaction or other transaction is unable to repay interest and principal on time or defaults. The issuer of a bond could also suffer a decrease in quality rating, which would affect the volatility and liquidity of the bond. Derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including the risk that the Fund will be unable to sell, unwind or value the derivative because of an illiquid market, the risk that the derivative is not well correlated with underlying investments or the Fund’s other portfolio holdings, and the risk that the counterparty is unwilling or unable to meet its obligation. The use of derivatives by the Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. Furthermore, if the Investment Manager is incorrect about its expectations of market conditions, the use of derivatives could result in a loss, which in some cases may be unlimited. Foreign securities carry additional risks when compared to U.S. securities, including currency fluctuations, adverse political and economic developments, unreliable or untimely information, less liquidity, limited legal recourse and higher transactional costs. The Investment Manager may not be able to cause certain of the underlying funds’ performance to match or correlate to that of the underlying funds’ respective underlying index or benchmark, either on a daily or aggregate basis. Factors such as underlying fund expenses, imperfect correlation between an underlying fund’s investments and those of its underlying index or underlying benchmark, rounding of share prices, changes to the composition of the underlying index or underlying benchmark, regulatory policies, high portfolio turnover rate, and the use of leverage all contribute to tracking error. Tracking error may cause an underlying fund’s and, thus the Fund’s, performance to be less than you expect.
The Series P (High Yield Series) may not be suitable for all investors. • The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. • The Fund’s exposure to high yield securities may subject the Fund to greater volatility. • The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. • The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile than if it had not been leveraged. • The Fund may invest in foreign securities which carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. • The Fund’s investments in restricted securities may involve financial and liquidity risk. • You may have a gain or loss when you sell your shares. • It is important to note that the Fund is not guaranteed by the U.S. government.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 3 |
| ECONOMIC AND MARKET OVERVIEW | December 31, 2012 |
The U.S. economy is reaching “escape velocity,” powered by the monetary rocket fuel from central banks around the world. Almost every domestic economic indicator is now positive and the economic backdrop is stronger than it has been in the last seven years.
Markets have now begun focusing on the U.S. debt ceiling debate, following Congress’ New Year’s reprieve on the Fiscal Cliff. Despite the uncertainty created by political partisanship in Washington, the strength of recent U.S. economic data demonstrates the resilience of the current U.S. economic expansion, including improvements in industrial production, initial jobless claims, third quarter GDP and continued recovery in the housing market. Investors can expect a continuation of the themes that have dominated the environment since the recovery began: tighter credit spreads, low interest rates, improving employment, modest inflation, and sustained economic growth.
Although Europe remains in a recession, more importantly, the political process towards fiscal unity appears to be underway with the initial steps taken towards the creation of a banking union. This has, for the time being, eliminated the worst-case scenario – an unwinding of the European Union. As the structural outlook in Europe improves, albeit at a glacial pace, tail risk, the possibility that an unlikely event will occur and cause a very large loss, is significantly mitigated. In China, along with the transition in political leadership, there are positive signs that the country may also have passed the bottom in the economic cycle, which could also be good news for emerging markets.
For the 12-month period ended December 31, 2012, the Standard & Poor’s 500 (“S&P 500”) Index*, which is generally regarded as an indicator of the broad U.S. stock market, returned 16.00%. Foreign markets were even stronger: the Morgan Stanley Capital International (“MSCI”) Europe-Australasia-Far East (“EAFE”) Index*, which is composed of approximately 1,100 companies in 20 developed countries in Europe and the Pacific Basin, returned 17.32%. The return of the MSCI Emerging Markets Index*, which measures market performance in global emerging markets, was 21.93%.
In the bond market, higher quality issues underperformed lower-rated bonds, as investors embraced risk. The Barclays U.S. Aggregate Bond Index*, which is a proxy for the U.S. investment grade bond market, posted a 4.21% return for the period, while the Barclays U.S. High Yield Index* returned 15.81%. Reflecting the Fed’s continuing accommodative monetary policy, interest rates on short-term securities remained at their lowest levels in many years; the return of the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.11% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| 4 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| ECONOMIC AND MARKET OVERVIEW (concluded) | December 31, 2012 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Barclays U.S. High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.
Barclays U.S. Intermediate Government/Credit Bond® Index measures the performance of U.S. Dollar denominated U.S. Treasuries, government-related and investment grade U.S. corporate securities that have a remaining maturity of greater than one year and less than ten years.
Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI EAFE Equal Weighted Index equally weights the issuers in the MSCI EAFE Index, which is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Equal Weighted Index is rebalanced quarterly so that each issuer has the same weight on each rebalancing date. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
S&P 500® Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
Russell 3000® Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.
Russell 2500® Value Index measures the performance of the small- to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values
Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth value.
Russell 1000® Value Index: A measure of the performance for the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.
Russell Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 5 |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
All mutual funds have operating expenses and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a Fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; and exchange fees; and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2012 and ending December 31, 2012.
The following tables illustrate a Fund’s costs in two ways:
Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
| 6 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded) |
| Beginning | Ending | Expenses | ||||||||||||||||||
| Expense | Fund | Account Value | Account Value | Paid During | ||||||||||||||||
| Ratio1,4 | Return | June 30, 2012 | December 31, 2012 | Period2 | ||||||||||||||||
| Table 1. Based on actual Fund return3 | ||||||||||||||||||||
| Series A (Large Cap Core Series) | 0.96 | % | 4.91 | % | $1,000.00 | $1,049.10 | $4.94 | |||||||||||||
| Series B (Large Cap Value Series) | 0.84 | % | 9.01 | % | 1,000.00 | 1,090.10 | 4.41 | |||||||||||||
| Series C (Money Market Series) | 0.73 | % | (0.22 | %) | 1,000.00 | 997.80 | 3.67 | |||||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 1.18 | % | 12.78 | % | 1,000.00 | 1,127.80 | 6.31 | |||||||||||||
| Series E (U.S. Intermediate Bond Series) | 0.81 | % | 3.73 | % | 1,000.00 | 1,037.30 | 4.15 | |||||||||||||
| Series J (Mid Cap Growth Series) | 0.95 | % | 5.78 | % | 1,000.00 | 1,057.80 | 4.91 | |||||||||||||
| Series N (Managed Asset Allocation Series) | 1.22 | % | 5.59 | % | 1,000.00 | 1,055.90 | 6.30 | |||||||||||||
| Series O (All Cap Value Series) | 0.91 | % | 9.60 | % | 1,000.00 | 1,096.00 | 4.79 | |||||||||||||
| Series P (High Yield Series) | 0.98 | % | 7.56 | % | 1,000.00 | 1,075.60 | 5.11 | |||||||||||||
| Series Q (Small Cap Value Series) | 1.16 | % | 10.74 | % | 1,000.00 | 1,107.40 | 6.14 | |||||||||||||
| Series V (Mid Cap Value Series) | 0.93 | % | 10.99 | % | 1,000.00 | 1,109.90 | 4.93 | |||||||||||||
| Series X (Small Cap Growth Series) | 1.16 | % | 4.82 | % | 1,000.00 | 1,048.20 | 5.97 | |||||||||||||
| Series Y (Large Cap Concentrated Growth Series) | 1.04 | % | 1.44 | % | 1,000.00 | 1,014.40 | 5.27 | |||||||||||||
| Series Z (Alpha Opportunity Series) | 2.23 | % | 6.48 | % | 1,000.00 | 1,064.80 | 11.57 | |||||||||||||
| Table 2. Based on hypothetical 5% return (before expenses) | ||||||||||||||||||||
| Series A (Large Cap Core Series) | 0.96 | % | 5.00 | % | $1,000.00 | $1,020.31 | $4.88 | |||||||||||||
| Series B (Large Cap Value Series) | 0.84 | % | 5.00 | % | 1,000.00 | 1,020.91 | 4.27 | |||||||||||||
| Series C (Money Market Series) | 0.73 | % | 5.00 | % | 1,000.00 | 1,021.47 | 3.71 | |||||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 1.18 | % | 5.00 | % | 1,000.00 | 1,019.20 | 5.99 | |||||||||||||
| Series E (U.S. Intermediate Bond Series) | 0.81 | % | 5.00 | % | 1,000.00 | 1,021.06 | 4.12 | |||||||||||||
| Series J (Mid Cap Growth Series) | 0.95 | % | 5.00 | % | 1,000.00 | 1,020.36 | 4.82 | |||||||||||||
| Series N (Managed Asset Allocation Series) | 1.22 | % | 5.00 | % | 1,000.00 | 1,019.00 | 6.19 | |||||||||||||
| Series O (All Cap Value Series) | 0.91 | % | 5.00 | % | 1,000.00 | 1,020.56 | 4.62 | |||||||||||||
| Series P (High Yield Series) | 0.98 | % | 5.00 | % | 1,000.00 | 1,020.21 | 4.98 | |||||||||||||
| Series Q (Small Cap Value Series) | 1.16 | % | 5.00 | % | 1,000.00 | 1,019.30 | 5.89 | |||||||||||||
| Series V (Mid Cap Value Series) | 0.93 | % | 5.00 | % | 1,000.00 | 1,020.46 | 4.72 | |||||||||||||
| Series X (Small Cap Growth Series) | 1.16 | % | 5.00 | % | 1,000.00 | 1,019.30 | 5.89 | |||||||||||||
| Series Y (Large Cap Concentrated Growth Series) | 1.04 | % | 5.00 | % | 1,000.00 | 1,019.91 | 5.28 | |||||||||||||
| Series Z (Alpha Opportunity Series) | 2.23 | % | 5.00 | % | 1,000.00 | 1,013.93 | 11.29 | |||||||||||||
| 1 | Annualized and excludes expenses of the underlying funds in which the Funds invest. |
| 2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
| 3 | Actual cumulative return at net asset value for the period June 30, 2012 to December 31, 2012. |
| 4 | This ratio represents annualized net expenses which includes dividends on short sales and prime broker interest expense. Excluding these expenses, the operating expense ratio would be 0.03% lower in Series Z (Alpha Opportunity Series). |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 7 |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders
For the fiscal year ended December 31, 2012, the Series A (Large Cap Core Series) returned 13.04%, while the benchmark, the S&P 500® Index, gained 16.00%. The Fund pursues its objective by investing 50% of its total assets according to a large cap growth strategy and approximately 50% to a large cap value strategy. The managers rebalance if either strategy equals or exceeds 60% of total assets. The managers use a blended approach, investing in growth stocks and value stocks, and may invest in a limited number of industries and sectors.
The large cap growth manager chooses growth-oriented companies through a combination of a qualitative top-down approach in reviewing growth trends that are based on several fixed-income factors, along with a quantitative fundamental bottom-up approach. The large cap value manager chooses securities of companies that appear to be undervalued relative to assets, growth potential and cash flow. The managers sell a security when the reasons for buying it no longer apply or when the company begins to show deteriorating fundamentals or poor performance.
Poor stock selection, particularly in the Financials and Health Care sectors, was the main reason for the underperformance relative to the benchmark. These effects were partially offset by good stock selection in the Consumer Discretionary sector and by both stock selection and an underweight in the Utilities sector.
The holdings contributing most to return were Apple, Inc. and Wells Fargo & Co. Leading detractors from performance were Caterpillar, Inc. and Hewlett-Packard Co.
From the growth perspective, our fixed income indicators, including the slope of the yield curve and corporate bond spreads, continue to point to a modest economic environment but a decent risk environment. Strong corporate debt issuance, coupled with historically tight bond spreads, confirms a healthy risk appetite with fixed-income markets, which we believe is a leading indicator of the risk environment for equities. We will focus our attention on secular growth names in the year to come, with an eye towards more cyclical names if the global economy can find firmer footing.
In the value side of the portfolio, we remain focused on searching for companies we think have good long-term fundamental prospects and attractive valuations that are likely to generate strong performance relative to the broader market, regardless of macroeconomic events.
We appreciate your business and the trust you place in us.
Sincerely,
Mark Bronzo, CFA, Portfolio Manager
Mark A. Mitchell, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| 8 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES A (LARGE CAP CORE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series A (Large Cap Core Series) | 13.04 | % | 0.52 | % | 4.20 | % | ||||||
| S&P 500 Index | 16.00 | % | 1.66 | % | 7.10 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Date: May 1, 1979 | ||||
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 4.1 | % | ||
| Financial Select Sector SPDR Fund | 2.3 | % | ||
| JPMorgan Chase & Co. | 2.3 | % | ||
| Mondelez International, Inc. — Class A | 2.2 | % | ||
| Health Care Select Sector SPDR Fund | 2.1 | % | ||
| Covidien plc | 2.1 | % | ||
| Wells Fargo & Co. | 1.9 | % | ||
| Aetna, Inc. | 1.9 | % | ||
| Google, Inc. — Class A | 1.9 | % | ||
| Chevron Corp. | 1.8 | % | ||
| Top Ten Total | 22.6 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 9 |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES A (LARGE CAP CORE SERIES) |
| Shares | Value | |||||||
| COMMON STOCKS† - 89.1% | ||||||||
| Information Technology - 20.1% | ||||||||
| Apple, Inc. | 15,295 | $ | 8,152,693 | |||||
| Google, Inc. — Class A* | 5,235 | 3,713,552 | ||||||
| International Business Machines Corp. | 17,250 | 3,304,238 | ||||||
| Microsoft Corp. | 121,530 | 3,248,497 | ||||||
| eBay, Inc.* | 63,650 | 3,247,423 | ||||||
| Computer Sciences Corp. | 75,010 | 3,004,151 | ||||||
| Oracle Corp. | 89,550 | 2,983,806 | ||||||
| TE Connectivity Ltd. | 77,700 | 2,884,224 | ||||||
| EMC Corp.* | 107,650 | 2,723,545 | ||||||
| Broadcom Corp. — Class A | 63,080 | 2,094,887 | ||||||
| Cisco Systems, Inc. | 102,700 | 2,018,055 | ||||||
| Hewlett-Packard Co. | 74,214 | 1,057,549 | ||||||
| NetApp, Inc.* | 22,270 | 747,159 | ||||||
| Euronet Worldwide, Inc.* | 20,642 | 487,151 | ||||||
| Mercury Systems, Inc.* | 23,080 | 212,336 | ||||||
| Total Information Technology | 39,879,266 | |||||||
| Consumer Discretionary - 13.2% | ||||||||
| Time Warner, Inc. | 69,400 | 3,319,401 | ||||||
| Starbucks Corp. | 60,450 | 3,241,329 | ||||||
| TJX Companies, Inc. | 75,650 | 3,211,343 | ||||||
| Comcast Corp. — Class A | 84,800 | 3,169,824 | ||||||
| Home Depot, Inc. | 50,800 | 3,141,980 | ||||||
| Walt Disney Co. | 61,842 | 3,079,113 | ||||||
| BorgWarner, Inc.* | 33,350 | 2,388,527 | ||||||
| Wynn Resorts Ltd. | 19,750 | 2,221,678 | ||||||
| Lowe’s Companies, Inc. | 50,390 | 1,789,853 | ||||||
| DeVry, Inc. | 27,900 | 662,067 | ||||||
| Total Consumer Discretionary | 26,225,115 | |||||||
| Financials - 12.3% | ||||||||
| JPMorgan Chase & Co. | 101,836 | 4,477,729 | ||||||
| Wells Fargo & Co. | 109,404 | 3,739,428 | ||||||
| Aon plc | 51,190 | 2,846,164 | ||||||
| Berkshire Hathaway, Inc. — Class A* | 19 | 2,547,140 | ||||||
| American International Group, Inc.* | 67,730 | 2,390,869 | ||||||
| Allstate Corp. | 48,400 | 1,944,228 | ||||||
| State Street Corp. | 40,100 | 1,885,101 | ||||||
| U.S. Bancorp | 55,658 | 1,777,717 | ||||||
| BB&T Corp. | 49,017 | 1,426,885 | ||||||
| Reinsurance Group of America, Inc. — | ||||||||
| Class A | 17,460 | 934,459 | ||||||
| Citigroup, Inc. | 12,280 | 485,797 | ||||||
| Total Financials | 24,455,517 | |||||||
| Energy - 11.3% | ||||||||
| Chevron Corp. | 33,800 | 3,655,132 | ||||||
| Ensco plc — Class A | 47,450 | 2,812,836 | ||||||
| Schlumberger Ltd. | 38,500 | 2,667,665 | ||||||
| Williams Companies, Inc. | 78,900 | 2,583,186 | ||||||
| McDermott International, Inc.* | 214,160 | 2,360,043 | ||||||
| Apache Corp. | 22,405 | 1,758,792 | ||||||
| Halliburton Co. | 46,300 | 1,606,147 | ||||||
| Exxon Mobil Corp. | 16,530 | 1,430,672 | ||||||
| ConocoPhillips | 19,000 | 1,101,810 | ||||||
| Whiting Petroleum Corp.* | 20,310 | 880,845 | ||||||
| Chesapeake Energy Corp. | 42,300 | 703,026 | ||||||
| Phillips 66 | 9,500 | 504,450 | ||||||
| WPX Energy, Inc.* | 29,566 | 439,942 | ||||||
| Total Energy | 22,504,546 | |||||||
| Industrials - 11.2% | ||||||||
| Honeywell International, Inc. | 44,000 | 2,792,679 | ||||||
| Deere & Co. | 31,450 | 2,717,909 | ||||||
| AMETEK, Inc. | 65,675 | 2,467,410 | ||||||
| URS Corp. | 62,160 | 2,440,402 | ||||||
| Boeing Co. | 29,780 | 2,244,221 | ||||||
| Republic Services, Inc. — Class A | 73,900 | 2,167,487 | ||||||
| United Technologies Corp. | 24,700 | 2,025,647 | ||||||
| Quanta Services, Inc.* | 67,890 | 1,852,718 | ||||||
| Equifax, Inc. | 34,180 | 1,849,822 | ||||||
| Parker Hannifin Corp. | 19,050 | 1,620,393 | ||||||
| Total Industrials | 22,178,688 | |||||||
| Health Care - 8.9% | ||||||||
| Covidien plc | 73,020 | 4,216,174 | ||||||
| Aetna, Inc. | 80,400 | 3,722,520 | ||||||
| Abbott Laboratories | 32,600 | 2,135,300 | ||||||
| Gilead Sciences, Inc.* | 29,038 | 2,132,841 | ||||||
| Biogen Idec, Inc.* | 11,550 | 1,694,039 | ||||||
| Forest Laboratories, Inc.* | 41,400 | 1,462,248 | ||||||
| UnitedHealth Group, Inc. | 24,200 | 1,312,608 | ||||||
| Teva Pharmaceutical Industries Ltd. ADR | 24,850 | 927,899 | ||||||
| Total Health Care | 17,603,629 | |||||||
| Consumer Staples - 7.8% | ||||||||
| Mondelez International, Inc. — Class A | 173,700 | 4,424,139 | ||||||
| Coca-Cola Co. | 87,700 | 3,179,125 | ||||||
| CVS Caremark Corp. | 53,050 | 2,564,968 | ||||||
| JM Smucker Co. | 24,300 | 2,095,632 | ||||||
| Wal-Mart Stores, Inc. | 29,780 | 2,031,889 | ||||||
| Kraft Foods Group, Inc. | 17,066 | 775,991 | ||||||
| Costco Wholesale Corp. | 4,770 | 471,133 | ||||||
| Total Consumer Staples | 15,542,877 | |||||||
| 10 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES A (LARGE CAP CORE SERIES) |
| Shares | Value | |||||||
| Materials - 2.3% | ||||||||
| Dow Chemical Co. | 76,950 | $ | 2,487,024 | |||||
| CF Industries Holdings, Inc. | 10,350 | 2,102,706 | ||||||
| Total Materials | 4,589,730 | |||||||
| Utilities - 1.6% | ||||||||
| Edison International | 72,000 | 3,253,680 | ||||||
| Telecommunication Services - 0.4% | ||||||||
| Windstream Corp. | 89,400 | 740,232 | ||||||
| Total Common Stocks | ||||||||
| (Cost $156,659,980) | 176,973,280 | |||||||
| EXCHANGE TRADED FUNDS† - 7.8% | ||||||||
| Financial Select Sector SPDR Fund | 279,300 | 4,580,520 | ||||||
| Health Care Select Sector SPDR Fund | 106,600 | 4,258,670 | ||||||
| Materials Select Sector SPDR Fund | 62,050 | 2,329,357 | ||||||
| Industrial Select Sector SPDR Fund | 59,450 | 2,253,155 | ||||||
| Consumer Staples Select Sector | ||||||||
| SPDR Fund | 59,400 | 2,068,902 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $15,271,509) | 15,490,604 | |||||||
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,1 - 2.1% | ||||||||
| UMB Financial Corp. | ||||||||
| issued 12/31/12 at 0.07% | ||||||||
| due 01/02/13 | $ | 4,142,000 | $ | 4,142,000 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $4,142,000) | 4,142,000 | |||||||
| Total Investments - 99.0% | ||||||||
| (Cost $176,073,489) | $ | 196,605,884 | ||||||
| Other Assets & Liabilities, net - 1.0% | 2,009,223 | |||||||
| Total Net Assets - 100.0% | $ | 198,615,107 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreement — See Note 5. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 11 |
| SERIES A (LARGE CAP CORE SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $171,931,489) | $ | 192,463,884 | ||
| Repurchase agreements, at value | ||||
| (cost $4,142,000) | 4,142,000 | |||
| Total investments | ||||
| (cost $176,073,489) | 196,605,884 | |||
| Cash | 1,603,724 | |||
| Prepaid expenses | 4,756 | |||
| Receivables: | ||||
| Securities sold | 372,619 | |||
| Dividends | 304,815 | |||
| Fund shares sold | 4,585 | |||
| Interest | 8 | |||
| Total assets | 198,896,391 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Management fees | 126,300 | |||
| Fund shares redeemed | 73,685 | |||
| Fund accounting/administration fees | 15,998 | |||
| Transfer agent/maintenance fees | 5,592 | |||
| Directors’ fees* | 535 | |||
| Miscellaneous | 59,174 | |||
| Total liabilities | 281,284 | |||
| Net assets | $ | 198,615,107 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 218,405,358 | ||
| Undistributed net investment income | 1,952,226 | |||
| Accumulated net realized loss on investments | (42,274,872 | ) | ||
| Net unrealized appreciation on investments | 20,532,395 | |||
| Net assets | $ | 198,615,107 | ||
| Capital shares outstanding | 7,873,905 | |||
| Net asset value per share | $ | 25.22 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Dividends | $ | 3,933,710 | ||
| Interest | 1,519 | |||
| Total investment income | 3,935,229 | |||
| Expenses: | ||||
| Management fees | 1,583,420 | |||
| Transfer agent/maintenance fees | 26,593 | |||
| Fund accounting/administration fees | 200,564 | |||
| Directors’ fees* | 23,885 | |||
| Custodian fees | 11,060 | |||
| Miscellaneous | 137,481 | |||
| Total expenses | 1,983,003 | |||
| Net investment income | 1,952,226 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 13,722,503 | |||
| Net realized gain | 13,722,503 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 10,476,312 | |||
| Net change in unrealized appreciation (depreciation) | 10,476,312 | |||
| Net realized and unrealized gain | 24,198,815 | |||
| Net increase in net assets resulting from operations | $ | 26,151,041 |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 12 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES A (LARGE CAP CORE SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,952,226 | $ | 1,309,773 | ||||
| Net realized gain on investments | 13,722,503 | 6,657,049 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 10,476,312 | (16,841,599 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 26,151,041 | (8,874,777 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 8,284,929 | 13,965,682 | ||||||
| Cost of shares redeemed | (42,815,935 | ) | (41,915,795 | ) | ||||
| Net decrease from capital share transactions | (34,531,006 | ) | (27,950,113 | ) | ||||
| Net decrease in net assets | (8,379,965 | ) | (36,824,890 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 206,995,072 | 243,819,962 | ||||||
| End of year | $ | 198,615,107 | $ | 206,995,072 | ||||
| Undistributed net investment income at end of year | $ | 1,952,226 | $ | 1,309,773 | ||||
| Capital share activity: | ||||||||
| Shares sold | 335,217 | 602,805 | ||||||
| Shares redeemed | (1,738,927 | ) | (1,815,320 | ) | ||||
| Net decrease in shares | (1,403,710 | ) | (1,212,515 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 13 |
| SERIES A (LARGE CAP CORE SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 22.31 | $ | 23.24 | $ | 19.97 | $ | 15.38 | $ | 24.57 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .23 | .13 | .18 | .11 | .14 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.68 | (1.06 | ) | 3.09 | 4.48 | (9.33 | ) | |||||||||||||
| Total from investment operations | 2.91 | (.93 | ) | 3.27 | 4.59 | (9.19 | ) | |||||||||||||
| Net asset value, end of period | $ | 25.22 | $ | 22.31 | $ | 23.24 | $ | 19.97 | $ | 15.38 | ||||||||||
| Total Returnb | 13.04 | % | (4.00 | %) | 16.37 | % | 29.84 | % | (37.40 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 198,615 | $ | 206,995 | $ | 243,820 | $ | 186,007 | $ | 165,109 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 0.92 | % | 0.57 | % | 0.89 | % | 0.68 | % | 0.66 | % | ||||||||||
| Total expensesc | 0.94 | % | 0.90 | % | 0.92 | % | 0.92 | % | 0.90 | % | ||||||||||
| Portfolio turnover rate | 103 | % | 87 | % | 111 | % | 78 | % | 142 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| 14 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the fiscal year ended December 31, 2012, the Series B (Large Cap Value Series) returned 15.61%, compared with the Russell 1000® Value Index, which returned 17.51%.
Our strategy is to select securities of companies that appear undervalued by the overall market relative to assets, earnings, growth potential or cash flows. Our investment approach is a defined and disciplined process with three key philosophical tenets that drive our investment decisions: a valuation focus, a long-term investment horizon and an opportunistic approach.
Our investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a corresponding valuation target for each company. We construct the portfolio based on the level of conviction generated by the bottom-up analysis and the upside/downside profile associated with each company.
The portfolio’s performance was helped by good stock selection and an underweight in the Utilities sector, as well as good stock selection in the Information Technology sector. However, these benefits were not enough to offset poor stock selection in the Financials sectors, and an underweight and poor stock selection in the Telecommunication Services sector.
The holdings contributing most to portfolio performance over the period were Computer Sciences Corp. and Equifax, Inc. The main detractors were Hewlett-Packard Co. and Western Union Co.
We remain focused on searching for companies we think have good long-term fundamental prospects and attractive valuations that are likely to generate strong performance relative to the broader market, regardless of macroeconomic events.
We appreciate your business and the trust you place in us.
Sincerely,
Mark A. Mitchell, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 15 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES B (LARGE CAP VALUE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
| Average Annual Returns* |
| Periods Ended 12/31/121 |
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series B (Large Cap Value Series) | 15.61 | % | 0.51 | % | 7.65 | % | ||||||
| Russell 1000 Value Index | 17.51 | % | 0.59 | % | 7.38 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 1979
Ten Largest Holdings (% of Total Net Assets) | ||||
| Aetna, Inc. | 4.0 | % | ||
| Chevron Corp. | 3.9 | % | ||
| Wells Fargo & Co. | 3.8 | % | ||
| Time Warner, Inc. | 3.5 | % | ||
| Edison International | 3.5 | % | ||
| Computer Sciences Corp. | 3.2 | % | ||
| TE Connectivity Ltd. | 3.1 | % | ||
| Aon plc | 3.1 | % | ||
| Williams Companies, Inc. | 2.8 | % | ||
| CVS Caremark Corp. | 2.7 | % | ||
| Top Ten Total | 33.6 | % |
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 16 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES B (LARGE CAP VALUE SERIES) |
| Shares | Value | |||||||
| COMMON STOCKS† - 96.4% | ||||||||
| Financials - 23.6% | ||||||||
| Wells Fargo & Co. | 272,825 | $ | 9,325,158 | |||||
| Aon plc | 136,310 | 7,578,836 | ||||||
| Berkshire Hathaway, Inc. — Class A* | 50 | 6,702,999 | ||||||
| American International Group, Inc.* | 179,839 | 6,348,317 | ||||||
| JPMorgan Chase & Co. | 135,369 | 5,952,175 | ||||||
| Allstate Corp. | 127,050 | 5,103,599 | ||||||
| State Street Corp. | 104,500 | 4,912,545 | ||||||
| U.S. Bancorp | 148,526 | 4,743,920 | ||||||
| BB&T Corp. | 128,263 | 3,733,736 | ||||||
| Reinsurance Group of America, Inc. — | ||||||||
| Class A | 46,530 | 2,490,286 | ||||||
| Citigroup, Inc. | 32,730 | 1,294,799 | ||||||
| Total Financials | 58,186,370 | |||||||
| Energy - 17.9% | ||||||||
| Chevron Corp. | 88,400 | 9,559,577 | ||||||
| Williams Companies, Inc. | 208,910 | 6,839,713 | ||||||
| McDermott International, Inc.* | 570,019 | 6,281,609 | ||||||
| Apache Corp. | 58,612 | 4,601,042 | ||||||
| Halliburton Co. | 120,900 | 4,194,021 | ||||||
| Exxon Mobil Corp. | 43,470 | 3,762,329 | ||||||
| ConocoPhillips | 41,200 | 2,389,188 | ||||||
| Whiting Petroleum Corp.* | 54,090 | 2,345,883 | ||||||
| Chesapeake Energy Corp. | 111,800 | 1,858,116 | ||||||
| WPX Energy, Inc.* | 77,433 | 1,152,203 | ||||||
| Phillips 66 | 20,600 | 1,093,860 | ||||||
| Total Energy | 44,077,541 | |||||||
| Industrials - 12.8% | ||||||||
| URS Corp. | 163,270 | 6,409,980 | ||||||
| Republic Services, Inc. — Class A | 191,700 | 5,622,561 | ||||||
| United Technologies Corp. | 63,900 | 5,240,439 | ||||||
| Quanta Services, Inc.* | 180,890 | 4,936,488 | ||||||
| Equifax, Inc. | 91,020 | 4,926,002 | ||||||
| Parker Hannifin Corp. | 50,760 | 4,317,646 | ||||||
| Total Industrials | 31,453,116 | |||||||
| Information Technology - 11.2% | ||||||||
| Computer Sciences Corp. | 199,580 | 7,993,178 | ||||||
| TE Connectivity Ltd. | 204,550 | 7,592,896 | ||||||
| Cisco Systems, Inc. | 267,800 | 5,262,270 | ||||||
| Hewlett-Packard Co. | 196,051 | 2,793,727 | ||||||
| NetApp, Inc.* | 58,490 | 1,962,340 | ||||||
| Euronet Worldwide, Inc.* | 54,865 | 1,294,814 | ||||||
| Mercury Systems, Inc.* | 60,620 | 557,704 | ||||||
| Total Information Technology | 27,456,929 | |||||||
| Health Care - 10.0% | ||||||||
| Aetna, Inc. | 211,000 | 9,769,300 | ||||||
| Covidien plc | 89,100 | 5,144,634 | ||||||
| Forest Laboratories, Inc.* | 107,800 | 3,807,496 | ||||||
| UnitedHealth Group, Inc. | 63,300 | 3,433,392 | ||||||
| Teva Pharmaceutical Industries Ltd. ADR | 65,320 | 2,439,049 | ||||||
| Total Health Care | 24,593,871 | |||||||
| Consumer Staples - 7.7% | ||||||||
| CVS Caremark Corp. | 139,120 | 6,726,452 | ||||||
| Wal-Mart Stores, Inc. | 79,090 | 5,396,310 | ||||||
| Mondelez International, Inc. — Class A | 136,300 | 3,471,561 | ||||||
| Kraft Foods Group, Inc. | 45,433 | 2,065,839 | ||||||
| Costco Wholesale Corp. | 12,680 | 1,252,404 | ||||||
| Total Consumer Staples | 18,912,566 | |||||||
| Consumer Discretionary - 6.2% | ||||||||
| Time Warner, Inc. | 181,933 | 8,701,855 | ||||||
| Lowe’s Companies, Inc. | 134,480 | 4,776,730 | ||||||
| DeVry, Inc. | 73,500 | 1,744,155 | ||||||
| Total Consumer Discretionary | 15,222,740 | |||||||
| Utilities - 3.5% | ||||||||
| Edison International | 189,700 | 8,572,543 | ||||||
| Materials - 2.7% | ||||||||
| Dow Chemical Co. | 205,350 | 6,636,912 | ||||||
| Telecommunication Services - 0.8% | ||||||||
| Windstream Corp. | 232,532 | 1,925,365 | ||||||
| Total Common Stocks | ||||||||
| (Cost $194,130,430) | 237,037,953 | |||||||
| EXCHANGE TRADED FUNDS† - 1.5% | ||||||||
| iShares Russell 1000 Value Index Fund | 51,780 | 3,770,620 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $3,547,806) | 3,770,620 | |||||||
| Face | ||||||||
| Amount | ||||||||
| REPURCHASE AGREEMENT††,1 - 2.1% | ||||||||
| UMB Financial Corp. | ||||||||
| issued 12/31/12 at 0.07% | ||||||||
| due 01/02/13 | $ | 5,245,000 | 5,245,000 | |||||
| Total Repurchase Agreement | ||||||||
| (Cost $5,245,000) | 5,245,000 | |||||||
| Total Investments - 100.0% | ||||||||
| (Cost $202,923,236) | $ | 246,053,573 | ||||||
| Other Assets & Liabilities, net - 0.0% | 53,122 | |||||||
| Total Net Assets - 100.0% | $ | 246,106,695 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreement — See Note 5. |
ADR — American Depositary Receipt
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 17 |
| SERIES B (LARGE CAP VALUE SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $197,678,236) | $ | 240,808,573 | ||
| Repurchase agreements, at value | ||||
| (cost $5,245,000) | 5,245,000 | |||
| Total investments | ||||
| (cost $202,923,236) | 246,053,573 | |||
| Prepaid expenses | 5,644 | |||
| Cash | 1,319 | |||
| Receivables: | ||||
| Dividends | 360,133 | |||
| Fund shares sold | 23,414 | |||
| Interest | 10 | |||
| Total assets | 246,444,093 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 143,509 | |||
| Management fees | 134,955 | |||
| Fund accounting/administration fees | 19,724 | |||
| Transfer agent/maintenance fees | 6,020 | |||
| Directors’ fees* | 393 | |||
| Miscellaneous | 32,797 | |||
| Total liabilities | 337,398 | |||
| Net assets | $ | 246,106,695 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 249,494,013 | ||
| Undistributed net investment income | 3,229,551 | |||
| Accumulated net realized loss on investments | (49,747,206 | ) | ||
| Net unrealized appreciation on investments | 43,130,337 | |||
| Net assets | $ | 246,106,695 | ||
| Capital shares outstanding | 8,586,755 | |||
| Net asset value per share | $ | 28.66 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Dividends | $ | 5,312,153 | ||
| Interest | 2,413 | |||
| Total investment income | 5,314,566 | |||
| Expenses: | ||||
| Management fees | 1,639,125 | |||
| Transfer agent/maintenance fees | 27,124 | |||
| Fund accounting/administration fees | 239,561 | |||
| Directors’ fees* | 28,311 | |||
| Custodian fees | 8,163 | |||
| Miscellaneous | 142,731 | |||
| Total expenses | 2,085,015 | |||
| Net investment income | 3,229,551 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 10,161,128 | |||
| Net realized gain | 10,161,128 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 23,246,913 | |||
| Net change in unrealized appreciation (depreciation) | 23,246,913 | |||
| Net realized and unrealized gain | 33,408,041 | |||
| Net increase in net assets resulting from operations | $ | 36,637,592 |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 18 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES B (LARGE CAP VALUE SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 3,229,551 | $ | 2,783,403 | ||||
| Net realized gain on investments | 10,161,128 | 8,846,208 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 23,246,913 | (21,354,454 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 36,637,592 | (9,724,843 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 14,915,262 | 17,773,916 | ||||||
| Cost of shares redeemed | (54,897,141 | ) | (56,778,889 | ) | ||||
| Net decrease from capital share transactions | (39,981,879 | ) | (39,004,973 | ) | ||||
| Net decrease in net assets | (3,344,287 | ) | (48,729,816 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 249,450,982 | 298,180,798 | ||||||
| End of year | $ | 246,106,695 | $ | 249,450,982 | ||||
| Undistributed net investment income at end of year | $ | 3,229,551 | $ | 2,783,403 | ||||
| Capital share activity: | ||||||||
| Shares sold | 550,498 | 700,724 | ||||||
| Shares redeemed | (2,025,731 | ) | (2,201,359 | ) | ||||
| Net decrease in shares | (1,475,233 | ) | (1,500,635 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 19 |
| SERIES B (LARGE CAP VALUE SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 24.79 | $ | 25.79 | $ | 22.20 | $ | 17.55 | $ | 27.94 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .35 | .26 | .19 | .19 | .29 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.52 | (1.26 | ) | 3.40 | 4.46 | (10.68 | ) | |||||||||||||
| Total from investment operations | 3.87 | (1.00 | ) | 3.59 | 4.65 | (10.39 | ) | |||||||||||||
| Net asset value, end of period | $ | 28.66 | $ | 24.79 | $ | 25.79 | $ | 22.20 | $ | 17.55 | ||||||||||
| Total Returnb | 15.61 | % | (3.88 | %) | 16.17 | % | 26.50 | % | (37.19 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 246,107 | $ | 249,451 | $ | 298,181 | $ | 280,473 | $ | 250,972 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 1.28 | % | 1.00 | % | 0.81 | % | 1.03 | % | 1.21 | % | ||||||||||
| Total expensesc | 0.83 | % | 0.80 | % | 0.80 | % | 0.81 | % | 0.80 | % | ||||||||||
| Portfolio turnover rate | 17 | % | 19 | % | 17 | % | 16 | % | 32 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| 20 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the fiscal year ended December 31, 2012, the Series C (Money Market Series) returned -0.52%. The U.S. Federal Reserve continues to hold rates near 0%, making it a challenge to maintain a positive yield. The Fed has signaled that it will continue to keep rates low in the near future.
Composition of Portfolio Assets
At December 31, 2012, the average weighted maturity of the holdings in the Fund was 45 days. At year-end, approximately 40% of the Fund consisted of a mix of Treasury and Agency repurchase agreements and 60% in commercial paper.
Market Review
The Federal Reserve has repeatedly stated its intention to keep rates low for the foreseeable future, which will continue to be challenging for money market portfolios as there is very little yield available. Because of the historically low yields, returns in the Fund turned negative after the application of management fees. Newly instituted SEC regulations require at least 30% of portfolio assets to be invested in government issues or equivalent securities, such as repurchase agreements. Additionally, average weighted maturity is now limited to a maximum of 60 days. Both changes are on the side of safety but weigh on the yield of money market funds.
The Fund focused on the high quality issuers and short duration periods due to the relatively flat yield curve over 60 day maturities, which provided no incentive to increase the Funds’ duration. In addition, we invested in asset-backed commercial paper of large, well-diversified programs that offer multiple layers of protection.
Outlook
Our philosophy in managing the Fund is to take a conservative approach that doesn’t add risk to the portfolio by reaching for marginal gains in yield. With the yield environment likely to remain as is for the time being, we will continue to manage the Fund conservatively with expectations of low returns. As always, we will continue to monitor the economic and market conditions when deciding portfolio strategies and will adjust the asset mix and maturity structure in the portfolio accordingly.
Thank you for your investment in the Series C (Money Market Series).
Sincerely,
Steve McFeely, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 21 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES C (MONEY MARKET SERIES)
OBJECTIVE: Seeks as high a level of current income as is consistent with preservation of capital by investing in money market securities with varying maturities.
Holdings Diversification (Market Exposure as % of Net Assets)
Inception Date: May 1, 1979
The Fund invests principally in money market instruments such as commercial paper.
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series C (Money Market Series) | -0.52 | % | 0.04 | % | 1.32 | % | ||||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 22 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES C (MONEY MARKET SERIES) |
| Face | ||||||||
| Amount | Value | |||||||
| MORTGAGE BACKED SECURITIES†† - 0.2% | ||||||||
| Small Business Administration Pools | ||||||||
| #503303, 0.75% due 01/01/131,2 | $ | 91,673 | $ | 91,971 | ||||
| #503295, 0.75% due 01/01/131,2 | 50,403 | 50,567 | ||||||
| #502353, 1.00% due 01/01/131,2 | 20,872 | 20,872 | ||||||
| Total Mortgage Backed Securities | ||||||||
| (Cost $162,977) | 163,410 | |||||||
| COMMERCIAL PAPER†† - 59.5% | ||||||||
| Toyota Motor Credit Corp. | ||||||||
| 0.24% due 03/06/13 | 3,500,000 | 3,499,128 | ||||||
| 0.23% due 08/14/13 | 205,000 | 204,691 | ||||||
| Total Toyota Motor Credit Corp. | 3,703,819 | |||||||
| Archer-Daniels-Midland Co. | ||||||||
| 0.20% due 01/31/13 | 3,000,000 | 2,999,500 | ||||||
| 0.25% due 02/06/13 | 600,000 | 599,850 | ||||||
| Total Archer-Daniels-Midland Co. | 3,599,350 | |||||||
| Coca-Cola Co. | ||||||||
| 0.16% due 03/04/13 | 2,000,000 | 1,999,545 | ||||||
| 0.20% due 02/06/13 | 1,000,000 | 999,894 | ||||||
| 0.14% due 03/01/13 | 600,000 | 599,870 | ||||||
| Total Coca-Cola Co. | 3,599,309 | |||||||
| American Honda Finance Corp. | ||||||||
| 0.16% due 02/22/13 | 2,500,000 | 2,499,171 | ||||||
| 0.16% due 03/21/13 | 1,100,000 | 1,099,404 | ||||||
| Total American Honda Finance Corp. | 3,598,575 | |||||||
| Sheffield Receivables Corp. | ||||||||
| 0.23% due 03/12/13 | 3,600,000 | 3,598,531 | ||||||
| Prudential plc | ||||||||
| 0.38% due 01/04/13 | 2,000,000 | 1,999,962 | ||||||
| 0.35% due 05/02/13 | 1,100,000 | 1,098,677 | ||||||
| 0.80% due 05/02/13 | 500,000 | 499,398 | ||||||
| Total Prudential plc | 3,598,037 | |||||||
| Barclays US Funding LLC | ||||||||
| 0.50% due 01/03/13 | 3,000,000 | 2,999,965 | ||||||
| 0.25% due 02/01/13 | 500,000 | 499,923 | ||||||
| Total Barclays US Funding LLC | 3,499,888 | |||||||
| General RE Corp. | ||||||||
| 0.17% due 02/06/13 | 3,500,000 | 3,499,338 | ||||||
| Nestle Capital Corp. | ||||||||
| 0.24% due 05/20/13 | 2,000,000 | 1,998,810 | ||||||
| 0.23% due 05/20/13 | 1,500,000 | 1,499,108 | ||||||
| Total Nestle Capital Corp. | 3,497,918 | |||||||
| Societe Generale North America, Inc. | ||||||||
| 0.30% due 02/01/13 | 2,900,000 | 2,899,251 | ||||||
| 0.38% due 02/07/13 | 500,000 | 499,862 | ||||||
| Total Societe Generale North America, Inc. | 3,399,113 | |||||||
| Jupiter Securitization Company LLC | ||||||||
| 0.21% due 03/06/13 | 2,000,000 | 1,999,345 | ||||||
| 0.21% due 03/05/13 | 1,250,000 | 1,249,596 | ||||||
| Total Jupiter Securitization Company LLC | 3,248,941 | |||||||
| UBS Finance Delaware LLC | ||||||||
| 0.38% due 09/10/13 | 3,000,000 | 2,991,194 | ||||||
| ING (U.S.) Funding LLC | ||||||||
| 0.60% due 05/02/13 | 1,000,000 | 998,797 | ||||||
| 0.55% due 05/01/13 | 800,000 | 799,053 | ||||||
| Total ING U.S. Funding LLC | 1,797,850 | |||||||
| Total Commercial Paper | ||||||||
| (Cost $43,628,812) | 43,631,863 | |||||||
| REPURCHASE AGREEMENT††,3 - 39.3% | ||||||||
| UMB Financial Corp. | ||||||||
| issued 12/31/12 at 0.07% | ||||||||
| due 01/02/13 | 28,846,000 | 28,846,000 | ||||||
| Total Repurchase Agreement | ||||||||
| (Cost $28,846,000) | 28,846,000 | |||||||
| Total Investments - 99.0% | ||||||||
| (Cost $72,637,789) | $ | 72,641,273 | ||||||
| Other Assets & Liabilities, net - 1.0% | 729,734 | |||||||
| Total Net Assets - 100.0% | $ | 73,371,007 | ||||||
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Maturity date indicated is next interest reset date. |
| 2 | Variable rate security. Rate indicated is rate effective at December 31, 2012. |
| 3 | Repurchase Agreement — See Note 5. |
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 23 |
| SERIES C (MONEY MARKET SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $43,791,789) | $ | 43,795,273 | ||
| Repurchase agreements, at value | ||||
| (cost $28,846,000) | 28,846,000 | |||
| Total investments | ||||
| (cost $72,637,789) | 72,641,273 | |||
| Prepaid expenses | 2,207 | |||
| Cash | 349 | |||
| Receivables: | ||||
| Fund shares sold | 747,886 | |||
| Securities sold | 71,618 | |||
| Interest | 322 | |||
| Total assets | 73,463,655 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Management fees | 31,280 | |||
| Fund shares redeemed | 17,344 | |||
| Professional fees | 12,990 | |||
| Transfer agent/maintenance fees | 7,737 | |||
| Fund accounting/administration fees | 5,943 | |||
| Directors’ fees* | 2,612 | |||
| Miscellaneous | 14,742 | |||
| Total liabilities | 92,648 | |||
| Net assets | $ | 73,371,007 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 73,367,523 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized gain on investments | — | |||
| Net unrealized appreciation on investments | 3,484 | |||
| Net assets | $ | 73,371,007 | ||
| Capital shares outstanding | 5,492,548 | |||
| Net asset value per share | $ | 13.36 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Interest | $ | 157,305 | ||
| Total investment income | 157,305 | |||
| Expenses: | ||||
| Management fees | 439,108 | |||
| Transfer agent/maintenance fees | 28,630 | |||
| Fund accounting/administration fees | 83,430 | |||
| Directors’ fees* | 8,337 | |||
| Custodian fees | 6,051 | |||
| Miscellaneous | 57,618 | |||
| Total expenses | 623,174 | |||
| Net investment loss | (465,869 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | — | |||
| Net realized gain | — | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 2,224 | |||
| Net change in unrealized appreciation (depreciation) | 2,224 | |||
| Net realized and unrealized gain | 2,224 | |||
| Net decrease in net assets resulting from operations | $ | (463,645 | ) |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 24 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES C (MONEY MARKET SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (465,869 | ) | $ | (682,146 | ) | ||
| Net realized loss on investments | — | (4 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 2,224 | 1,797 | ||||||
| Net decrease in net assets resulting from operations | (463,645 | ) | (680,353 | ) | ||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 77,832,972 | 174,897,246 | ||||||
| Cost of shares redeemed | (112,615,282 | ) | (171,790,898 | ) | ||||
| Net increase (decrease) from capital share transactions | (34,782,310 | ) | 3,106,348 | |||||
| Net increase (decrease) in net assets | (35,245,955 | ) | 2,425,995 | |||||
| Net assets: | ||||||||
| Beginning of year | 108,616,962 | 106,190,967 | ||||||
| End of year | $ | 73,371,007 | $ | 108,616,962 | ||||
| Undistributed net investment income at end of year | $ | — | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | 5,809,813 | 12,988,330 | ||||||
| Shares redeemed | (8,405,645 | ) | (12,763,672 | ) | ||||
| Net increase (decrease) in shares | (2,595,832 | ) | 224,658 | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 25 |
| SERIES C (MONEY MARKET SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 13.43 | $ | 13.50 | $ | 13.56 | $ | 13.61 | $ | 13.33 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (.07 | ) | (.08 | ) | (.06 | ) | (.03 | ) | .26 | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | (— | )c | .01 | (— | )c | (.02 | ) | .02 | ||||||||||||
| Total from investment operations | (.07 | ) | (.07 | ) | (.06 | ) | (.05 | ) | .28 | |||||||||||
| Net asset value, end of period | $ | 13.36 | $ | 13.43 | $ | 13.50 | $ | 13.56 | $ | 13.61 | ||||||||||
| Total Returnb | (0.52 | %) | (0.52 | %) | (0.44 | %) | (0.37 | %) | 2.10 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 73,371 | $ | 108,617 | $ | 106,191 | $ | 153,262 | $ | 268,318 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.53 | %) | (0.57 | %) | (0.46 | %) | (0.23 | %) | 1.94 | % | ||||||||||
| Total expenses | 0.71 | % | 0.70 | % | 0.70 | % | 0.67 | % | 0.65 | % | ||||||||||
| Portfolio turnover rate | — | — | — | — | — | |||||||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Less than $0.01 per share. |
| 26 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series D (MSCI EAFE Equal Weight Series) returned 16.57%, while the Fund’s benchmark, the MSCI EAFE Equal Weighted Index, returned 16.91%.
The strategy provides broad exposure to the companies in the MSCI EAFE Equal Weighted Index, which represents the equity markets of developed countries in Europe, Australasia and the Far East. The Fund seeks performance that corresponds, before fees and expenses, to the price and yield performance of the MSCI EAFE Equal Weighted Index. The index weights the issuers in the MSCI EAFE Index (the cap-weighted version of the index) the same weight on the rebalancing date. Between two rebalancings, the weight of securities in the equal weighted index will deviate from equal weight based on the performance of each security.
The sectors contributing most to Fund performance over the past 12 months were the Financials and Industrials sectors. The Telecommunication Services sector was the only detractor from return.
The holdings contributing most to the portfolio performance over the period were Vanguard MSCI EAFE ETF and the Goodman Group.
The holdings detracting most from portfolio performance over the period were Bankia S.A. and Banco Popular Espanol S.A.
Thank you for investing in the Fund.
Sincerely,
Michael Byrum, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 27 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES D (MSCI EAFE EQUAL WEIGHT SERIES)
OBJECTIVE: Seeks performance that corresponds, before fees and expenses, to the price and yield performance of the MSCI EAFE Equal Weighted Index (the “Underlying Index”).
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 16.57 | % | -3.48 | % | 7.55 | % | ||||||
| MSCI EAFE Equal Weighted Index | 16.91 | % | N/A | N/A | ||||||||
| MSCI EAFE Equal Weighted Index-Blended** | 16.91 | % | -2.19 | % | 7.22 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: April 19, 1984
Ten Largest Holdings (% of Total Net Assets)
| Vanguard MSCI EAFE ETF | 3.5 | % | ||
| iShares MSCI Japan Index Fund | 0.8 | % | ||
| Sharp Corp. | 0.2 | % | ||
| Invensys plc | 0.2 | % | ||
| Tokyo Electric Power Company, Inc. | 0.2 | % | ||
| Nomura Holdings, Inc. | 0.1 | % | ||
| Sumco Corp. | 0.1 | % | ||
| Kobe Steel Ltd. | 0.1 | % | ||
| Mazda Motor Corp. | 0.1 | % | ||
| Tokyu Land Corp. | 0.1 | % | ||
| Top Ten Total | 5.4 | % |
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The MSCI EAFE Equal Weighted Index and MSCI World Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
| ** | The MSCI EAFE Equal Weighted Index-Blended uses performance data for the MSCI World Index from 12/31/02 to 04/28/11, and the MSCI EAFE Equal Weight Index from 04/29/11 to 12/31/12. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 28 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| COMMON STOCKS†† - 95.2% | ||||||||
| FINANCIALS - 21.9% | ||||||||
| Nomura Holdings, Inc. | 44,000 | $ | 260,118 | |||||
| Tokyu Land Corp. | 33,000 | 241,488 | ||||||
| Unione di Banche Italiane SCPA | 51,529 | 240,206 | ||||||
| Mitsubishi Estate Company Ltd. | 10,000 | 239,103 | ||||||
| Daiwa Securities Group, Inc. | 42,000 | 234,022 | ||||||
| Sumitomo Realty & Development | ||||||||
| Company Ltd. | 7,000 | 232,901 | ||||||
| Daiwa House Industry Company Ltd. | 13,000 | 223,223 | ||||||
| Dai-ichi Life Insurance Company Ltd. | 158 | 222,034 | ||||||
| Banco Espirito Santo S.A.* | 185,508 | 220,563 | ||||||
| Shinsei Bank Ltd. | 110,250 | 220,391 | ||||||
| Keppel Land Ltd. | 65,770 | 220,310 | ||||||
| Mitsui Fudosan Company Ltd. | 9,000 | 219,889 | ||||||
| Mitsubishi UFJ Financial Group, Inc. | 40,320 | 217,899 | ||||||
| KBC Groep N.V. | 6,237 | 217,303 | ||||||
| Vienna Insurance Group AG | ||||||||
| Wiener Versicherung Gruppe | 4,066 | 216,947 | ||||||
| Delta Lloyd N.V. | 13,070 | 215,242 | ||||||
| Investor AB — Class B | 8,173 | 214,768 | ||||||
| Sumitomo Mitsui Trust Holdings, Inc. | 60,990 | 214,614 | ||||||
| SBI Holdings, Inc. | 23,986 | 214,145 | ||||||
| NTT Urban Development Corp. | 221 | 214,084 | ||||||
| Wendel S.A. | 2,076 | 213,928 | ||||||
| Mizuho Financial Group, Inc. | 116,650 | 213,605 | ||||||
| Banca Monte dei Paschi di Siena SpA* | 713,839 | 213,439 | ||||||
| Investec plc | 30,644 | 213,367 | ||||||
| Aegon N.V. | 33,035 | 213,331 | ||||||
| Macquarie Group Ltd. | 5,669 | 212,637 | ||||||
| Aberdeen Asset Management plc | 35,298 | 212,429 | ||||||
| City Developments Ltd. | 19,850 | 212,323 | ||||||
| Mediobanca SpA | 34,378 | 212,285 | ||||||
| Industrivarden AB — Class C | 12,720 | 211,985 | ||||||
| London Stock Exchange Group plc | 11,884 | 211,877 | ||||||
| Banco Popolare SC* | 126,891 | 211,226 | ||||||
| Sumitomo Mitsui Financial Group, Inc. | 5,800 | 210,515 | ||||||
| Royal Bank of Scotland Group plc* | 39,305 | 210,101 | ||||||
| NKSJ Holdings, Inc. | 9,800 | 209,934 | ||||||
| ORIX Corp. | 1,860 | 209,837 | ||||||
| Hang Lung Properties Ltd. | 52,060 | 209,527 | ||||||
| Erste Group Bank AG* | 6,565 | 208,664 | ||||||
| United Overseas Bank Ltd. | 12,710 | 208,523 | ||||||
| Aviva plc | 33,688 | 208,486 | ||||||
| Standard Chartered plc | 8,055 | 208,477 | ||||||
| AXA S.A. | 11,613 | 208,453 | ||||||
| Banco Bilbao Vizcaya Argentaria S.A. | 22,418 | 208,214 | ||||||
| Sun Hung Kai Properties Ltd. | 13,710 | 207,931 | ||||||
| Ageas | 7,032 | 207,709 | ||||||
| Credit Saison Company Ltd. | 8,310 | 207,591 | ||||||
| Assicurazioni Generali SpA | 11,356 | 207,460 | ||||||
| MS&AD Insurance Group Holdings | 10,400 | 207,289 | ||||||
| RSA Insurance Group plc | 100,336 | 207,128 | ||||||
| Barclays plc | 47,604 | 206,833 | ||||||
| T&D Holdings, Inc. | 17,000 | 206,718 | ||||||
| UOL Group Ltd. | 41,850 | 206,427 | ||||||
| Natixis | 60,204 | 205,717 | ||||||
| Credit Agricole S.A.* | 25,222 | 205,343 | ||||||
| Oversea-Chinese Banking Corporation Ltd. | 25,420 | 204,861 | ||||||
| Partners Group Holding AG | 886 | 204,680 | ||||||
| Deutsche Boerse AG | 3,338 | 204,626 | ||||||
| Investment AB Kinnevik — Class B | 9,767 | 204,360 | ||||||
| Lend Lease Group | 20,879 | 204,159 | ||||||
| Standard Life plc | 37,331 | 204,087 | ||||||
| Mizrahi Tefahot Bank Ltd.* | 19,644 | 203,780 | ||||||
| Pohjola Bank plc — Class A | 13,601 | 203,590 | ||||||
| Allianz AG | 1,460 | 203,453 | ||||||
| Segro plc | 50,060 | 203,194 | ||||||
| CapitaLand Ltd. | 66,000 | 203,182 | ||||||
| Schroders plc | 7,309 | 203,037 | ||||||
| Mapfre S.A. | 65,797 | 202,664 | ||||||
| Banco Santander S.A. | 24,903 | 202,321 | ||||||
| ICAP plc | 39,996 | 202,260 | ||||||
| Societe Generale S.A.* | 5,320 | 202,214 | ||||||
| Unibail-Rodamco SE | 834 | 202,182 | ||||||
| Global Logistic Properties Ltd. | 87,330 | 201,996 | ||||||
| Tryg A/S | 2,667 | 201,801 | ||||||
| UniCredit SpA* | 40,959 | 201,635 | ||||||
| CNP Assurances | 13,070 | 201,117 | ||||||
| Wharf Holdings Ltd. | 25,210 | 200,932 | ||||||
| Skandinaviska Enskilda Banken AB — | ||||||||
| Class A | 23,468 | 200,843 | ||||||
| Commerzbank AG* | 104,863 | 200,827 | ||||||
| Nomura Real Estate Holdings, Inc. | 10,510 | 200,722 | ||||||
| Swedbank AB — Class A | 10,209 | 200,618 | ||||||
| Klepierre | 5,016 | 200,421 | ||||||
| Bendigo and Adelaide Bank Ltd. | 22,461 | 200,340 | ||||||
| Admiral Group plc | 10,516 | 200,221 | ||||||
| Old Mutual plc | 68,108 | 200,002 | ||||||
| Swiss Prime Site AG† | 2,397 | 199,946 | ||||||
| DBS Group Holdings Ltd. | 16,280 | 199,888 | ||||||
| ING Groep N.V.* | 21,019 | 199,573 | ||||||
| Hammerson plc | 24,874 | 199,496 | ||||||
| Zurich Insurance Group AG | 745 | 199,487 | ||||||
| Suncorp Group Ltd. | 18,647 | 199,382 | ||||||
| Resolution Ltd. | 48,961 | 199,273 | ||||||
| Wheelock & Company Ltd. | 39,060 | 199,263 | ||||||
| Lloyds Banking Group plc* | 249,895 | 199,198 | ||||||
| IMMOFINANZ AG | 47,292 | 199,025 | ||||||
| Hong Kong Exchanges and Clearing Ltd. | 11,480 | 198,689 | ||||||
| AMP Ltd. | 39,097 | 198,567 | ||||||
| Resona Holdings, Inc. | 43,420 | 198,281 | ||||||
| British Land Company plc | 21,459 | 198,153 | ||||||
| Hannover Rueckversicherung AG | 2,529 | 198,017 | ||||||
| HSBC Holdings plc | 18,681 | 198,006 | ||||||
| Muenchener Rueckversicherungs AG | 1,096 | 197,794 | ||||||
| Cheung Kong Holdings Ltd. | 12,710 | 197,775 | ||||||
| Bank Hapoalim BM* | 46,081 | 197,763 | ||||||
| Corio N.V. | 4,314 | 197,759 | ||||||
| Singapore Exchange Ltd. | 34,000 | 197,603 | ||||||
| Tokio Marine Holdings, Inc. | 7,100 | 197,550 | ||||||
| Exor SpA | 7,835 | 197,393 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 29 |
| SCHEDULE OF INVESTMENTS (CONTINUED) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| ASX Ltd. | 6,040 | $ | 197,362 | |||||
| CapitaCommercial Trust | 142,000 | 197,083 | ||||||
| 3i Group plc | 55,206 | 197,014 | ||||||
| Australia & New Zealand Banking | ||||||||
| Group Ltd. | 7,471 | 197,010 | ||||||
| Nordea Bank AB | 20,469 | 196,947 | ||||||
| Julius Baer Group Ltd. | 5,532 | 196,815 | ||||||
| National Australia Bank Ltd. | 7,465 | 196,602 | ||||||
| Fonciere Des Regions | 2,337 | 196,602 | ||||||
| Pargesa Holding S.A. | 2,848 | 196,143 | ||||||
| Westpac Banking Corp. | 7,147 | 196,076 | ||||||
| Credit Suisse Group AG | 8,039 | 196,063 | ||||||
| Sino Land Company Ltd. | 107,051 | 196,040 | ||||||
| Commonwealth Bank of Australia | 3,004 | 195,889 | ||||||
| Banco Popular Espanol S.A.* | 250,466 | 195,708 | ||||||
| Insurance Australia Group Ltd. | 39,620 | 195,390 | ||||||
| Centro Retail Australia | 82,357 | 195,215 | ||||||
| Chugoku Bank Ltd. | 14,000 | 195,161 | ||||||
| Wing Hang Bank Ltd. | 18,510 | 194,986 | ||||||
| Government Properties Trust, Inc. | 50,537 | 194,774 | ||||||
| Legal & General Group plc | 81,054 | 194,300 | ||||||
| BNP Paribas S.A. | 3,414 | 194,296 | ||||||
| Eurazeo | 4,010 | 194,090 | ||||||
| CapitaMall Trust | 110,330 | 193,905 | ||||||
| Capital Shopping Centres Group plc | 33,698 | 193,887 | ||||||
| Land Securities Group plc | 14,535 | 193,869 | ||||||
| First Pacific Company Ltd. | 175,250 | 193,545 | ||||||
| SCOR SE | 7,158 | 193,407 | ||||||
| Nishi-Nippon City Bank Ltd. | 78,000 | 193,299 | ||||||
| Henderson Land Development | ||||||||
| Company Ltd. | 26,990 | 193,241 | ||||||
| Stockland | 52,168 | 193,138 | ||||||
| Danske Bank A/S* | 11,371 | 193,078 | ||||||
| Groupe Bruxelles Lambert S.A. | 2,417 | 192,708 | ||||||
| Aeon Credit Service Company Ltd. | 9,510 | 192,186 | ||||||
| Svenska Handelsbanken AB — Class A | 5,342 | 192,111 | ||||||
| Dexus Property Group | 180,600 | 192,060 | ||||||
| Kerry Properties Ltd. | 36,530 | 191,925 | ||||||
| CapitaMalls Asia Ltd. | 119,060 | 191,777 | ||||||
| Baloise Holding AG | 2,219 | 191,525 | ||||||
| Swiss Re AG | 2,642 | 191,406 | ||||||
| Japan Retail Fund Investment Corp. | 104 | 190,937 | ||||||
| Sony Financial Holdings, Inc. | 10,600 | 190,328 | ||||||
| Swire Pacific Ltd. — Class A | 15,210 | 190,275 | ||||||
| ICADE | 2,130 | 190,109 | ||||||
| Hang Seng Bank Ltd. | 12,310 | 190,043 | ||||||
| Sampo Oyj — Class A | 5,870 | 190,042 | ||||||
| New World Development Company Ltd. | 120,000 | 189,995 | ||||||
| Bank of East Asia Ltd. | 48,920 | 189,986 | ||||||
| Gjensidige Forsikring ASA | 13,209 | 189,763 | ||||||
| Hysan Development Company Ltd. | 38,920 | 189,275 | ||||||
| AIA Group Ltd. | 47,600 | 188,811 | ||||||
| Westfield Group | 17,072 | 188,781 | ||||||
| DNB ASA | 14,746 | 188,421 | ||||||
| BOC Hong Kong Holdings Ltd. | 59,840 | 188,257 | ||||||
| Swire Properties Ltd. | 55,800 | 187,949 | ||||||
| Bank Leumi Le-Israel BM* | 55,199 | 187,941 | ||||||
| Prudential plc | 13,143 | 187,481 | ||||||
| Gecina S.A. | 1,656 | 187,470 | ||||||
| Ascendas Real Estate Investment Trust | 95,760 | 187,419 | ||||||
| Acom Company Ltd.* | 6,510 | 187,273 | ||||||
| UBS AG* | 11,967 | 187,137 | ||||||
| Japan Real Estate Investment Corp. | 19 | 186,953 | ||||||
| Mirvac Group | 119,792 | 186,663 | ||||||
| Deutsche Bank AG | 4,238 | 186,389 | ||||||
| QBE Insurance Group Ltd. | 16,246 | 186,382 | ||||||
| Banque Cantonale Vaudoise | 350 | 186,267 | ||||||
| Bank of Kyoto Ltd. | 22,000 | 186,083 | ||||||
| Westfield Retail Trust | 58,905 | 186,079 | ||||||
| Gunma Bank Ltd. | 38,000 | 185,681 | ||||||
| Banco de Sabadell S.A.* | 70,996 | 185,614 | ||||||
| Yamaguchi Financial Group, Inc. | 21,000 | 185,224 | ||||||
| Japan Prime Realty Investment Corp. | 64 | 184,738 | ||||||
| CFS Retail Property Trust Group | 92,172 | 184,622 | ||||||
| Swiss Life Holding AG | 1,382 | 184,333 | ||||||
| Suruga Bank Ltd. | 15,000 | 184,252 | ||||||
| Aozora Bank Ltd. | 60,000 | 184,249 | ||||||
| Ratos AB — Class B | 19,114 | 184,136 | ||||||
| Fukuoka Financial Group, Inc. | 46,000 | 183,986 | ||||||
| Shizuoka Bank Ltd. | 18,850 | 183,896 | ||||||
| Seven Bank Ltd. | 69,800 | 183,884 | ||||||
| Intesa Sanpaolo SpA | 106,211 | 183,612 | ||||||
| Iyo Bank Ltd. | 23,000 | 182,088 | ||||||
| Chiba Bank Ltd. | 31,000 | 181,373 | ||||||
| Bank of Yokohama Ltd. | 39,000 | 181,105 | ||||||
| CaixaBank | 51,566 | 180,580 | ||||||
| Hachijuni Bank Ltd. | 36,000 | 180,384 | ||||||
| Joyo Bank Ltd. | 38,000 | 180,320 | ||||||
| Raiffeisen Bank International AG | 4,334 | 180,232 | ||||||
| Hiroshima Bank Ltd. | 43,000 | 180,091 | ||||||
| Daito Trust Construction Company Ltd. | 1,900 | 179,341 | ||||||
| Mitsubishi UFJ Lease & Finance | ||||||||
| Company Ltd. | 4,170 | 179,150 | ||||||
| Nomura Real Estate Office Fund, | ||||||||
| Inc. — Class A | 31 | 178,349 | ||||||
| Goodman Group | 38,756 | 176,818 | ||||||
| Nippon Building Fund, Inc. | 17 | 175,638 | ||||||
| Link REIT | 34,490 | 172,742 | ||||||
| Aeon Mall Company Ltd. | 7,000 | 171,989 | ||||||
| Hargreaves Lansdown plc | 15,063 | 168,414 | ||||||
| Hulic Company Ltd. | 23,631 | 160,131 | ||||||
| Bankia S.A.*,† | 135,630 | 69,976 | ||||||
| Intesa Sanpaolo SpA | 9,830 | 13,957 | ||||||
| Hang Lung Group Ltd. | 780 | 4,488 | ||||||
| Hokuhoku Financial Group, Inc. | 40 | 59 | ||||||
| Man Group plc | 3 | 4 | ||||||
| Total Financials | 40,621,163 | |||||||
| 30 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Industrials - 19.0% | ||||||||
| Invensys plc | 52,650 | $ | 281,784 | |||||
| Bouygues S.A. | 7,854 | 233,636 | ||||||
| European Aeronautic Defence and Space | ||||||||
| Company N.V. | 5,896 | 232,352 | ||||||
| Shimizu Corp. | 61,060 | 229,240 | ||||||
| Taisei Corp. | 68,000 | 225,832 | ||||||
| Obayashi Corp. | 40,000 | 225,239 | ||||||
| Hitachi Construction Machinery | ||||||||
| Company Ltd. | 10,600 | 222,644 | ||||||
| ACS Actividades de Construccion | ||||||||
| y Servicios S.A. | 8,777 | 222,368 | ||||||
| Fuji Electric Company Ltd. | 90,000 | 221,156 | ||||||
| Amada Company Ltd. | 34,000 | 220,959 | ||||||
| NSK Ltd. | 31,000 | 220,305 | ||||||
| Randstad Holding N.V. | 5,935 | 220,219 | ||||||
| Mitsui OSK Lines Ltd. | 74,000 | 220,163 | ||||||
| Kawasaki Heavy Industries Ltd. | 81,000 | 220,003 | ||||||
| JTEKT Corp. | 23,010 | 219,086 | ||||||
| Ryanair Holdings plc ADR† | 6,362 | 218,090 | ||||||
| SMC Corp. | 1,200 | 217,709 | ||||||
| IHI Corp. | 84,000 | 217,545 | ||||||
| FANUC Corp. | 1,170 | 217,402 | ||||||
| Metso Oyj | 5,091 | 217,273 | ||||||
| Mitsubishi Logistics Corp. | 15,000 | 214,965 | ||||||
| Nippon Express Company Ltd. | 52,000 | 214,604 | ||||||
| Securitas AB — Class B | 24,390 | 213,882 | ||||||
| Kajima Corp. | 64,700 | 213,801 | ||||||
| Finmeccanica SpA* | 36,882 | 213,375 | ||||||
| Abertis Infraestructuras S.A. | 12,900 | 212,992 | ||||||
| Sojitz Corp. | 144,200 | 212,935 | ||||||
| Komatsu Ltd. | 8,300 | 212,711 | ||||||
| Smiths Group plc | 10,840 | 212,236 | ||||||
| ALS Ltd. | 18,569 | 212,094 | ||||||
| Balfour Beatty plc | 47,016 | 211,623 | ||||||
| Alstom S.A. | 5,245 | 211,221 | ||||||
| Furukawa Electric Company Ltd.* | 94,000 | 211,149 | ||||||
| Deutsche Lufthansa AG | 11,171 | 211,111 | ||||||
| Sumitomo Heavy Industries Ltd. | 44,000 | 210,604 | ||||||
| TNT Express N.V.† | 18,917 | 210,424 | ||||||
| Zardoya Otis S.A.† | 14,730 | 209,915 | ||||||
| Nabtesco Corp. | 9,400 | 209,695 | ||||||
| Makita Corp. | 4,500 | 208,780 | ||||||
| Vinci S.A. | 4,337 | 208,746 | ||||||
| IMI plc | 11,530 | 208,577 | ||||||
| Kinden Corp. | 32,000 | 208,273 | ||||||
| Japan Steel Works Ltd. | 32,000 | 208,213 | ||||||
| Qantas Airways Ltd.* | 132,755 | 208,148 | ||||||
| Hochtief AG* | 3,558 | 208,052 | ||||||
| Kubota Corp. | 18,000 | 206,691 | ||||||
| Mitsubishi Heavy Industries Ltd. | 42,710 | 206,336 | ||||||
| Hopewell Holdings Ltd. | 47,500 | 205,967 | ||||||
| DSV A/S | 7,960 | 205,893 | ||||||
| Daikin Industries Ltd. | 6,000 | 205,834 | ||||||
| Cie de St.-Gobain | 4,791 | 205,677 | ||||||
| Atlantia SpA | 11,329 | 205,652 | ||||||
| Koninklijke Boskalis Westminster N.V. | 4,543 | 205,581 | ||||||
| Cobham plc | 56,580 | 205,573 | ||||||
| Sandvik AB | 12,779 | 205,440 | ||||||
| Singapore Technologies Engineering Ltd. | 65,000 | 205,180 | ||||||
| Alfa Laval AB | 9,790 | 204,766 | ||||||
| ABB Ltd. | 9,850 | 204,120 | ||||||
| Adecco S.A. | 3,857 | 204,115 | ||||||
| Mitsubishi Electric Corp. | 24,000 | 204,085 | ||||||
| Safran S.A. | 4,691 | 203,087 | ||||||
| Schneider Electric S.A. | 2,773 | 203,031 | ||||||
| TOTO Ltd. | 27,000 | 202,730 | ||||||
| Asciano Ltd. | 41,370 | 202,639 | ||||||
| Orkla ASA | 23,126 | 202,603 | ||||||
| Tokyu Corp. | 36,000 | 202,557 | ||||||
| Rexel S.A. | 9,905 | 202,519 | ||||||
| Nippon Yusen K.K. | 86,000 | 202,173 | ||||||
| Noble Group Ltd. | 208,980 | 201,927 | ||||||
| BAE Systems plc | 36,280 | 201,671 | ||||||
| Orient Overseas International Ltd. | 30,510 | 201,431 | ||||||
| NGK Insulators Ltd. | 17,000 | 201,410 | ||||||
| Prysmian SpA | 10,089 | 201,321 | ||||||
| Yangzijiang Shipbuilding Holdings Ltd. | 251,060 | 201,171 | ||||||
| International Consolidated Airlines | ||||||||
| Group S.A.* | 68,330 | 200,962 | ||||||
| SembCorp Industries Ltd. | 46,060 | 200,863 | ||||||
| Marubeni Corp. | 28,000 | 200,652 | ||||||
| Mitsui & Company Ltd. | 13,400 | 200,596 | ||||||
| Legrand S.A. | 4,728 | 200,573 | ||||||
| NWS Holdings Ltd. | 118,000 | 200,571 | ||||||
| Siemens AG | 1,833 | 200,375 | ||||||
| Toyota Tsusho Corp. | 8,110 | 199,923 | ||||||
| ComfortDelGro Corporation Ltd. | 135,830 | 199,849 | ||||||
| LIXIL Group Corp. | 8,960 | 199,604 | ||||||
| Keppel Corporation Ltd. | 21,850 | 199,551 | ||||||
| Melrose Industries plc | 54,301 | 199,449 | ||||||
| Fraser and Neave Ltd. | 24,920 | 199,151 | ||||||
| Weir Group plc | 6,440 | 199,117 | ||||||
| Deutsche Post AG | 9,025 | 198,716 | ||||||
| Hino Motors Ltd. | 22,000 | 198,602 | ||||||
| Geberit AG | 895 | 198,259 | ||||||
| G4S plc | 47,303 | 198,200 | ||||||
| THK Company Ltd. | 11,000 | 197,592 | ||||||
| GS Yuasa Corp. | 49,000 | 197,308 | ||||||
| Groupe Eurotunnel S.A. | 25,338 | 196,831 | ||||||
| ITOCHU Corp. | 18,600 | 196,336 | ||||||
| Wartsila Oyj Abp | 4,511 | 196,327 | ||||||
| SKF AB — Class B | 7,749 | 196,320 | ||||||
| Brambles Ltd. | 24,707 | 196,158 | ||||||
| Fraport AG Frankfurt Airport | ||||||||
| Services Worldwide | 3,362 | 196,062 | ||||||
| SembCorp Marine Ltd. | 51,280 | 195,925 | ||||||
| Dai Nippon Printing Company Ltd. | 25,000 | 195,787 | ||||||
| Vallourec S.A. | 3,731 | 195,784 | ||||||
| Intertek Group plc | 3,837 | 194,921 | ||||||
| Assa Abloy AB — Class B | 5,175 | 194,857 | ||||||
| Sulzer AG | 1,231 | 194,691 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 31 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Skanska AB — Class B | 11,834 | $ | 194,263 | |||||
| Cathay Pacific Airways Ltd. | 104,410 | 193,945 | ||||||
| Hutchison Whampoa Ltd. | 18,280 | 193,726 | ||||||
| Toll Holdings Ltd. | 40,338 | 193,583 | ||||||
| Zodiac Aerospace | 1,746 | 193,239 | ||||||
| Aurizon Holdings Ltd. | 49,006 | 192,956 | ||||||
| Brenntag AG | 1,465 | 192,944 | ||||||
| MAN SE | 1,793 | 192,543 | ||||||
| Kintetsu Corp. | 47,000 | 192,349 | ||||||
| Andritz AG | 2,988 | 191,943 | ||||||
| Ferrovial S.A. | 12,894 | 191,882 | ||||||
| Leighton Holdings Ltd. | 10,136 | 191,581 | ||||||
| Kamigumi Company Ltd. | 24,000 | 191,249 | ||||||
| Hutchison Port Holdings Trust | 242,000 | 191,180 | ||||||
| Bureau Veritas S.A. | 1,705 | 191,119 | ||||||
| JGC Corp. | 6,140 | 191,089 | ||||||
| Sumitomo Corp. | 14,910 | 191,050 | ||||||
| Auckland International Airport Ltd. | 86,024 | 190,886 | ||||||
| Aeroports de Paris | 2,466 | 190,863 | ||||||
| Capita plc | 15,444 | 190,789 | ||||||
| Fiat Industrial SpA | 17,416 | 190,740 | ||||||
| Tobu Railway Company Ltd. | 36,000 | 190,671 | ||||||
| Meggitt plc | 30,443 | 190,652 | ||||||
| Sumitomo Electric Industries Ltd. | 16,510 | 190,594 | ||||||
| Edenred | 6,153 | 190,240 | ||||||
| Yamato Holdings Company Ltd. | 12,510 | 189,874 | ||||||
| Rolls-Royce Holdings plc | 13,211 | 189,457 | ||||||
| Wolseley plc | 3,951 | 189,025 | ||||||
| Koninklijke Philips Electronics N.V. | 7,131 | 188,769 | ||||||
| Singapore Airlines Ltd. | 21,280 | 188,769 | ||||||
| SGS S.A. | 85 | 188,656 | ||||||
| Mitsubishi Corp. | 9,800 | 188,440 | ||||||
| Scania AB — Class B | 9,055 | 188,320 | ||||||
| Babcock International Group plc | 11,908 | 187,945 | ||||||
| MTR Corporation Ltd. | 47,420 | 187,918 | ||||||
| GEA Group AG | 5,773 | 187,652 | ||||||
| Odakyu Electric Railway Company Ltd. | 18,000 | 187,038 | ||||||
| Chiyoda Corp. | 13,070 | 186,993 | ||||||
| Kone Oyj — Class B | 2,529 | 186,983 | ||||||
| Central Japan Railway Co. | 2,300 | 186,430 | ||||||
| Secom Company Ltd. | 3,700 | 186,178 | ||||||
| Keio Corp. | 25,000 | 186,141 | ||||||
| Toppan Printing Company Ltd. | 30,000 | 185,738 | ||||||
| Keisei Electric Railway Company Ltd. | 22,000 | 185,418 | ||||||
| Thales S.A. | 5,300 | 184,606 | ||||||
| Transurban Group | 28,925 | 184,099 | ||||||
| Kurita Water Industries Ltd. | 8,390 | 184,019 | ||||||
| Kuehne + Nagel International AG | 1,524 | 183,602 | ||||||
| Volvo AB — Class B | 13,306 | 183,531 | ||||||
| Serco Group plc | 20,955 | 183,461 | ||||||
| Sydney Airport | 52,015 | 183,459 | ||||||
| Mabuchi Motor Company Ltd. | 4,300 | 183,137 | ||||||
| Asahi Glass Company Ltd. | 25,000 | 182,308 | ||||||
| West Japan Railway Co. | 4,600 | 180,995 | ||||||
| East Japan Railway Co. | 2,800 | 180,830 | ||||||
| Hankyu Hanshin Holdings, Inc. | 35,000 | 180,732 | ||||||
| All Nippon Airways Company Ltd. | 86,000 | 180,448 | ||||||
| Experian plc | 11,185 | 180,339 | ||||||
| Societe BIC S.A. | 1,491 | 178,665 | ||||||
| Bunzl plc | 10,800 | 178,652 | ||||||
| Ushio, Inc. | 16,200 | 177,419 | ||||||
| Keikyu Corp. | 20,000 | 177,328 | ||||||
| Koninklijke Vopak N.V. | 2,499 | 176,591 | ||||||
| Japan Airlines Company Ltd.* | 4,100 | 176,009 | ||||||
| Nidec Corp. | 3,000 | 174,974 | ||||||
| Park24 Company Ltd. | 11,000 | 173,502 | ||||||
| Aggreko plc | 5,190 | 148,089 | ||||||
| AP Moeller - Maersk A/S — Class B | 19 | 143,844 | ||||||
| Schindler Holding AG - Participation | ||||||||
| Certificate | 952 | 137,615 | ||||||
| Atlas Copco AB — Class A | 4,817 | 133,615 | ||||||
| Atlas Copco AB — Class B | 2,799 | 68,726 | ||||||
| Schindler Holding AG | 422 | 59,806 | ||||||
| AP Moeller - Maersk A/S — Class A | 8 | 56,964 | ||||||
| Nippon Sheet Glass Company Ltd. | 770 | 1,017 | ||||||
| Neptune Orient Lines Ltd.* | 1,000 | 952 | ||||||
| Cosco Corporation Singapore Ltd. | 1,000 | 745 | ||||||
| Kawasaki Kisen Kaisha Ltd.* | 20 | 31 | ||||||
| Total Industrials | 35,114,153 | |||||||
| CONSUMER DISCRETIONARY - 13.4% | ||||||||
| Sharp Corp.† | 90,000 | 314,371 | ||||||
| Mazda Motor Corp.* | 120,000 | 245,965 | ||||||
| Panasonic Corp. | 37,910 | 231,390 | ||||||
| Fuji Heavy Industries Ltd. | 18,000 | 226,698 | ||||||
| Daihatsu Motor Company Ltd. | 11,000 | 218,873 | ||||||
| Lagardere SCA | 6,505 | 218,731 | ||||||
| Sekisui House Ltd. | 20,000 | 218,716 | ||||||
| Peugeot S.A.* | 29,952 | 218,504 | ||||||
| Casio Computer Company Ltd. | 24,910 | 218,363 | ||||||
| Yamaha Corp. | 20,610 | 218,310 | ||||||
| Marui Group Company Ltd. | 27,100 | 216,219 | ||||||
| Porsche Automobil Holding SE | 2,626 | 216,089 | ||||||
| J Front Retailing Company Ltd. | 39,000 | 215,878 | ||||||
| Daimler AG | 3,883 | 213,711 | ||||||
| Jardine Cycle & Carriage Ltd. | 5,360 | 213,516 | ||||||
| NGK Spark Plug Company Ltd. | 16,000 | 212,871 | ||||||
| Fiat SpA* | 41,866 | 210,828 | ||||||
| Genting Singapore plc | 183,330 | 210,647 | ||||||
| Sony Corp. | 18,800 | 210,583 | ||||||
| Li & Fung Ltd. | 116,040 | 209,408 | ||||||
| Nikon Corp. | 7,100 | 209,357 | ||||||
| Suzuki Motor Corp. | 8,000 | 209,081 | ||||||
| Dentsu, Inc. | 7,800 | 208,664 | ||||||
| ITV plc | 120,132 | 208,285 | ||||||
| Mitsubishi Motors Corp.* | 201,070 | 207,621 | ||||||
| Honda Motor Company Ltd. | 5,600 | 207,131 | ||||||
| Toyota Boshoku Corp. | 17,810 | 206,235 | ||||||
| Takashimaya Company Ltd. | 29,000 | 206,105 | ||||||
| Continental AG | 1,767 | 205,883 | ||||||
| Renault S.A. | 3,783 | 205,381 | ||||||
| Toyota Motor Corp. | 4,400 | 205,203 | ||||||
| 32 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Christian Dior S.A. | 1,202 | $ | 204,820 | |||||
| Wolters Kluwer N.V. | 9,949 | 204,303 | ||||||
| Eutelsat Communications S.A. | 6,140 | 204,152 | ||||||
| Sekisui Chemical Company Ltd. | 23,420 | 204,050 | ||||||
| Koito Manufacturing Company Ltd. | 14,000 | 203,918 | ||||||
| Fast Retailing Company Ltd. | 800 | 203,910 | ||||||
| Tabcorp Holdings Ltd. | 63,533 | 203,183 | ||||||
| Bridgestone Corp. | 7,800 | 202,789 | ||||||
| Accor S.A. | 5,680 | 202,523 | ||||||
| JCDecaux S.A. | 8,457 | 201,794 | ||||||
| Cie Generale des Etablissements | ||||||||
| Michelin | 2,104 | 201,538 | ||||||
| LVMH Moet Hennessy Louis Vuitton S.A. | 1,092 | 201,471 | ||||||
| Isetan Mitsukoshi Holdings Ltd. | 20,610 | 201,441 | ||||||
| Yamada Denki Company Ltd. | 5,210 | 201,116 | ||||||
| GKN plc | 53,230 | 200,817 | ||||||
| Publicis Groupe S.A. | 3,333 | 200,459 | ||||||
| Hennes & Mauritz AB — Class B | 5,779 | 200,341 | ||||||
| WPP plc | 13,710 | 200,258 | ||||||
| TUI Travel plc | 43,150 | 200,235 | ||||||
| Kabel Deutschland Holding AG | 2,641 | 198,712 | ||||||
| Asics Corp. | 13,010 | 198,496 | ||||||
| Denso Corp. | 5,700 | 198,246 | ||||||
| OPAP S.A. | 27,648 | 198,189 | ||||||
| Cie Financiere Richemont S.A. | 2,524 | 197,982 | ||||||
| Toyota Industries Corp. | 6,200 | 197,690 | ||||||
| Whitbread plc | 4,913 | 197,423 | ||||||
| Sodexo | 2,334 | 197,156 | ||||||
| Inditex S.A. | 1,403 | 197,066 | ||||||
| Galaxy Entertainment Group Ltd.* | 49,140 | 197,055 | ||||||
| Yamaha Motor Company Ltd. | 17,800 | 196,934 | ||||||
| Isuzu Motors Ltd. | 33,000 | 196,675 | ||||||
| Pirelli & C. SpA | 17,064 | 196,542 | ||||||
| Kingfisher plc | 42,040 | 196,443 | ||||||
| Reed Elsevier N.V. | 13,244 | 196,314 | ||||||
| Reed Elsevier plc | 18,543 | 195,695 | ||||||
| Sands China Ltd. | 43,750 | 195,606 | ||||||
| SES S.A. | 6,783 | 195,292 | ||||||
| Next plc | 3,208 | 194,758 | ||||||
| Shangri-La Asia Ltd. | 96,270 | 193,944 | ||||||
| Harvey Norman Holdings Ltd. | 97,208 | 193,758 | ||||||
| InterContinental Hotels Group plc | 6,904 | 193,554 | ||||||
| Pearson plc | 9,931 | 193,484 | ||||||
| Toho Company Ltd. | 11,000 | 193,361 | ||||||
| Crown Ltd. | 17,271 | 193,266 | ||||||
| Husqvarna AB — Class B | 31,816 | 193,148 | ||||||
| Adidas AG | 2,163 | 192,983 | ||||||
| Hugo Boss AG | 1,816 | 192,933 | ||||||
| SKYCITY Entertainment Group Ltd. | 61,263 | 192,870 | ||||||
| Electrolux AB | 7,298 | 192,828 | ||||||
| Tatts Group Ltd. | 61,131 | 192,794 | ||||||
| PPR | 1,026 | 192,631 | ||||||
| Marks & Spencer Group plc | 30,628 | 192,419 | ||||||
| Sumitomo Rubber Industries Ltd. | 15,920 | 192,265 | ||||||
| Hakuhodo DY Holdings, Inc. | 2,970 | 191,949 | ||||||
| ABC-Mart, Inc. | 4,400 | 191,313 | ||||||
| Luxottica Group SpA | 4,630 | 191,041 | ||||||
| Compass Group plc | 16,054 | 190,517 | ||||||
| Aisin Seiki Company Ltd. | 6,100 | 190,244 | ||||||
| Bayerische Motoren Werke AG | 1,950 | 189,695 | ||||||
| British Sky Broadcasting Group plc | 14,985 | 188,948 | ||||||
| Sega Sammy Holdings, Inc. | 11,200 | 188,809 | ||||||
| ProSiebenSat.1 Media AG | 6,613 | 188,303 | ||||||
| MGM China Holdings Ltd. | 102,123 | 188,107 | ||||||
| Burberry Group plc | 9,354 | 187,950 | ||||||
| SJM Holdings Ltd. | 79,630 | 187,945 | ||||||
| Axel Springer AG | 4,373 | 187,147 | ||||||
| Singapore Press Holdings Ltd. | 56,340 | 186,594 | ||||||
| Nitori Holdings Company Ltd. | 2,550 | 186,593 | ||||||
| Nissan Motor Company Ltd. | 19,510 | 184,893 | ||||||
| Nokian Renkaat Oyj | 4,592 | 183,883 | ||||||
| Flight Centre Ltd. | 6,490 | 183,873 | ||||||
| Rakuten, Inc.* | 23,588 | 183,717 | ||||||
| Rinnai Corp. | 2,700 | 183,216 | ||||||
| Stanley Electric Company Ltd. | 12,900 | 183,117 | ||||||
| USS Company Ltd. | 1,760 | 183,036 | ||||||
| Yue Yuen Industrial Holdings Ltd. | 54,100 | 182,991 | ||||||
| Oriental Land Company Ltd. | 1,500 | 181,426 | ||||||
| Carnival plc | 4,630 | 179,788 | ||||||
| Shimano, Inc. | 2,800 | 179,065 | ||||||
| Benesse Holdings, Inc. | 4,300 | 178,724 | ||||||
| Sankyo Company Ltd. | 4,500 | 178,333 | ||||||
| NOK Corp. | 11,400 | 178,288 | ||||||
| McDonald’s Holdings Company | ||||||||
| Japan Ltd. | 6,710 | 176,840 | ||||||
| Jupiter Telecommunications | ||||||||
| Company Ltd.† | 142 | 176,630 | ||||||
| Toyoda Gosei Company Ltd. | 8,700 | 176,619 | ||||||
| Echo Entertainment Group Ltd. | 48,737 | 176,245 | ||||||
| Wynn Macau Ltd.* | 63,760 | 175,588 | ||||||
| Shimamura Company Ltd. | 1,800 | 174,695 | ||||||
| NHK Spring Company Ltd. | 21,200 | 174,467 | ||||||
| Namco Bandai Holdings, Inc. | 13,220 | 171,143 | ||||||
| Volkswagen AG | 738 | 169,278 | ||||||
| Don Quijote Company Ltd. | 4,600 | 169,000 | ||||||
| Sanrio Company Ltd. | 5,200 | 165,690 | ||||||
| Swatch Group AG | 319 | 161,651 | ||||||
| Swatch Group AG/REG | 449 | 38,813 | ||||||
| Volkswagen AG | 150 | 32,530 | ||||||
| Bayerische Motoren Werke AG | 307 | 19,881 | ||||||
| Lifestyle International Holdings Ltd. | 20 | 49 | ||||||
| Mediaset SpA | 2 | 4 | ||||||
| Total Consumer Discretionary | 24,758,875 | |||||||
| Materials - 10.1% | ||||||||
| Kobe Steel Ltd.* | 199,040 | 253,996 | ||||||
| Fortescue Metals Group Ltd. | 46,205 | 230,553 | ||||||
| Taiheiyo Cement Corp. | 83,000 | 227,903 | ||||||
| JFE Holdings, Inc. | 12,100 | 227,755 | ||||||
| Rio Tinto plc | 3,894 | 227,176 | ||||||
| Mitsubishi Materials Corp. | 65,000 | 221,931 | ||||||
| Kazakhmys plc | 17,120 | 221,216 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 33 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Akzo Nobel N.V. | 3,326 | $ | 220,100 | |||||
| HeidelbergCement AG | 3,585 | 219,301 | ||||||
| ArcelorMittal | 12,523 | 218,273 | ||||||
| Nippon Paper Group, Inc. | 15,700 | 217,862 | ||||||
| Daido Steel Company Ltd. | 43,000 | 217,766 | ||||||
| Voestalpine AG | 5,919 | 217,413 | ||||||
| Rio Tinto Ltd. | 3,079 | 216,757 | ||||||
| Salzgitter AG | 4,129 | 216,325 | ||||||
| Mitsubishi Chemical Holdings Corp. | 43,010 | 213,986 | ||||||
| Anglo American plc | 6,765 | 213,282 | ||||||
| Toyo Seikan Kaisha Ltd. | 15,810 | 212,778 | ||||||
| CRH plc | 10,441 | 212,260 | ||||||
| Lafarge S.A. | 3,286 | 212,116 | ||||||
| ThyssenKrupp AG | 8,974 | 211,831 | ||||||
| Sumitomo Metal Mining Company Ltd. | 15,000 | 211,470 | ||||||
| Mitsui Chemicals, Inc. | 81,000 | 210,822 | ||||||
| BHP Billiton plc | 5,968 | 210,546 | ||||||
| Vedanta Resources plc | 10,881 | 209,986 | ||||||
| Ube Industries Ltd. | 87,000 | 208,729 | ||||||
| Evraz plc | 48,429 | 207,725 | ||||||
| Boral Ltd. | 45,150 | 207,432 | ||||||
| Teijin Ltd. | 83,000 | 206,437 | ||||||
| Stora Enso Oyj — Class R | 29,448 | 206,052 | ||||||
| Umicore S.A. | 3,710 | 205,367 | ||||||
| Solvay S.A. | 1,411 | 205,251 | ||||||
| Antofagasta plc | 9,369 | 205,247 | ||||||
| Holcim Ltd. | 2,784 | 204,910 | ||||||
| Daicel Corp. | 31,000 | 204,846 | ||||||
| Imerys S.A. | 3,177 | 203,702 | ||||||
| Boliden AB | 10,711 | 203,579 | ||||||
| Sika AG | 88 | 203,395 | ||||||
| BHP Billiton Ltd. | 5,201 | 203,308 | ||||||
| Oji Holdings Corp. | 59,000 | 203,254 | ||||||
| Norsk Hydro ASA | 40,016 | 203,041 | ||||||
| Eurasian Natural Resources Corp. plc | 42,927 | 203,030 | ||||||
| Iluka Resources Ltd. | 20,928 | 202,505 | ||||||
| Sumitomo Chemical Company Ltd. | 64,000 | 201,436 | ||||||
| Koninklijke DSM N.V. | 3,305 | 201,360 | ||||||
| UPM-Kymmene Oyj | 17,115 | 201,288 | ||||||
| Johnson Matthey plc | 5,112 | 200,810 | ||||||
| Xstrata plc | 11,467 | 200,245 | ||||||
| Orica Ltd. | 7,599 | 200,155 | ||||||
| BASF SE | 2,117 | 200,118 | ||||||
| Fletcher Building Ltd. | 28,405 | 199,882 | ||||||
| Maruichi Steel Tube Ltd. | 8,680 | 199,795 | ||||||
| K+S AG | 4,299 | 199,597 | ||||||
| Kuraray Company Ltd. | 15,130 | 198,090 | ||||||
| Glencore International plc | 34,235 | 197,848 | ||||||
| Sims Metal Management Ltd. | 19,921 | 197,097 | ||||||
| Nippon Steel & Sumitomo Metal Corp. | 80,000 | 196,724 | ||||||
| Givaudan S.A. | 186 | 196,423 | ||||||
| Arkema S.A. | 1,871 | 196,389 | ||||||
| Toray Industries, Inc. | 32,000 | 196,328 | ||||||
| Mitsubishi Gas Chemical Company, Inc. | 32,000 | 196,035 | ||||||
| Hitachi Metals Ltd. | 23,000 | 195,893 | ||||||
| Novozymes A/S — Class B | 6,873 | 195,052 | ||||||
| Shin-Etsu Chemical Company Ltd. | 3,200 | 195,049 | ||||||
| Asahi Kasei Corp. | 33,000 | 194,885 | ||||||
| Croda International plc | 4,965 | 194,052 | ||||||
| Kansai Paint Company Ltd. | 18,000 | 193,738 | ||||||
| Yara International ASA | 3,884 | 193,592 | ||||||
| Incitec Pivot Ltd. | 56,653 | 193,397 | ||||||
| Amcor Ltd. | 22,777 | 192,750 | ||||||
| Hitachi Chemical Company Ltd. | 12,800 | 192,693 | ||||||
| JSR Corp. | 10,100 | 192,541 | ||||||
| Yamato Kogyo Company Ltd. | 6,580 | 192,466 | ||||||
| Air Liquide S.A. | 1,523 | 192,350 | ||||||
| Syngenta AG | 476 | 192,161 | ||||||
| Lanxess AG | 2,176 | 191,816 | ||||||
| Air Water, Inc. | 15,000 | 191,739 | ||||||
| Denki Kagaku Kogyo K.K. | 56,000 | 191,489 | ||||||
| James Hardie Industries plc | 19,744 | 191,402 | ||||||
| Rexam plc | 26,688 | 190,989 | ||||||
| Showa Denko K.K. | 125,000 | 190,811 | ||||||
| Alumina Ltd. | 195,486 | 187,854 | ||||||
| Linde AG | 1,071 | 187,309 | ||||||
| Kaneka Corp. | 37,000 | 186,970 | ||||||
| EMS-Chemie Holding AG | 787 | 185,407 | ||||||
| Taiyo Nippon Sanso Corp. | 32,000 | 183,870 | ||||||
| Nitto Denko Corp. | 3,700 | 181,989 | ||||||
| Israel Corporation Ltd. | 276 | 181,599 | ||||||
| Israel Chemicals Ltd. | 15,032 | 181,083 | ||||||
| Fresnillo plc | 5,858 | 179,745 | ||||||
| Randgold Resources Ltd. | 1,767 | 174,873 | ||||||
| OZ Minerals Ltd. | 24,369 | 173,279 | ||||||
| Newcrest Mining Ltd. | 6,895 | 161,498 | ||||||
| Lynas Corporation Ltd.* | 5 | 3 | ||||||
| Total Materials | 18,765,178 | |||||||
| Consumer Staples - 7.1% | ||||||||
| Delhaize Group S.A. | 5,341 | 215,060 | ||||||
| Svenska Cellulosa AB — Class B | 9,376 | 203,917 | ||||||
| Associated British Foods plc | 7,912 | 202,090 | ||||||
| Suedzucker AG | 4,895 | 200,860 | ||||||
| Casino Guichard Perrachon S.A. | 2,088 | 199,929 | ||||||
| Kikkoman Corp. | 14,000 | 199,655 | ||||||
| Wilmar International Ltd. | 72,280 | 199,576 | ||||||
| Tesco plc | 36,111 | 198,969 | ||||||
| Koninklijke Ahold N.V. | 14,797 | 198,349 | ||||||
| Colruyt S.A.† | 3,994 | 197,631 | ||||||
| J Sainsbury plc | 34,769 | 196,731 | ||||||
| Carrefour S.A. | 7,635 | 196,517 | ||||||
| Wesfarmers Ltd. | 5,077 | 196,126 | ||||||
| Golden Agri-Resources Ltd. | 363,290 | 195,530 | ||||||
| Kesko Oyj — Class B | 5,938 | 194,881 | ||||||
| Danone S.A.† | 2,958 | 194,787 | ||||||
| Beiersdorf AG | 2,376 | 194,485 | ||||||
| Aryzta AG | 3,760 | 193,335 | ||||||
| Carlsberg A/S — Class B | 1,960 | 193,043 | ||||||
| L’Oreal S.A. | 1,376 | 191,398 | ||||||
| Pernod-Ricard S.A. | 1,649 | 191,256 | ||||||
| Heineken Holding N.V. | 3,473 | 191,171 | ||||||
| Unicharm Corp. | 3,680 | 190,987 | ||||||
| 34 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| WM Morrison Supermarkets plc | 44,457 | $ | 190,886 | |||||
| Kerry Group plc — Class A | 3,609 | 190,569 | ||||||
| Heineken N.V. | 2,841 | 190,409 | ||||||
| Woolworths Ltd. | 6,187 | 190,048 | ||||||
| Toyo Suisan Kaisha Ltd. | 7,140 | 189,995 | ||||||
| SABMiller plc | 4,091 | 189,909 | ||||||
| Lawson, Inc. | 2,800 | 189,698 | ||||||
| Aeon Company Ltd. | 16,610 | 189,587 | ||||||
| Unilever N.V. | 4,954 | 189,496 | ||||||
| Distribuidora Internacional | ||||||||
| de Alimentacion S.A. | 29,667 | 189,485 | ||||||
| Nestle S.A. | 2,891 | 188,485 | ||||||
| Jeronimo Martins SGPS S.A. | 9,747 | 188,411 | ||||||
| Unilever plc | 4,841 | 188,169 | ||||||
| Anheuser-Busch InBev N.V. | 2,161 | 188,129 | ||||||
| Yakult Honsha Company Ltd. | 4,300 | 188,110 | ||||||
| Reckitt Benckiser Group plc | 2,960 | 187,925 | ||||||
| Nisshin Seifun Group, Inc. | 15,010 | 187,599 | ||||||
| Olam International Ltd. | 145,410 | 186,807 | ||||||
| Coca-Cola West Company Ltd. | 12,100 | 186,591 | ||||||
| Coca Cola Hellenic Bottling | ||||||||
| Company S.A.† | 7,987 | 186,541 | ||||||
| Shiseido Company Ltd. | 13,100 | 184,678 | ||||||
| Coca-Cola Amatil Ltd. | 13,119 | 184,600 | ||||||
| Swedish Match AB | 5,491 | 184,386 | ||||||
| Tate & Lyle plc | 14,889 | 184,162 | ||||||
| Nissin Foods Holdings Company Ltd. | 4,840 | 183,388 | ||||||
| Seven & I Holdings Company Ltd. | 6,500 | 183,008 | ||||||
| DE Master Blenders 1753 N.V.* | 15,861 | 182,163 | ||||||
| Yamazaki Baking Company Ltd. | 16,280 | 181,173 | ||||||
| Metro AG | 6,492 | 180,298 | ||||||
| British American Tobacco plc | 3,540 | 179,998 | ||||||
| Nippon Meat Packers, Inc. | 13,000 | 179,978 | ||||||
| Diageo plc | 6,168 | 179,674 | ||||||
| Barry Callebaut AG | 185 | 178,849 | ||||||
| Imperial Tobacco Group plc | 4,608 | 178,655 | ||||||
| Japan Tobacco, Inc. | 6,299 | 177,717 | ||||||
| MEIJI Holdings Company Ltd. | 4,100 | 177,582 | ||||||
| Asahi Group Holdings Ltd. | 8,350 | 177,569 | ||||||
| Remy Cointreau S.A.† | 1,624 | 177,282 | ||||||
| Kao Corp. | 6,800 | 176,967 | ||||||
| FamilyMart Company Ltd. | 4,300 | 176,927 | ||||||
| Kirin Holdings Company Ltd. | 15,000 | 176,266 | ||||||
| Ajinomoto Company, Inc. | 13,280 | 175,504 | ||||||
| Metcash Ltd. | 49,969 | 173,450 | ||||||
| Treasury Wine Estates Ltd. | 34,475 | 169,900 | ||||||
| Calbee, Inc. | 2,200 | 154,821 | ||||||
| Henkel AG & Company KGaA | 1,414 | 116,294 | ||||||
| Lindt & Spruengli AG | 3 | 113,468 | ||||||
| Lindt & Spruengli AG - Participation | ||||||||
| Certificate | 25 | 81,470 | ||||||
| Henkel AG & Company KGaA | 1,031 | 70,736 | ||||||
| Total Consumer Staples | 13,154,095 | |||||||
| Information Technology - 6.3% | ||||||||
| Sumco Corp.* | 26,460 | 259,942 | ||||||
| STMicroelectronics N.V. | 30,647 | 222,411 | ||||||
| Yaskawa Electric Corp. | 23,000 | 221,669 | ||||||
| Nokia Oyj | 56,028 | 221,334 | ||||||
| Advantest Corp. | 14,000 | 220,822 | ||||||
| Ibiden Company Ltd. | 13,600 | 217,353 | ||||||
| Trend Micro, Inc.* | 7,100 | 214,255 | ||||||
| Rohm Company Ltd. | 6,500 | 212,214 | ||||||
| Ricoh Company Ltd. | 20,000 | 212,020 | ||||||
| Toshiba Corp. | 53,000 | 209,519 | ||||||
| Fujitsu Ltd. | 50,000 | 209,433 | ||||||
| FUJIFILM Holdings Corp. | 10,400 | 208,981 | ||||||
| Telefonaktiebolaget LM | ||||||||
| Ericsson — Class B | 20,656 | 208,712 | ||||||
| Canon, Inc. | 5,300 | 205,166 | ||||||
| Omron Corp. | 8,500 | 203,770 | ||||||
| Hirose Electric Company Ltd. | 1,700 | 203,299 | ||||||
| Brother Industries Ltd. | 18,810 | 202,241 | ||||||
| Murata Manufacturing Company Ltd. | 3,400 | 200,316 | ||||||
| ASM Pacific Technology Ltd. | 16,300 | 200,131 | ||||||
| Hitachi Ltd. | 34,000 | 199,820 | ||||||
| Amadeus IT Holding S.A. — Class A | 7,901 | 199,604 | ||||||
| Infineon Technologies AG | 24,450 | 199,116 | ||||||
| Tokyo Electron Ltd. | 4,300 | 198,070 | ||||||
| Nomura Research Institute Ltd. | 9,500 | 197,641 | ||||||
| NTT Data Corp. | 63 | 196,954 | ||||||
| Citizen Holdings Company Ltd. | 37,310 | 196,838 | ||||||
| Capital Gemini S.A. | 4,502 | 196,797 | ||||||
| Computershare Ltd. | 20,782 | 196,299 | ||||||
| Hamamatsu Photonics K.K. | 5,380 | 195,362 | ||||||
| ASML Holding N.V. | 3,041 | 194,967 | ||||||
| Keyence Corp. | 700 | 193,881 | ||||||
| SAP AG | 2,409 | 193,652 | ||||||
| Nippon Electric Glass Company Ltd. | 34,000 | 193,350 | ||||||
| ARM Holdings plc | 15,302 | 193,195 | ||||||
| Hexagon AB — Class B | 7,593 | 192,069 | ||||||
| Kyocera Corp. | 2,110 | 191,061 | ||||||
| Konica Minolta Holdings, Inc. | 26,510 | 190,533 | ||||||
| Yokogawa Electric Corp. | 17,380 | 190,334 | ||||||
| NEC Corp.* | 90,000 | 189,600 | ||||||
| Hoya Corp. | 9,600 | 188,918 | ||||||
| Shimadzu Corp. | 27,640 | 188,369 | ||||||
| Dassault Systemes S.A. | 1,672 | 186,881 | ||||||
| AtoS | 2,645 | 185,690 | ||||||
| NICE Systems Ltd.* | 5,533 | 185,370 | ||||||
| United Internet AG | 8,487 | 183,474 | ||||||
| Dena Company Ltd.† | 5,600 | 183,471 | ||||||
| Oracle Corporation Japan | 4,400 | 183,062 | ||||||
| Gemalto N.V. | 2,006 | 181,012 | ||||||
| Sage Group plc | 37,199 | 178,881 | ||||||
| Yahoo Japan Corp. | 551 | 178,185 | ||||||
| Konami Corp. | 7,810 | 175,652 | ||||||
| Square Enix Holdings Company Ltd. | 13,810 | 175,454 | ||||||
| Otsuka Corp. | 2,300 | 173,799 | ||||||
| Hitachi High-Technologies Corp. | 8,300 | 171,540 | ||||||
| TDK Corp. | 4,700 | 170,942 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 35 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Nintendo Company Ltd. | 1,600 | $ | 170,627 | |||||
| Nexon Company Ltd.* | 16,769 | 169,622 | ||||||
| Gree, Inc. | 10,880 | 168,638 | ||||||
| Itochu Techno-Solutions Corp. | 3,900 | 160,392 | ||||||
| Mellanox Technologies Ltd.* | 2,160 | 133,832 | ||||||
| Elpida Memory, Inc.*,†††,1 | 50,900 | 587 | ||||||
| Foxconn International Holdings Ltd.* | 150 | 74 | ||||||
| Alcatel-Lucent* | 3 | 4 | ||||||
| Total Information Technology | 11,647,207 | |||||||
| Health Care - 5.5% | ||||||||
| Olympus Corp.* | 11,030 | 213,719 | ||||||
| Lonza Group AG | 3,946 | 213,667 | ||||||
| Orion Oyj — Class B | 7,206 | 212,098 | ||||||
| Grifols S.A.* | 5,821 | 203,484 | ||||||
| CSL Ltd. | 3,557 | 201,074 | ||||||
| Shire plc | 6,480 | 199,305 | ||||||
| Sanofi | 2,090 | 198,130 | ||||||
| Bayer AG | 2,073 | 197,621 | ||||||
| Cochlear Ltd. | 2,374 | 197,054 | ||||||
| William Demant Holding A/S* | 2,294 | 197,031 | ||||||
| Dainippon Sumitomo Pharma | ||||||||
| Company Ltd. | 16,410 | 196,895 | ||||||
| Elekta AB — Class B† | 12,623 | 196,880 | ||||||
| Roche Holding AG | 967 | 195,370 | ||||||
| Getinge AB — Class B | 5,737 | 195,073 | ||||||
| Ramsay Health Care Ltd. | 6,824 | 194,884 | ||||||
| Cie Generale d’Optique Essilor | ||||||||
| International S.A. | 1,932 | 194,793 | ||||||
| Smith & Nephew plc | 17,601 | 194,636 | ||||||
| Sysmex Corp. | 4,220 | 194,080 | ||||||
| Coloplast A/S — Class B | 3,945 | 193,415 | ||||||
| Novartis AG | 3,059 | 193,110 | ||||||
| AstraZeneca plc | 4,025 | 190,786 | ||||||
| Sonic Healthcare Ltd. | 13,642 | 190,665 | ||||||
| Novo Nordisk A/S — Class B | 1,169 | 190,308 | ||||||
| Eisai Company Ltd. | 4,560 | 190,106 | ||||||
| GlaxoSmithKline plc | 8,691 | 189,227 | ||||||
| UCB S.A. | 3,292 | 188,532 | ||||||
| Fresenius Medical Care AG & Co. KGaA | 2,726 | 188,066 | ||||||
| Shionogi & Company Ltd. | 11,300 | 188,062 | ||||||
| Celesio AG | 10,822 | 187,387 | ||||||
| Fresenius SE & Company KGaA | 1,629 | 187,386 | ||||||
| Kyowa Hakko Kirin Company Ltd. | 19,000 | 187,201 | ||||||
| Elan Corporation plc* | 18,231 | 186,873 | ||||||
| Sonova Holding AG† | 1,683 | 186,448 | ||||||
| Merck KGaA | 1,412 | 186,034 | ||||||
| Daiichi Sankyo Company Ltd. | 12,100 | 185,526 | ||||||
| Actelion Ltd. | 3,870 | 185,051 | ||||||
| Miraca Holdings, Inc. | 4,580 | 184,435 | ||||||
| Takeda Pharmaceutical Company Ltd. | 4,100 | 183,017 | ||||||
| QIAGEN N.V.* | 10,061 | 182,660 | ||||||
| Hisamitsu Pharmaceutical Company, Inc. | 3,630 | 180,437 | ||||||
| Chugai Pharmaceutical Company Ltd. | 9,300 | 177,963 | ||||||
| Mitsubishi Tanabe Pharma Corp. | 13,600 | 177,142 | ||||||
| Otsuka Holdings Company Ltd. | 6,230 | 175,285 | ||||||
| Suzuken Company Limited/Aichi Japan | 6,200 | 174,451 | ||||||
| Ono Pharmaceutical Company Ltd. | 3,410 | 173,976 | ||||||
| Teva Pharmaceutical Industries Ltd. | 4,641 | 172,506 | ||||||
| Terumo Corp. | 4,340 | 172,123 | ||||||
| Tsumura & Co. | 5,700 | 172,096 | ||||||
| Santen Pharmaceutical Company Ltd. | 4,480 | 171,872 | ||||||
| Taisho Pharmaceutical Holdings | ||||||||
| Company Ltd. | 2,500 | 171,489 | ||||||
| Alfresa Holdings Corp. | 4,300 | 167,862 | ||||||
| Medipal Holdings Corp. | 15,110 | 167,318 | ||||||
| Astellas Pharma, Inc. | 3,700 | 166,147 | ||||||
| M3, Inc. | 100 | 159,405 | ||||||
| Prothena Corporation plc*,† | 445 | 3,259 | ||||||
| Total Health Care | 10,123,420 | |||||||
| Utilities - 4.7% | ||||||||
| Tokyo Electric Power Company, Inc.* | 116,720 | 280,944 | ||||||
| EDP - Energias de Portugal S.A. | 74,801 | 227,454 | ||||||
| Hokkaido Electric Power Company, Inc. | 18,600 | 225,513 | ||||||
| Acciona S.A. | 2,969 | 221,649 | ||||||
| Veolia Environnement S.A. | 18,146 | 219,913 | ||||||
| Kyushu Electric Power Company, Inc. | 19,310 | 219,878 | ||||||
| Suez Environnement Co. | 17,969 | 216,686 | ||||||
| Shikoku Electric Power Company, Inc. | 13,500 | 215,096 | ||||||
| Gas Natural SDG S.A. | 11,833 | 213,248 | ||||||
| Enel Green Power SpA | 112,056 | 208,667 | ||||||
| Kansai Electric Power Company, Inc. | 19,800 | 207,679 | ||||||
| Enel SpA | 49,850 | 207,283 | ||||||
| Verbund AG | 8,239 | 204,570 | ||||||
| Chugoku Electric Power Company, Inc. | 13,010 | 204,468 | ||||||
| Iberdrola S.A. | 36,397 | 203,201 | ||||||
| Enagas S.A. | 9,452 | 202,434 | ||||||
| Terna Rete Elettrica Nazionale SpA | 49,989 | 199,979 | ||||||
| AGL Energy Ltd. | 12,379 | 199,259 | ||||||
| Snam SpA | 42,459 | 198,116 | ||||||
| Centrica plc | 36,077 | 196,916 | ||||||
| Fortum Oyj | 10,502 | 196,543 | ||||||
| Red Electrica Corporation S.A. | 3,974 | 196,236 | ||||||
| SP AusNet | 168,617 | 196,201 | ||||||
| E.ON SE | 10,418 | 195,337 | ||||||
| Hokuriku Electric Power Co. | 16,400 | 194,382 | ||||||
| SSE plc | 8,291 | 192,823 | ||||||
| Severn Trent plc | 7,464 | 192,016 | ||||||
| Cheung Kong Infrastructure Holdings Ltd. | 31,080 | 191,995 | ||||||
| United Utilities Group plc | 17,337 | 190,792 | ||||||
| Hong Kong & China Gas Company Ltd. | 68,820 | 189,098 | ||||||
| APA Group | 32,403 | 187,301 | ||||||
| National Grid plc | 16,279 | 186,652 | ||||||
| Contact Energy Ltd.* | 43,012 | 186,188 | ||||||
| Tohoku Electric Power Company, Inc.* | 19,910 | 185,416 | ||||||
| Power Assets Holdings Ltd. | 21,600 | 185,332 | ||||||
| Electricite de France S.A. | 9,991 | 185,078 | ||||||
| Chubu Electric Power Company, Inc. | 13,710 | 182,725 | ||||||
| CLP Holdings Ltd. | 21,640 | 181,829 | ||||||
| GDF Suez | 8,565 | 176,348 | ||||||
| RWE AG | 4,211 | 174,605 | ||||||
| Electric Power Development | ||||||||
| Company Ltd. | 7,300 | 172,921 | ||||||
| 36 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| Toho Gas Company Ltd. | 32,000 | $ | 171,382 | |||||
| Osaka Gas Company Ltd. | 47,000 | 170,503 | ||||||
| Tokyo Gas Company Ltd. | 37,000 | 168,841 | ||||||
| RWE AG | 336 | 12,701 | ||||||
| Total Utilities | 8,736,198 | |||||||
| Energy - 3.8% | ||||||||
| Whitehaven Coal Ltd. | 62,200 | 232,104 | ||||||
| Cosmo Oil Company Ltd. | 97,000 | 216,965 | ||||||
| Aker Solutions ASA | 10,125 | 209,612 | ||||||
| JX Holdings, Inc. | 36,610 | 206,430 | ||||||
| Origin Energy Ltd. | 16,610 | 204,443 | ||||||
| Delek Group Ltd. | 851 | 200,309 | ||||||
| Idemitsu Kosan Company Ltd. | 2,300 | 200,164 | ||||||
| Tenaris S.A. | 9,508 | 198,181 | ||||||
| Eni SpA | 8,072 | 197,680 | ||||||
| Caltex Australia Ltd. | 9,763 | 197,167 | ||||||
| Total S.A. | 3,786 | 196,933 | ||||||
| Petrofac Ltd. | 7,300 | 195,056 | ||||||
| Fugro N.V. | 3,279 | 194,506 | ||||||
| Galp Energia SGPS S.A.† | 12,502 | 194,001 | ||||||
| Subsea 7 S.A. | 8,052 | 193,449 | ||||||
| Neste Oil Oyj | 14,829 | 192,183 | ||||||
| OMV AG | 5,295 | 191,807 | ||||||
| Statoil ASA | 7,612 | 191,799 | ||||||
| Japan Petroleum Exploration Co. | 5,370 | 189,414 | ||||||
| Woodside Petroleum Ltd. | 5,282 | 188,464 | ||||||
| Santos Ltd. | 15,969 | 187,341 | ||||||
| BP plc | 26,896 | 187,057 | ||||||
| Technip S.A. | 1,616 | 186,807 | ||||||
| AMEC plc | 11,283 | 186,406 | ||||||
| Cie Generale de Geophysique - Veritas* | 6,125 | 186,056 | ||||||
| TonenGeneral Sekiyu K.K. | 21,280 | 183,791 | ||||||
| Lundin Petroleum AB* | 7,938 | 183,756 | ||||||
| BG Group plc | 10,942 | 182,492 | ||||||
| Transocean Ltd. | 4,057 | 181,761 | ||||||
| Inpex Corp. | 34 | 181,614 | ||||||
| Repsol S.A. | 8,766 | 178,880 | ||||||
| Showa Shell Sekiyu K.K. | 31,600 | 178,764 | ||||||
| Tullow Oil plc | 8,529 | 177,737 | ||||||
| Seadrill Ltd. | 4,816 | 177,376 | ||||||
| WorleyParsons Ltd. | 7,182 | 177,139 | ||||||
| Saipem SpA | 4,269 | 166,236 | ||||||
| Royal Dutch Shell plc — Class A | 3,233 | 112,262 | ||||||
| Royal Dutch Shell plc — Class B | 2,289 | 81,695 | ||||||
| Total Energy | 7,087,837 | |||||||
| Telecommunication Services - 3.4% | ||||||||
| Telekom Austria AG | 28,379 | 215,417 | ||||||
| TDC A/S | 28,724 | 203,461 | ||||||
| Portugal Telecom SGPS S.A. | 40,260 | 200,422 | ||||||
| Vivendi S.A. | 8,809 | 199,159 | ||||||
| France Telecom S.A. | 17,955 | 199,125 | ||||||
| PCCW Ltd. | 449,210 | 198,565 | ||||||
| Tele2 AB — Class B | 10,938 | 197,760 | ||||||
| Elisa Oyj | 8,919 | 197,668 | ||||||
| StarHub Ltd. | 62,980 | 197,292 | ||||||
| Deutsche Telekom AG | 17,299 | 196,849 | ||||||
| Singapore Telecommunications Ltd. | 72,060 | 196,103 | ||||||
| Swisscom AG | 452 | 195,719 | ||||||
| BT Group plc | 51,254 | 195,537 | ||||||
| Inmarsat plc | 20,102 | 193,674 | ||||||
| Telefonica S.A. | 14,220 | 192,463 | ||||||
| Telenet Group Holding N.V.† | 4,089 | 192,351 | ||||||
| HKT Trust / HKT Ltd. | 195,095 | 191,639 | ||||||
| Millicom International Cellular S.A. | 2,197 | 190,757 | ||||||
| TeliaSonera AB | 27,948 | 189,794 | ||||||
| Belgacom S.A. | 6,450 | 189,643 | ||||||
| Telstra Corporation Ltd. | 41,467 | 189,194 | ||||||
| Telenor ASA | 9,216 | 187,597 | ||||||
| Ziggo N.V.† | 5,741 | 187,566 | ||||||
| Vodafone Group plc | 73,925 | 186,102 | ||||||
| Telecom Corporation of | ||||||||
| New Zealand Ltd. | 97,284 | 184,601 | ||||||
| Iliad S.A.† | 1,073 | 184,131 | ||||||
| NTT DOCOMO, Inc. | 127 | 182,841 | ||||||
| Bezeq The Israeli Telecommunication | ||||||||
| Corporation Ltd. | 153,504 | 177,855 | ||||||
| KDDI Corp. | 2,500 | 176,519 | ||||||
| Softbank Corp. | 4,800 | 175,655 | ||||||
| Nippon Telegraph & Telephone Corp. | 4,100 | 172,403 | ||||||
| Koninklijke KPN N.V. | 34,076 | 168,462 | ||||||
| Telecom Italia SpA | 137,491 | 124,673 | ||||||
| Telecom Italia SpA - Savings Shares | 88,219 | 70,190 | ||||||
| Total Telecommunication Services | 6,301,187 | |||||||
| Total Common Stocks | ||||||||
| (Cost $176,715,733) | 176,309,313 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 37 |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Shares | Value | |||||||
| RIGHTS†††- 0.0% | ||||||||
| Olam International Ltd. | ||||||||
| Expires 01/21/13*,1 | 45,513 | $ | — | |||||
| Total Rights | ||||||||
| (Cost $–) | — | |||||||
| EXCHANGE TRADED FUNDS† - 4.4% | ||||||||
| Vanguard MSCI EAFE ETF | 181,931 | 6,409,430 | ||||||
| iShares MSCI Japan Index Fund | 157,191 | 1,532,612 | ||||||
| iShares MSCI Singapore Index Fund | 6,634 | 90,819 | ||||||
| iShares MSCI Hong Kong Index Fund | 4,638 | 90,070 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $7,723,852) | 8,122,931 | |||||||
| SHORT-TERM INVESTMENTS†† - 0.4% | ||||||||
| State Street General Account | ||||||||
| U.S. Government Fund | 729,294 | 729,294 | ||||||
| Total Short-Term Investments | ||||||||
| (Cost $729,294) | 729,294 | |||||||
| Total Investments - 100.0% | ||||||||
| (Cost $185,168,879) | $ | 185,161,538 | ||||||
| Other Assets & Liabilities, net - 0.0% | 71,212 | |||||||
| Total Net Assets - 100.0% | $ | 185,232,750 | ||||||
INVESTMENT CONCENTRATION
At December 31, 2012, the investment diversification of the series by country was as follows:
| Country | % of Net Assets | Value | ||||||
| Japan | 33.6 | % | $ | 62,222,156 | ||||
| Britain | 10.3 | % | 19,077,288 | |||||
| France | 7.3 | % | 13,534,955 | |||||
| Australia | 7.0 | % | 13,007,983 | |||||
| United States | 5.2 | % | 9,641,353 | |||||
| Germany | 4.9 | % | 9,076,903 | |||||
| Switzerland | 4.2 | % | 7,801,670 | |||||
| Hong Kong | 4.2 | % | 7,759,249 | |||||
| Sweden | 3.2 | % | 5,931,731 | |||||
| Singapore | 3.1 | % | 5,793,529 | |||||
| Netherlands | 2.7 | % | 4,904,285 | |||||
| Italy | 2.4 | % | 4,463,539 | |||||
| Spain | 2.3 | % | 4,279,986 | |||||
| Finland | 1.5 | % | 2,800,145 | |||||
| Belgium | 1.2 | % | 2,199,684 | |||||
| Austria | 1.0 | % | 1,826,019 | |||||
| Israel | 1.0 | % | 1,822,038 | |||||
| Denmark | 1.0 | % | 1,780,475 | |||||
| Other | 3.9 | % | 7,238,550 | |||||
| Total Investments | 100.0 | % | $ | 185,161,538 | ||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs, except as noted — See Note 4. |
| ††† | Value determined based on Level 3 inputs — See Note 4. |
| 1 | Illiquid security. |
ADR — American Depositary Receipt
plc — Public Limited Company
REIT — Real Estate Investment Trust
| 38 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
STATEMENT OF ASSETS
| AND LIABILITIES |
| December 31, 2012 | ||||
| Assets: | ||||
| Investments at value | ||||
| (cost $185,168,879) | $ | 185,161,538 | ||
| Foreign currency, at value | ||||
| (cost $31,503) | 31,524 | |||
| Prepaid expenses | 4,287 | |||
| Receivables: | ||||
| Dividends | 171,645 | |||
| Securities sold | 198,411 | |||
| Foreign taxes reclaim | 123,148 | |||
| Fund shares sold | 3,081 | |||
| Total assets | 185,693,634 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 150,152 | |||
| Management fees | 108,093 | |||
| Custodian fees | 100,854 | |||
| Fund accounting/administration fees | 23,163 | |||
| Transfer agent/maintenance fees | 5,918 | |||
| Directors’ fees* | 3,808 | |||
| Miscellaneous | 68,896 | |||
| Total liabilities | 460,884 | |||
| Net assets | $ | 185,232,750 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 259,942,054 | ||
| Undistributed net investment income | 8,169,335 | |||
| Accumulated net realized loss on investments | (82,868,429 | ) | ||
| Net unrealized depreciation on investments and foreign currency | (10,210 | ) | ||
| Net assets | $ | 185,232,750 | ||
| Capital shares outstanding | 18,419,054 | |||
| Net asset value per share | $ | 10.06 | ||
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $651,614) | $ | 5,847,254 | ||
| Interest | 869 | |||
| Other income | 131 | |||
| Total investment income | 5,848,254 | |||
| Expenses: | ||||
| Management fees | 1,282,801 | |||
| Transfer agent/maintenance fees | 26,996 | |||
| Fund accounting/administration fees | 274,888 | |||
| Custodian fees | 225,572 | |||
| Directors’ fees* | 23,333 | |||
| Miscellaneous | 302,501 | |||
| Total expenses | 2,136,091 | |||
| Net investment income | 3,712,163 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (14,435,564 | ) | ||
| Foreign currency | (96,199 | ) | ||
| Securities sold short | 4 | |||
| Net realized loss | (14,531,759 | ) | ||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 39,099,883 | |||
| Foreign currency | 1,793 | |||
| Net change in unrealized appreciation (depreciation) | 39,101,676 | |||
| Net realized and unrealized gain | 24,569,917 | |||
| Net increase in net assets resulting from operations | $ | 28,282,080 | ||
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 39 |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 3,712,163 | $ | 2,895,379 | ||||
| Net realized gain (loss) on investments and foreign currency | (14,531,759 | ) | 40,436,575 | |||||
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | 39,101,676 | (80,144,459 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 28,282,080 | (36,812,505 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 9,335,815 | 11,891,306 | ||||||
| Cost of shares redeemed | (38,131,911 | ) | (58,976,775 | ) | ||||
| Net decrease from capital share transactions | (28,796,096 | ) | (47,085,469 | ) | ||||
| Net decrease in net assets | (514,016 | ) | (83,897,974 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 185,746,766 | 269,644,740 | ||||||
| End of year | $ | 185,232,750 | $ | 185,746,766 | ||||
| Undistributed net investment income at end of year | $ | 8,169,335 | $ | 1,977,489 | ||||
| Capital share activity: | ||||||||
| Shares sold | 1,002,338 | 1,188,367 | ||||||
| Shares redeemed | (4,113,445 | ) | (5,964,233 | ) | ||||
| Net decrease in shares | (3,111,107 | ) | (4,775,866 | ) | ||||
| 40 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES D (MSCI EAFE EQUAL WEIGHT SERIES) |
| Financial Highlights |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008e | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 8.63 | $ | 10.25 | $ | 8.86 | $ | 7.40 | $ | 12.01 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .19 | .12 | .04 | .09 | .11 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.24 | (1.74 | ) | 1.35 | 1.37 | (4.72 | ) | |||||||||||||
| Total from investment operations | 1.43 | (1.62 | ) | 1.39 | 1.46 | (4.61 | ) | |||||||||||||
| Net asset value, end of period | $ | 10.06 | $ | 8.63 | $ | 10.25 | $ | 8.86 | $ | 7.40 | ||||||||||
| Total Returnb | 16.57 | % | (15.80 | %) | 15.69 | % | 19.73 | % | (38.38 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 185,233 | $ | 185,747 | $ | 269,645 | $ | 270,081 | $ | 275,965 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 2.03 | % | 1.23 | % | 0.49 | % | 1.12 | % | 1.09 | % | ||||||||||
| Total expensesc | 1.17 | % | 1.21 | % | 1.26 | % | 1.27 | % | 1.26 | % | ||||||||||
| Net expensesd | 1.17 | % | 1.21 | % | 1.26 | % | 1.27 | % | 1.25 | % | ||||||||||
| Portfolio turnover rate | 36 | % | 171 | % | 283 | % | 317 | % | 302 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
| e | Security Investors, LLC (“SI”) became the sub-advisor of Series D effective May 1, 2008. Prior to May 1, 2008, Oppenheimer sub-advised 50% of Series D and SI sub-advised 50%. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 41 |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders
Guggenheim Investments Series E (U.S. Intermediate Bond Series) is managed by a team of seasoned professionals, including B. Scott Minerd, Portfolio Manager at the Investment Manager and Chief Investment Officer and a Managing Partner at Guggenheim Partners Investment Management, LLC (“GPIM”); Anne B. Walsh, Portfolio Manager at the Investment Manager and Senior Managing Director at GPIM; James W. Michal, Portfolio Manager at the Investment Manager and Director and Portfolio Manager at GPIM; and JeffreyB. Abrams, Portfolio Manager at the Investment Manager and Senior Managing Director and Portfolio Manager at GPIM. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the 12-month period ended December 31, 2012.
For the one-year period ending December 31, 2012, the Series E (U.S. Intermediate Bond Series) returned 5.86%, compared with the 3.88% return of its benchmark, the Barclays U.S. Intermediate Government/Credit Bond® Index.
Effective August 2012, the Fund experienced a change in individuals managing the portfolio, although Guggenheim Investments continues to serve as the investment manager. The change in portfolio management teams does not affect the investment objective of the Fund, which is to seek current income. In pursuit of its objective, the Fund will invest, under normal market conditions, at least 80% of its net assets in investment grade U.S. fixed-income securities.
Such fixed-income securities may include corporate bonds and other corporate debt securities, securities issued by the U.S. government or its agencies and instrumentalities, and mortgage-backed and asset-backed securities. The investment manager will attempt to maintain a dollar weighted average duration of 3 to 4.5 years and a dollar weighted average maturity of 3 to 10 years in managing the Fund’s portfolio. The Fund also may invest in debt securities that are not investment grade (also known as “high yield/high risk securities” or “junk bonds”) or restricted securities that include limitations on resale.
The Board of Directors approved a change in the Fund, effective January 29, 2013. The Fund’s investment objective will change to: seeks to provide total return, comprised of current income and capital appreciation; its name changed to Series E (Total Return Bond Series) and its benchmark changed to the Barclays U.S. Aggregate Index. Shareholders were notified of the changes prior to their becoming effective.
In the fixed income domain, abundant liquidity and the continuation of open-ended quantitative easing suggest a benign credit environment with low default rates. With yields on Treasuries remaining largely range-bound and the corporate yields off all-time lows, the leveraged credit sector continues to benefit from the dearth of viable fixed income alternatives.
Accommodative monetary stimulus provided by central banks across the globe combined with elevated investor demand for yield continued to drive spreads and overall yields tighter. Volatility still persisted as risks posed by mixed U.S. economic data and economic weakness of the European Union from weaker periphery countries led to some choppiness throughout the period. Despite stress stemming from European debt issues and the threat of dissolution of the single Euro currency, European and emerging markets outperformed the U.S. market on both equity and bond benchmarks over the past 12 months.
Structured credit and corporate bonds rallied on the back of monetary stimulus with the main drivers of positive Fund performance being corporate bonds, asset-backed securities (“ABS”) and collateralized loan obligations (“CLOs”). Cash flow of principal and interest also contributed to positive performance. We continue to position the portfolio to remain overweight spread duration and underweight effective duration.
| 42 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| MANAGERS’ COMMENTARY (Unaudited) (concluded) | December 31, 2012 |
Detractors to performance for the period included several corporate credit positions that experienced mark to market weakness given specific credit or industry outlooks. Guggenheim continues to believe that corporate fundamentals will remain positive as accommodation and low borrowing rates will remain supportive of corporate credits.
We remain bullish on credit spread assets, such as CLOs (particularly floaters discounted to par) where spreads have more room to tighten, and hard assets, such as commercial ABS, that will appreciate as asset values are inflated through monetary accommodation. We anticipate further investment opportunities over the next few years as global deleveraging, coupled with the need for alternative and structured financing, should continue to provide supply to structured finance investors.
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| The Guggenheim Funds annual REPORT | 43 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES E (U.S. INTERMEDIATE BOND SERIES)
OBJECTIVE: Seeks to provide current income.
Cumulative Fund Performance*
| Average Annual Returns* | ||||||||||||
| Periods Ended 12/31/121 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series E (U.S. Intermediate Bond Series) | 5.86 | % | 3.17 | % | 3.14 | % | ||||||
| Barclays U.S. Intermediate Government/Credit Bond Index | 3.88 | % | 5.18 | % | 4.62 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: April 26, 1985
Portfolio Composition by Quality Rating
(Based on Standard and Poor’s Ratings)
| Rating** | ||||
| Fixed Income Instruments | ||||
| BBB | 16.0 | % | ||
| A | 13.6 | % | ||
| BBB+ | 13.4 | % | ||
| BBB- | 8.9 | % | ||
| A- | 8.7 | % | ||
| A+ | 7.6 | % | ||
| AA- | 6.5 | % | ||
| AA+ | 4.3 | % | ||
| AAA | 3.7 | % | ||
| B | 2.9 | % | ||
| B+ | 2.2 | % | ||
| AA | 2.1 | % | ||
| Other - Non Investment Grade | 8.5 | % | ||
| Other Instruments | ||||
| Preferred Stocks | 0.2 | % | ||
| Total Investments | 98.6 | % | ||
The chart above reflects percentages of the value of total investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Barclays U.S. Intermediate Government/Credit Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| ** | Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, which are all a Nationally Recognized Statistical Rating Organization (“NRSRO”). For purposes of this presentation, when ratings are available from more than one agency, the highest rating is used. Guggenheim Investments has converted Moody’s and Fitch ratings to the equivalent S&P rating. Unrated securities do not necessarily indicate low credit quality. Security ratings are determined at the time of purchase and may change thereafter. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 44 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) | |
| Shares | Value | |||||||
| PREFERRED STOCKS††† - 0.2% | ||||||||
| Woodbourne Capital Trust III 0.03%1,2,3,4,6 | 300,000 | $ | 53,138 | |||||
| Woodbourne Capital Trust IV 0.03%1,2,3,4,6 | 300,000 | 53,138 | ||||||
| Woodbourne Capital Trust I 0.03%1,2,3,4,6 | 300,000 | 53,138 | ||||||
| Woodbourne Capital Trust II 0.03%1,2,3,4,6 | 300,000 | 53,138 | ||||||
| Total Preferred Stocks | ||||||||
| (Cost $1,205,796) | 212,552 | |||||||
| Face | ||||||||
| Amount | ||||||||
| CORPORATE BONDS†† - 80.0% | ||||||||
| FINANCIALS - 26.7% | ||||||||
| Ford Motor Credit Company LLC | ||||||||
| 5.00% due 05/15/18 | $ | 2,000,000 | 2,206,872 | |||||
| 3.88% due 01/15/15 | 2,000,000 | 2,085,686 | ||||||
| JPMorgan Chase & Co. | ||||||||
| 4.65% due 06/01/14 | 2,000,000 | 2,107,210 | ||||||
| 6.30% due 04/23/19 | 1,000,000 | 1,233,762 | ||||||
| American Express Credit Corp. | ||||||||
| 2.38% due 03/24/17 | 2,000,000 | 2,092,633 | ||||||
| Citigroup, Inc. | ||||||||
| 8.50% due 05/22/19 | 1,000,000 | 1,344,637 | ||||||
| 6.38% due 08/12/14 | 500,000 | 540,325 | ||||||
| 4.75% due 05/19/15 | 9,000 | 9,702 | ||||||
| ING US, Inc. | ||||||||
| 5.50% due 07/15/223,4 | 1,600,000 | 1,736,330 | ||||||
| New York Life Global Funding | ||||||||
| 2.45% due 07/14/163,4 | 1,500,000 | 1,571,742 | ||||||
| Prudential Financial, Inc. | ||||||||
| 5.63% due 06/15/43 | 1,500,000 | 1,554,450 | ||||||
| Montpelier Re Holdings Ltd. | ||||||||
| 4.70% due 10/15/22 | 1,500,000 | 1,534,626 | ||||||
| Infinity Property & Casualty Corp. | ||||||||
| 5.00% due 09/19/22 | 1,450,000 | 1,512,695 | ||||||
| Susquehanna Bancshares, Inc. | ||||||||
| 5.38% due 08/15/22 | 1,100,000 | 1,174,760 | ||||||
| Caribbean Development Bank | ||||||||
| 4.38% due 11/09/273,4 | 1,100,000 | 1,097,446 | ||||||
| General Electric Capital Corp. | ||||||||
| 3.35% due 10/17/16 | 750,000 | 805,040 | ||||||
| 7.13% due 12/15/492 | 230,000 | 259,967 | ||||||
| US Bancorp | ||||||||
| 2.95% due 07/15/22 | 1,000,000 | 1,010,226 | ||||||
| RenaissanceRe Holdings Ltd. | ||||||||
| 5.88% due 02/15/13 | 1,000,000 | 1,005,325 | ||||||
| Macquarie Group Ltd. | ||||||||
| 6.25% due 01/14/213,4 | 550,000 | 609,637 | ||||||
| 7.63% due 08/13/193,4 | 300,000 | 353,353 | ||||||
| Nuveen Investments, Inc. | ||||||||
| 9.13% due 10/15/173,4 | 750,000 | 736,875 | ||||||
| Jones Lang LaSalle, Inc. | ||||||||
| 4.40% due 11/15/22 | 700,000 | 715,087 | ||||||
| Lancashire Holdings Ltd. | ||||||||
| 5.70% due 10/01/223,4 | 700,000 | 695,303 | ||||||
| Nationstar Mortgage LLC / | ||||||||
| Nationstar Capital Corp. | ||||||||
| 7.88% due 10/01/203,4 | 500,000 | 527,500 | ||||||
| CNO Financial Group, Inc. | ||||||||
| 6.38% due 10/01/203,4 | 450,000 | 468,000 | ||||||
| Hub International Ltd. | ||||||||
| 8.13% due 10/15/183,4 | 400,000 | 410,000 | ||||||
| Torchmark Corp. | ||||||||
| 7.88% due 05/15/23 | 250,000 | 335,429 | ||||||
| Residential Capital LLC | ||||||||
| 8.50% due 06/01/135 | 650,000 | 149,500 | ||||||
| Hospitality Properties Trust | ||||||||
| 5.00% due 08/15/22 | 100,000 | 105,801 | ||||||
| EPR Properties | ||||||||
| 5.75% due 08/15/22 | 100,000 | 103,691 | ||||||
| Total Financials | 30,093,610 | |||||||
| INFORMATION TECHNOLOGY - 12.4% | ||||||||
| Amphenol Corp. | ||||||||
| 4.00% due 02/01/22 | 3,000,000 | 3,172,443 | ||||||
| 4.75% due 11/15/14 | 2,000,000 | 2,131,016 | ||||||
| Broadcom Corp. | ||||||||
| 2.70% due 11/01/18 | 2,000,000 | 2,143,142 | ||||||
| Computer Sciences Corp. | ||||||||
| 4.45% due 09/15/22 | 1,950,000 | 2,036,476 | ||||||
| Cisco Systems, Inc. | ||||||||
| 4.45% due 01/15/20 | 1,250,000 | 1,449,460 | ||||||
| Autodesk, Inc. | ||||||||
| 3.60% due 12/15/22 | 1,250,000 | 1,255,513 | ||||||
| First Data Corp. | ||||||||
| 6.75% due 11/01/203,4 | 750,000 | 757,500 | ||||||
| 8.75% due 01/15/223,4 | 250,000 | 255,625 | ||||||
| Altera Corp. | ||||||||
| 1.75% due 05/15/17 | 500,000 | 510,890 | ||||||
| ViaSat, Inc. | ||||||||
| 6.88% due 06/15/203,4 | 300,000 | 313,500 | ||||||
| Total Information Technology | 14,025,565 | |||||||
| CONSUMER DISCRETIONARY - 10.5% | ||||||||
| Omnicom Group, Inc. | ||||||||
| 6.25% due 07/15/19 | 3,000,000 | 3,660,860 | ||||||
| Starbucks Corp. | ||||||||
| 6.25% due 08/15/17 | 2,000,000 | 2,405,718 | ||||||
| Johns Hopkins University | ||||||||
| 5.25% due 07/01/19 | 1,500,000 | 1,798,560 | ||||||
| Expedia, Inc. | ||||||||
| 5.95% due 08/15/20 | 1,260,000 | 1,401,879 | ||||||
| Continental Airlines 2012-2 | ||||||||
| Class-A Pass Through Trust | ||||||||
| 4.00% due 10/29/24 | 1,100,000 | 1,157,750 | ||||||
| Sabre, Inc. | ||||||||
| 8.50% due 05/15/193,4 | 1,000,000 | 1,065,000 | ||||||
| Stanadyne Corp. | ||||||||
| 10.00% due 08/15/14 | 180,000 | 166,950 | ||||||
| GRD Holdings III Corp. | ||||||||
| 10.75% due 06/01/193,4 | 125,000 | 125,313 | ||||||
| Yonkers Racing Corp. | ||||||||
| 11.38% due 07/15/163,4 | 100,000 | 108,000 | ||||||
| Total Consumer Discretionary | 11,890,030 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 45 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) |
| Face | ||||||||
| Amount | Value | |||||||
| INDUSTRIALS - 9.7% | ||||||||
| Burlington Northern Santa Fe LLC | ||||||||
| 3.05% due 03/15/22 | $ | 4,000,000 | $ | 4,128,015 | ||||
| United Parcel Service, Inc. | ||||||||
| 3.13% due 01/15/21 | 2,000,000 | 2,151,420 | ||||||
| Asciano Finance Ltd. | ||||||||
| 4.63% due 09/23/203,4 | 1,350,000 | 1,400,805 | ||||||
| Penske Truck Leasing Company Lp/ | ||||||||
| PTL Finance Corp. | ||||||||
| 4.88% due 07/11/223,4 | 1,300,000 | 1,342,900 | ||||||
| Chicago Bridge & Iron Co. | ||||||||
| 5.15% due 10/19/22 | 750,000 | 753,158 | ||||||
| Verisk Analytics, Inc. | ||||||||
| 4.13% due 09/12/22 | 700,000 | 716,784 | ||||||
| SBM Baleia Azul Sarl | ||||||||
| 5.50% due 09/15/27 | 500,000 | 500,105 | ||||||
| Total Industrials | 10,993,187 | |||||||
| MATERIALS - 5.2% | ||||||||
| Newcrest Finance Pty Ltd. | ||||||||
| 4.20% due 10/01/223,4 | 1,100,000 | 1,131,342 | ||||||
| 4.45% due 11/15/213,4 | 500,000 | 526,329 | ||||||
| Praxair, Inc. | ||||||||
| 5.20% due 03/15/17 | 1,000,000 | 1,169,341 | ||||||
| AngloGold Ashanti Holdings plc | ||||||||
| 5.13% due 08/01/22 | 1,050,000 | 1,064,157 | ||||||
| Airgas, Inc. | ||||||||
| 4.50% due 09/15/14 | 1,000,000 | 1,055,334 | ||||||
| IAMGOLD Corp. | ||||||||
| 6.75% due 10/01/203,4 | 1,000,000 | 975,000 | ||||||
| Total Materials | 5,921,503 | |||||||
| UTILITIES - 3.8% | ||||||||
| American Water Capital Corp. | ||||||||
| 6.09% due 10/15/17 | 3,000,000 | 3,585,633 | ||||||
| Oncor Electric Delivery Company LLC | ||||||||
| 6.38% due 01/15/15 | 600,000 | 662,171 | ||||||
| Total Utilities | 4,247,804 | |||||||
| ENERGY - 3.7% | ||||||||
| Eagle Rock Energy Partners | ||||||||
| Limited Partnership/Eagle Rock | ||||||||
| Energy Finance Corp. | ||||||||
| 8.38% due 06/01/193,4 | 1,000,000 | 1,020,000 | ||||||
| BreitBurn Energy Partners | ||||||||
| Limited Partnership/BreitBurn | ||||||||
| Finance Corp. | ||||||||
| 7.88% due 04/15/223,4 | 550,000 | 570,625 | ||||||
| Midstates Petroleum Company | ||||||||
| Incorporated/Midstates | ||||||||
| Petroleum Co LLC | ||||||||
| 10.75% due 10/01/203,4 | 500,000 | 531,250 | ||||||
| Magnum Hunter Resources Corp. | ||||||||
| 9.75% due 05/15/203,4 | 375,000 | 389,063 | ||||||
| Tesoro Logistics Limited Partnership/ | ||||||||
| Tesoro Logistics Finance Corp. | ||||||||
| 5.88% due 10/01/203,4 | 350,000 | 363,125 | ||||||
| Bristow Group, Inc. | ||||||||
| 6.25% due 10/15/22 | 300,000 | 321,000 | ||||||
| Hiland Partners Limited | ||||||||
| Partnership/Hiland Partners | ||||||||
| Finance Corp. | ||||||||
| 7.25% due 10/01/203,4 | 250,000 | 267,500 | ||||||
| Penn Virginia Resource Partners | ||||||||
| Limited Partnership/Penn Virginia | ||||||||
| Resource Finance Corp. | ||||||||
| 8.25% due 04/15/18 | 200,000 | 212,000 | ||||||
| Drill Rigs Holdings, Inc. | ||||||||
| 6.50% due 10/01/173,4 | 185,000 | 184,075 | ||||||
| Penn Virginia Resource Partners | ||||||||
| Limited Partnership/Penn Virginia | ||||||||
| Resource Finance Corporation II | ||||||||
| 8.38% due 06/01/203,4 | 150,000 | 161,625 | ||||||
| Crestwood Midstream Partners | ||||||||
| Limited Partnership/Crestwood | ||||||||
| Midstream Finance Corp. | ||||||||
| 7.75% due 04/01/19 | 110,000 | 114,125 | ||||||
| Total Energy | 4,134,388 | |||||||
| HEALTH CARE - 2.9% | ||||||||
| AstraZeneca plc | ||||||||
| 5.90% due 09/15/17 | 1,750,000 | 2,126,294 | ||||||
| Novartis Securities Investment Ltd. | ||||||||
| 5.13% due 02/10/19 | 1,000,000 | 1,195,174 | ||||||
| Total Health Care | 3,321,468 | |||||||
| CONSUMER STAPLES - 2.8% | ||||||||
| General Mills, Inc. | ||||||||
| 5.70% due 02/15/17 | 1,200,000 | 1,410,115 | ||||||
| Anheuser-Busch InBev Worldwide, Inc. | ||||||||
| 1.38% due 07/15/17 | 1,000,000 | 1,010,530 | ||||||
| Procter & Gamble Co. | ||||||||
| 2.30% due 02/06/22 | 500,000 | 508,815 | ||||||
| Energizer Holdings, Inc. | ||||||||
| 4.70% due 05/24/22 | 250,000 | 267,705 | ||||||
| Total Consumer Staples | 3,197,165 | |||||||
| TELECOMMUNICATION SERVICES - 2.3% | ||||||||
| Univision Communications, Inc. | ||||||||
| 6.75% due 09/15/223,4 | 1,000,000 | 1,032,500 | ||||||
| AT&T, Inc. | ||||||||
| 1.70% due 06/01/17 | 1,000,000 | 1,014,247 | ||||||
| Open Solutions, Inc. | ||||||||
| 9.75% due 02/01/153,4 | 450,000 | 361,125 | ||||||
| Zayo Group LLC/Zayo Capital, Inc. | ||||||||
| 10.13% due 07/01/20 | 120,000 | 136,500 | ||||||
| Total Telecommunication Services | 2,544,372 | |||||||
| Total Corporate Bonds | ||||||||
| (Cost $85,038,556) | 90,369,092 | |||||||
| 46 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) |
| Face | ||||||||
| Amount | Value | |||||||
| ASSET BACKED SECURITIES†† - 14.7% | ||||||||
| Willis Engine Securitization Trust | ||||||||
| 2012-A, 5.50% due 09/15/373,4 | $ | 2,231,100 | $ | 2,220,592 | ||||
| West Coast Funding Ltd. | ||||||||
| 2006-1A, 0.43% due 11/02/413,4,6 | 2,268,756 | 2,146,810 | ||||||
| KKR Financial CLO 2007-1 Corp. | ||||||||
| 2007-1A, 1.76% due 05/15/213,4,6 | 1,250,000 | 1,173,737 | ||||||
| 2007-1A, 2.56% due 05/15/213,4,6 | 500,000 | 460,840 | ||||||
| Garanti Diversified Payment | ||||||||
| Rights Finance Co. | ||||||||
| 2007-A, 0.54% due 07/09/176 | 1,520,000 | 1,427,204 | ||||||
| Grayson CLO Ltd. | ||||||||
| 2006-1A, 0.72% due 11/01/213,4,6 | 1,250,000 | 1,070,448 | ||||||
| Drug Royalty II Limited | ||||||||
| Partnership 1 2012-1 | ||||||||
| 2012-1, 4.31% due 01/15/253,4,6 | 1,000,000 | 1,000,730 | ||||||
| Great Lakes CLO 2012-1 Ltd. | ||||||||
| 2012-1A, 4.67% due 01/15/233,4,6 | 1,000,000 | 992,750 | ||||||
| Knightsbridge CLO | ||||||||
| 2007-1A, 3.10% due 01/11/223,4,6 | 1,000,000 | 917,250 | ||||||
| Rockwall CDO Ltd. | ||||||||
| 2007-1A, 0.86% due 08/01/243,4,6 | 900,000 | 704,538 | ||||||
| Jasper CLO Ltd. | ||||||||
| 2005-1A, 0.89% due 08/01/173,4,6 | 700,000 | 651,000 | ||||||
| ICE EM CLO | ||||||||
| 2007-1A, 1.32% due 08/15/223,4,6 | 750,000 | 635,385 | ||||||
| Newstar Trust | ||||||||
| 2012-2A, 3.56% due 01/20/233,4,6 | 500,000 | 500,760 | ||||||
| Marathon Clo II Ltd. | ||||||||
| 2005-2A, 2.11% due 12/20/193,4,6 | 500,000 | 464,930 | ||||||
| Golub Capital Partners Fundings Ltd. | ||||||||
| 2007-1A, 1.06% due 03/15/223,4,6 | 500,000 | 446,000 | ||||||
| Latitude CLO II Corp. | ||||||||
| 2006-2A, 1.11% due 12/15/183,4,6 | 500,000 | 416,825 | ||||||
| Cerberus Offshore Levered I, LP | ||||||||
| 2012-1A, 5.20% due 11/30/183,4,6 | 350,000 | 351,694 | ||||||
| Eastland CLO Ltd. | ||||||||
| 2007-1A, 0.71% due 05/01/223,4,6 | 400,000 | 324,068 | ||||||
| Westwood CDO Ltd. | ||||||||
| 2007-1A, 0.98% due 03/25/213,4,6 | 300,000 | 257,019 | ||||||
| Carlyle Global Market Strategies | ||||||||
| CLO 2012-3 Ltd. | ||||||||
| 2012-3A, 0.00% due 10/04/243,4,6 | 250,000 | 245,018 | ||||||
| Credit-Based Asset Servicing and | ||||||||
| Securitization LLC | ||||||||
| 2005-CB5, 0.47% due 08/25/356 | 133,920 | 128,415 | ||||||
| Total Asset Backed Securities | ||||||||
| (Cost $16,205,134) | 16,536,013 | |||||||
| U.S. GOVERNMENT SECURITIES† - 2.3% | ||||||||
| U.S. Treasury Bill | ||||||||
| 0.00% due 01/10/13 | 1,300,000 | 1,299,991 | ||||||
| 0.00% due 01/03/13 | 750,000 | 750,000 | ||||||
| 0.00% due 02/07/13 | 500,000 | 499,985 | ||||||
| Total U.S. Government Securities | ||||||||
| (Cost $2,549,997) | 2,549,976 | |||||||
| MORTGAGE BACKED SECURITIES†† - 1.0% | ||||||||
| VNO 2012-6AVE Mortgage Trust | ||||||||
| 2012-6AVE, 3.34% due 11/15/303,4 | 1,100,000 | 1,013,752 | ||||||
| JP Morgan Mortgage Trust | ||||||||
| 2006-A3, 2.91% due 04/25/366 | 92,653 | 74,762 | ||||||
| Ginnie Mae | ||||||||
| #518436, 7.25% due 09/15/29 | 10,026 | 11,998 | ||||||
| Fannie Mae7 | ||||||||
| 1990-68, 6.95% due 07/25/20 | 1,360 | 1,506 | ||||||
| 1990-103, 7.50% due 09/25/20 | 408 | 450 | ||||||
| Freddie Mac7 | ||||||||
| 1990-188, 7.00% due 09/15/21 | 591 | 660 | ||||||
| Total Mortgage Backed Securities | ||||||||
| (Cost $1,124,407) | 1,103,128 | |||||||
| SENIOR FLOATING RATE INTERESTS†† - 0.4% | ||||||||
| CONSUMER DISCRETIONARY - 0.4% | ||||||||
| Ollie’s Bargain Outlet | ||||||||
| 6.25% due 09/27/196 | 450,000 | 452,250 | ||||||
| Total Senior Floating Rate Interests | ||||||||
| (Cost $441,229) | 452,250 | |||||||
| Total Investments - 98.6% | ||||||||
| (Cost $106,565,119) | $ | 111,223,011 | ||||||
| Other Assets & Liabilities, net - 1.4% | 1,568,466 | |||||||
| Total Net Assets - 100.0% | $ | 112,791,477 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| ††† | Value determined based on Level 3 inputs — See Note 4. |
| 1 | Illiquid security. |
| 2 | Perpetual maturity. |
| 3 | Security was acquired through a private placement. |
| 4 | Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $37,295,085 (cost $37,508,178), or 33.1% of total net assets. |
| 5 | Security is in default of interest and/or principal obligations. |
| 6 | Variable rate security. Rate indicated is rate effective at December 31, 2012. |
| 7 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 47 |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $106,565,119) | $ | 111,223,011 | ||
| Cash | 388,851 | |||
| Prepaid expenses | 16,224 | |||
| Receivables: | ||||
| Interest | 1,310,322 | |||
| Investment advisor | 19,340 | |||
| Fund shares sold | 2,316 | |||
| Total assets | 112,960,064 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Management fees | 70,681 | |||
| Fund shares redeemed | 69,610 | |||
| Fund accounting/administration fees | 8,953 | |||
| Transfer agent/maintenance fees | 5,870 | |||
| Miscellaneous | 13,473 | |||
| Total liabilities | 168,587 | |||
| Net assets | $ | 112,791,477 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 118,229,989 | ||
| Undistributed net investment income | 2,472,337 | |||
| Accumulated net realized loss on investments | (12,568,741 | ) | ||
| Net unrealized appreciation on investments | 4,657,892 | |||
| Net assets | $ | 112,791,477 | ||
| Capital shares outstanding | 7,806,739 | |||
| Net asset value per share | $ | 14.45 | ||
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 | ||||
| Investment Income: | ||||
| Interest | $ | 4,163,506 | ||
| Dividends | 33,289 | |||
| Total investment income | 4,196,795 | |||
| Expenses: | ||||
| Management fees | 885,234 | |||
| Transfer agent/maintenance fees | 26,828 | |||
| Fund accounting/administration fees | 112,128 | |||
| Directors’ fees* | 11,128 | |||
| Custodian fees | 4,407 | |||
| Miscellaneous | 71,481 | |||
| Total expenses | 1,111,206 | |||
| Less: | ||||
| Expenses waived by Advisor | (154,822 | ) | ||
| Net expenses | 956,384 | |||
| Net investment income | 3,240,411 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,617,000 | |||
| Net realized gain | 3,617,000 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | (279,472 | ) | ||
| Net change in unrealized appreciation (depreciation) | (279,472 | ) | ||
| Net realized and unrealized gain | 3,337,528 | |||
| Net increase in net assets resulting from operations | $ | 6,577,939 | ||
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 48 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 3,240,411 | $ | 3,338,308 | ||||
| Net realized gain on investments | 3,617,000 | 2,006,145 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (279,472 | ) | 1,351,543 | |||||
| Net increase in net assets resulting from operations | 6,577,939 | 6,695,996 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 21,460,693 | 44,342,161 | ||||||
| Cost of shares redeemed | (38,822,059 | ) | (54,554,705 | ) | ||||
| Net decrease from capital share transactions | (17,361,366 | ) | (10,212,544 | ) | ||||
| Net decrease in net assets | (10,783,427 | ) | (3,516,548 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 123,574,904 | 127,091,452 | ||||||
| End of year | $ | 112,791,477 | $ | 123,574,904 | ||||
| Undistributed net investment income at end of year | $ | 2,472,337 | $ | 2,419,921 | ||||
| Capital share activity: | ||||||||
| Shares sold | 1,532,362 | 3,325,643 | ||||||
| Shares redeemed | (2,778,441 | ) | (4,063,434 | ) | ||||
| Net decrease in shares | (1,246,079 | ) | (737,791 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 49 |
| SERIES E (U.S. INTERMEDIATE BOND SERIES) |
| Financial Highlights |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 13.65 | $ | 12.98 | $ | 12.24 | $ | 11.29 | $ | 12.36 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .38 | .34 | .35 | .37 | .58 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | .42 | .33 | .39 | .58 | (1.65 | ) | ||||||||||||||
| Total from investment operations | .80 | .67 | .74 | .95 | (1.07 | ) | ||||||||||||||
| Net asset value, end of period | $ | 14.45 | $ | 13.65 | $ | 12.98 | $ | 12.24 | $ | 11.29 | ||||||||||
| Total Returnb | 5.86 | % | 5.16 | % | 6.05 | % | 8.41 | % | (8.66 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 112,791 | $ | 123,575 | $ | 127,091 | $ | 130,569 | $ | 99,070 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 2.75 | % | 2.57 | % | 2.72 | % | 3.08 | % | 4.80 | % | ||||||||||
| Total expenses | 0.94 | % | 0.92 | % | 0.92 | % | 0.92 | % | 0.93 | % | ||||||||||
| Net expensesc | 0.81 | % | 0.81 | % | 0.79 | % | 0.77 | % | 0.78 | % | ||||||||||
| Portfolio turnover rate | 79 | % | 49 | % | 38 | % | 76 | % | 34 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Net expense information reflects the expense ratios after expense waivers. |
| 50 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series J (Mid Cap Growth Series) returned 15.79%, compared with the benchmark, the Russell Midcap® Growth Index, which returned 15.81%.
The Fund seeks to deliver long-term capital appreciation by investing in a concentrated portfolio of midcap growth securities. It seeks to identify securities that are in the early-to-middle stages of growth and primarily invests in companies that offer unique proprietary products or are within profitable market niches with rapid growth potential.
The Fund uses a combination of a qualitative top-down approach in reviewing growth trends that is based on several fixed income factors, such as bond spreads and interest rates, along with a quantitative, fundamental bottom-up approach.
The portfolio’s performance was helped by stock selection in Consumer Discretionary and Financials. The primary detractor from return was poor stock selection in the Health Care sector.
The holdings contributing most to portfolio performance over the period were Jarden Corp. and Discover Financial Services. Leading detractors from performance were International Game Technology and Endo Health Solutions, Inc.
Our fixed income indicators, including the slope of the yield curve and corporate bond spreads, continue to point to a modest economic environment but a decent risk environment. Strong corporate debt issuance, coupled with historically tight bond spreads, confirms a healthy risk appetite with fixed-income markets, which we believe is a leading indicator of the risk environment for equities. We will focus our attention on secular growth names in the year to come, with an eye towards more cyclical names if the global economy can find firmer footing.
We appreciate your business and the trust you place in us.
Sincerely,
Joseph O’Connor, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 51 |
| Performance Report and FUND PROFILE (Unaudited) | December 31, 2012 |
| SERIES J (Mid cap Growth SERIES) | |
| OBJECTIVE: Seeks capital appreciation. |
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series J (Mid Cap Growth Series) | 15.79 | % | 3.52 | % | 7.57 | % | ||||||
| Russell Midcap Growth Index | 15.81 | % | 3.23 | % | 10.32 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: October 1, 1992
| Ten Largest Holdings (% of Total Net Assets) | ||||
| iShares Russell Midcap | ||||
| Growth Index Fund | 5.3 | % | ||
| Ashland, Inc. | 3.4 | % | ||
| Financial Select Sector SPDR Fund | 3.4 | % | ||
| Yahoo!, Inc. | 2.5 | % | ||
| Industrial Select Sector SPDR Fund | 2.4 | % | ||
| Precision Castparts Corp. | 2.2 | % | ||
| Covidien plc | 2.2 | % | ||
| Ensco plc — Class A | 2.1 | % | ||
| Union Pacific Corp. | 2.1 | % | ||
| Jarden Corp. | 2.1 | % | ||
| Top Ten Total | 27.7 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell Midcap Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 52 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES J (MID CAP GROWTH SERIES) |
| Shares | Value | |||||||
| COMMON STOCKS† - 84.1% | ||||||||
| CONSUMER DISCRETIONARY - 20.9% | ||||||||
| Jarden Corp. | 56,275 | $ | 2,909,417 | |||||
| Omnicom Group, Inc. | 44,900 | 2,243,204 | ||||||
| Wyndham Worldwide Corp. | 33,450 | 1,779,875 | ||||||
| Newell Rubbermaid, Inc. | 78,550 | 1,749,308 | ||||||
| Penn National Gaming, Inc.* | 33,295 | 1,635,117 | ||||||
| AutoZone, Inc.* | 4,550 | 1,612,657 | ||||||
| BorgWarner, Inc.* | 21,950 | 1,572,059 | ||||||
| Priceline.com, Inc.* | 2,445 | 1,518,834 | ||||||
| Urban Outfitters, Inc.* | 36,550 | 1,438,608 | ||||||
| Las Vegas Sands Corp. | 30,250 | 1,396,340 | ||||||
| Wynn Resorts Ltd. | 12,312 | 1,384,977 | ||||||
| VF Corp. | 9,050 | 1,366,279 | ||||||
| Discovery Communications, Inc. — | ||||||||
| Class A* | 20,500 | 1,301,340 | ||||||
| Dick’s Sporting Goods, Inc. | 27,250 | 1,239,603 | ||||||
| Macy’s, Inc. | 29,920 | 1,167,478 | ||||||
| Starwood Hotels & Resorts | ||||||||
| Worldwide, Inc. | 19,800 | 1,135,728 | ||||||
| Ross Stores, Inc. | 18,550 | 1,004,483 | ||||||
| Coach, Inc. | 17,700 | 982,527 | ||||||
| Bed Bath & Beyond, Inc.* | 16,100 | 900,151 | ||||||
| Scripps Networks Interactive, Inc. — | ||||||||
| Class A | 8,900 | 515,488 | ||||||
| Total Consumer Discretionary | 28,853,473 | |||||||
| INFORMATION TECHNOLOGY - 17.4% | ||||||||
| Yahoo!, Inc.* | 170,400 | 3,390,959 | ||||||
| Juniper Networks, Inc.* | 135,750 | 2,670,202 | ||||||
| Alliance Data Systems Corp.* | 17,664 | 2,557,041 | ||||||
| Intuit, Inc. | 41,050 | 2,442,475 | ||||||
| Broadcom Corp. — Class A | 71,190 | 2,364,220 | ||||||
| Avago Technologies Ltd. | 68,860 | 2,180,108 | ||||||
| Cadence Design Systems, Inc.* | 150,820 | 2,037,578 | ||||||
| Nuance Communications, Inc.* | 88,070 | 1,965,722 | ||||||
| IAC/InterActiveCorp | 28,380 | 1,342,374 | ||||||
| Citrix Systems, Inc.* | 13,400 | 881,050 | ||||||
| Teradata Corp.* | 11,975 | 741,133 | ||||||
| F5 Networks, Inc.* | 5,550 | 539,183 | ||||||
| Aruba Networks, Inc.* | 25,350 | 526,013 | ||||||
| NetApp, Inc.* | 13,200 | 442,860 | ||||||
| Total Information Technology | 24,080,918 | |||||||
| INDUSTRIALS - 11.9% | ||||||||
| Precision Castparts Corp. | 16,175 | 3,063,868 | ||||||
| Union Pacific Corp. | 23,421 | 2,944,488 | ||||||
| Triumph Group, Inc. | 43,300 | 2,827,490 | ||||||
| Hubbell, Inc. — Class B | 30,050 | 2,543,132 | ||||||
| AMETEK, Inc. | 53,030 | 1,992,337 | ||||||
| Dover Corp. | 21,700 | 1,425,907 | ||||||
| Stanley Black & Decker, Inc. | 10,380 | 767,809 | ||||||
| Joy Global, Inc. | 7,180 | 457,940 | ||||||
| IHS, Inc. — Class A* | 3,830 | 367,680 | ||||||
| Total Industrials | 16,390,651 | |||||||
| HEALTH CARE - 11.8% | ||||||||
| Covidien plc | 52,050 | 3,005,366 | ||||||
| Cerner Corp.* | 24,800 | 1,925,472 | ||||||
| Cooper Companies, Inc. | 20,020 | 1,851,450 | ||||||
| CareFusion Corp.* | 50,250 | 1,436,145 | ||||||
| Thermo Fisher Scientific, Inc. | 21,900 | 1,396,782 | ||||||
| Alexion Pharmaceuticals, Inc.* | 13,300 | 1,247,673 | ||||||
| Teva Pharmaceutical Industries Ltd. ADR | 32,855 | 1,226,805 | ||||||
| Endo Health Solutions, Inc.* | 44,350 | 1,165,075 | ||||||
| Agilent Technologies, Inc. | 27,340 | 1,119,300 | ||||||
| Regeneron Pharmaceuticals, Inc.* | 5,115 | 875,023 | ||||||
| Vertex Pharmaceuticals, Inc.* | 14,400 | 603,936 | ||||||
| Illumina, Inc.* | 8,100 | 450,279 | ||||||
| Total Health Care | 16,303,306 | |||||||
| MATERIALS - 8.7% | ||||||||
| Ashland, Inc. | 58,520 | 4,705,593 | ||||||
| FMC Corp. | 47,550 | 2,782,626 | ||||||
| Airgas, Inc. | 22,100 | 2,017,509 | ||||||
| Ball Corp. | 41,962 | 1,877,800 | ||||||
| CF Industries Holdings, Inc. | 3,200 | 650,112 | ||||||
| Total Materials | 12,033,640 | |||||||
| ENERGY - 5.7% | ||||||||
| Ensco plc — Class A | 50,050 | 2,966,963 | ||||||
| Oil States International, Inc.* | 30,375 | 2,173,028 | ||||||
| Pioneer Natural Resources Co. | 12,900 | 1,375,011 | ||||||
| Concho Resources, Inc.* | 8,800 | 708,928 | ||||||
| Energy XXI Bermuda Ltd. | 21,057 | 677,825 | ||||||
| Total Energy | 7,901,755 | |||||||
| FINANCIALS - 4.3% | ||||||||
| Discover Financial Services | 46,760 | 1,802,598 | ||||||
| KeyCorp | 187,800 | 1,581,276 | ||||||
| T. Rowe Price Group, Inc. | 23,550 | 1,533,812 | ||||||
| MetLife, Inc. | 33,294 | 1,096,704 | ||||||
| Total Financials | 6,014,390 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 53 |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES J (MID CAP GROWTH SERIES) |
| Shares | Value | |||||||
| CONSUMER STAPLES - 3.4% | ||||||||
| McCormick & Company, Inc. | 31,700 | $ | 2,013,901 | |||||
| Dr Pepper Snapple Group, Inc. | 35,305 | 1,559,775 | ||||||
| Whole Foods Market, Inc. | 12,800 | 1,169,024 | ||||||
| Total Consumer Staples | 4,742,700 | |||||||
| Total Common Stocks | ||||||||
| (Cost $110,274,862) | 116,320,833 | |||||||
| EXCHANGE TRADED FUNDS† - 11.1% | ||||||||
| iShares Russell Midcap | ||||||||
| Growth Index Fund | 116,515 | 7,317,142 | ||||||
| Financial Select Sector SPDR Fund | 286,500 | 4,698,600 | ||||||
| Industrial Select Sector SPDR Fund | 89,300 | 3,384,470 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $14,655,581) | 15,400,212 | |||||||
| Face | ||||||||
| Amount | Value | |||||||
| REPURCHASE AGREEMENT††,1 - 5.9% | ||||||||
| UMB Financial Corp. | ||||||||
| issued 12/31/12 at 0.07% | ||||||||
| due 01/02/13 | $ | 8,118,000 | $ | 8,118,000 | ||||
| Total Repurchase Agreement | ||||||||
| (Cost $8,118,000) | 8,118,000 | |||||||
| Total Investments - 101.1% | ||||||||
| (Cost $133,048,443) | $ | 139,839,045 | ||||||
| Other Assets & Liabilities, net - (1.1)% | (1,583,699 | ) | ||||||
| Total Net Assets - 100.0% | $ | 138,255,346 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | Repurchase Agreement — See Note 5. |
ADR — American Depositary Receipt
plc — Public Limited Company
| 54 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES J (MID CAP GROWTH SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $124,930,443) | $ | 131,721,045 | ||
| Repurchase agreements, at value | ||||
| (cost $8,118,000) | 8,118,000 | |||
| Total investments | ||||
| (cost $133,048,443) | 139,839,045 | |||
| Prepaid expenses | 3,173 | |||
| Receivables: | ||||
| Security litigation | 170,615 | |||
| Dividends | 114,803 | |||
| Fund shares sold | 38,773 | |||
| Interest | 16 | |||
| Total assets | 140,166,425 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,452,676 | |||
| Fund shares redeemed | 336,553 | |||
| Management fees | 87,667 | |||
| Fund accounting/administration fees | 11,104 | |||
| Transfer agent/maintenance fees | 5,291 | |||
| Directors’ fees* | 195 | |||
| Miscellaneous | 17,593 | |||
| Total liabilities | 1,911,079 | |||
| Net assets | $ | 138,255,346 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 151,563,585 | ||
| Undistributed net investment income | 205,098 | |||
| Accumulated net realized loss on investments | (20,303,939 | ) | ||
| Net unrealized appreciation on investments | 6,790,602 | |||
| Net assets | $ | 138,255,346 | ||
| Capital shares outstanding | 4,152,961 | |||
| Net asset value per share | $ | 33.29 | ||
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 | ||||
| Investment Income: | ||||
| Dividends | $ | 1,556,120 | ||
| Interest | 2,374 | |||
| Total investment income | 1,558,494 | |||
| Expenses: | ||||
| Management fees | 1,067,980 | |||
| Transfer agent/maintenance fees | 26,300 | |||
| Fund accounting/administration fees | 135,276 | |||
| Directors’ fees* | 15,670 | |||
| Custodian fees | 6,238 | |||
| Miscellaneous | 101,932 | |||
| Total expenses | 1,353,396 | |||
| Net investment income | 205,098 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 18,104,274 | |||
| Net realized gain | 18,104,274 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 2,314,116 | |||
| Net change in unrealized appreciation (depreciation) | 2,314,116 | |||
| Net realized and unrealized gain | 20,418,390 | |||
| Net increase in net assets resulting from operations | $ | 20,623,488 | ||
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 55 |
| SERIES J (MID CAP GROWTH SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income (loss) | $ | 205,098 | $ | (149,404 | ) | |||
| Net realized gain on investments | 18,104,274 | 17,884,969 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 2,314,116 | (24,499,861 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 20,623,488 | (6,764,296 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 10,267,365 | 15,343,716 | ||||||
| Cost of shares redeemed | (29,104,216 | ) | (41,499,200 | ) | ||||
| Net decrease from capital share transactions | (18,836,851 | ) | (26,155,484 | ) | ||||
| Net increase (decrease) in net assets | 1,786,637 | (32,919,780 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 136,468,709 | 169,388,489 | ||||||
| End of year | $ | 138,255,346 | $ | 136,468,709 | ||||
| Undistributed net investment income at end of year | $ | 205,098 | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | 318,863 | 506,362 | ||||||
| Shares redeemed | (913,102 | ) | (1,396,435 | ) | ||||
| Net decrease in shares | (594,239 | ) | (890,073 | ) | ||||
| 56 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES J (MID CAP GROWTH SERIES) |
| Financial Highlights |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 28.75 | $ | 30.05 | $ | 24.20 | $ | 16.81 | $ | 28.00 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | .05 | (.03 | ) | (.02 | ) | (.03 | ) | (.01 | ) | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 4.49 | (1.27 | ) | 5.87 | 7.42 | (11.18 | ) | |||||||||||||
| Total from investment operations | 4.54 | (1.30 | ) | 5.85 | 7.39 | (11.19 | ) | |||||||||||||
| Net asset value, end of period | $ | 33.29 | $ | 28.75 | $ | 30.05 | $ | 24.20 | $ | 16.81 | ||||||||||
| Total Returnb | 15.79 | % | (4.33 | %) | 24.17 | % | 43.96 | % | (39.96 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 138,255 | $ | 136,469 | $ | 169,388 | $ | 154,273 | $ | 122,030 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | 0.14 | % | (0.10 | %) | (0.10 | %) | (0.13 | %) | (0.06 | %) | ||||||||||
| Total expensesc | 0.95 | % | 0.91 | % | 0.91 | % | 0.92 | % | 0.91 | % | ||||||||||
| Portfolio turnover rate | 150 | % | 155 | % | 130 | % | 136 | % | 203 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 57 |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the fiscal year ended December 31, 2012, the Series N (Managed Asset Allocation Series) rose 13.29%, outperforming its weighted benchmark that is 60% S&P® 500 Index and 40% Barclays U.S. Aggregate® Bond Index, which gained 11.28%. The S&P 500® Index rose 16.00% over the year and the Barclays U.S. Aggregate® Bond Index gained 4.21%.
Effective April 30, 2012, the portfolio’s sub-advisor changed from T. Rowe Price to Security Investors, LLC, also known as Guggenheim Investments. T. Rowe Price is not affiliated with Security Investors, LLC.
The change in the portfolio management team does not affect the investment objective of the Fund, which is to seek to provide growth of capital and, secondarily, preservation of capital. The Fund pursues its objective by investing principally in equity, fixed income and money market assets through investing in a diversified portfolio of futures contracts and exchange-traded funds and other pooled investment vehicles that track major equity indexes and fixed income indexes.
Under normal market conditions, the Funds’ investments are expected to achieve a moderate allocation of equity, fixed income and money market assets in approximately the following amounts: (1) 60% of assets in equity securities, which may include stock of small capitalization U.S. companies, mid-capitalization U.S. companies, large capitalization U.S. companies and non-U.S. companies; (2) 35% of assets in fixed income securities, which may include short and long term corporate and government bonds; and (3) 5% of assets in cash. However, the Investment Manager intends to utilize dynamic asset allocation techniques that will allow rapid shifts between asset classes to attempt to exploit current market trends, and the Fund may invest fully in any asset class at any time.
Market Review
The U.S. economy continues its positive expansion, although the risks of delinquencies, consumer demand, and the knock-on effect of Europe continue to weigh on the market. Unprecedented policy actions by the Federal Reserve (“the Fed”) continue to provide ample liquidity and accommodation to stimulate growth of the U.S. economy. Recent Fed action, such as the third round of quantitative easing announced in September 2012, shows an increased tolerance for potentially higher levels of inflation. The Fed was aggressive in its policy action by announcing an open-ended bond purchasing program that focused on agency mortgages. Operation Twist, the Fed’s program of buying longer duration Treasury securities while simultaneously selling shorter duration securities, was also extended.
The underlying thesis over the past few months still holds true—that the U.S. economy has shown resiliency through the many headwinds which it has faced, and that better-than-expected growth is anticipated in 2013. Private sector employment is increasing faster than it did in the prior expansion. Additionally, state and local governments are starting to be net contributors to employment. The economy is also experiencing the start of the recovery in the housing market, which is supportive of economic growth. While economic conditions in the U.S. are expected to improve throughout 2013, it will be some time before the unemployment rate falls below an acceptable level for policymakers. Furthermore, inflationary pressures will likely stay muted, as history has shown, there will not be a secular rise in inflation until capacity utilization rises to a level far higher than where it is currently.
Central banks around the world have tagged along with U.S. policymakers and are engaging in their own forms of accommodative policy actions, which should continue to benefit risk assets and assets linked to inflation. While the European Central Bank has made considerable strides to reduce stress emanating from troubled eurozone nations, it is evident that restructuring of toxic debt will take considerable time and effort. The eurozone currency still remains at a relatively high value compared to the U.S. dollar, which makes European countries less competitive with respect to exports. Despite all of these headwinds, the U.S. economy appears to have the momentum, albeit at a slow pace, to withstand an imminent European recession. In China, it appears that we are past the bottom in economic growth, and there are signs that things are turning positive. Industrial production, stock prices, even real estate prices are beginning to rise. The positive news for China could also be good news for the emerging markets.
The over-all environment for the period helped equity markets trend significantly higher and moderated performance of fixed-income markets.
| 58 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| MANAGERS’ COMMENTARY (Unaudited) (concluded) | December 31, 2012 |
Portfolio Review
Outperformance for the portfolio while being sub-advised by T. Rowe Price was due to outperformance of its large cap equity component, and general overweight position in equities relative to fixed income. Other portfolio contributors for this period were high yield bonds and small cap equities, while the allocation to the MSCI EAFE Index detracted from performance.
Since Guggenheim Investments assumed management of the portfolio, a transition that was completed in April 2012, performance has been driven primarily by performance of the allocation to index futures on the MSCI EAFE Index. After reaching a low point for the year in late May, international equities as represented by the EAFE began a strong move upward, as the European debt crisis appeared to be under control and a hard economic landing in China avoided. Detractors from return since June 2012 have been futures positions in equity indices for Canada, France and Hong Kong.
Outlook
We continue to expect moderate volatility in the near term, driven largely by issues surrounding the U.S. fiscal situation and European debt restructuring. Though volatility will likely persist over the next few months, there are limited catalysts that would derail a U.S. economic recovery given momentum that is currently being witnessed. Low borrowing rates will likely continue to promote growth and support the corporate, consumer and housing sectors.
Central bankers in major economies across the globe have been aggressive to avoid any sluggish growth in their respective economies, engaging in a variety of forms of monetary stimulus. We view this as a near-term positive for risk assets, especially in the U.S. but we do not feel this liquidity injection will have as much of a dampening effect on market volatility in 2013 due to decreasing marginal effects of the policy.
Economic uncertainty throughout Europe, Asia, and the U.S. still remains a cause for concern; however, the Federal Reserve is committed to remain accommodative until economic activity significantly improves. Market volatility will likely continue, but economic data suggests the U.S. will continue to grow at a positive pace.
We appreciate your business and the trust you place in us.
Sincerely,
Matthew Wu, Ph.D., CFA, Portfolio Manager
Michael Byrum, CFA, Portfolio Manager
Michael Dellapa, CFA, CAIA, Portfolio Manager
Ryan Harder, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 59 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES N (Managed Asset Allocation SERIES)
OBJECTIVE: Seeks growth of capital and, secondarily, preservation of capital.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series N (Managed Asset | ||||||||||||
| Allocation Series) | 13.29 | % | 2.89 | % | 6.97 | % | ||||||
| S&P 500 Index | 16.00 | % | 1.66 | % | 7.10 | % | ||||||
| Blended Index** | 11.28 | % | 3.81 | % | 6.62 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 1, 1995
| Largest Holdings (% of Total Net Assets) | ||||
| iShares Core Total US Bond Market ETF | 19.3 | % | ||
| SPDR S&P 500 ETF Trust | 10.7 | % | ||
| Vanguard S&P 500 ETF | 10.7 | % | ||
| iShares iBoxx Investment Grade | ||||
| Corporate Bond Fund | 7.4 | % | ||
| iShares Core S&P Mid-Capital ETF | 6.1 | % | ||
| iShares MSCI EAFE Index Fund | 3.4 | % | ||
| Total | 57.6 | % | ||
“Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the Barclays U.S. Aggregate Bond Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
| ** | The Blended Index is 60% S&P 500 Index and 40% Barclays U.S. Aggregate Bond Index. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 60 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| Shares | Value | |||||||
| RIGHTS†† - 0.0% | ||||||||
| INDUSTRIALS - 0.0% | ||||||||
| Rolls-Royce Holdings plc* | ||||||||
| Expires 01/21/13 | 555,546 | $ | 903 | |||||
| Total Rights | ||||||||
| (Cost $550) | 903 | |||||||
| EXCHANGE TRADED FUNDS† - 57.6% | ||||||||
| iShares Core Total US Bond Market ETF | 108,091 | 12,007,829 | ||||||
| SPDR S&P 500 ETF Trust | 46,804 | 6,670,506 | ||||||
| Vanguard S&P 500 ETF | 101,785 | 6,640,453 | ||||||
| iShares iBoxx Investment Grade Corporate Bond Fund | 38,120 | 4,612,139 | ||||||
| iShares Core S&P Mid-Capital ETF | 37,201 | 3,783,342 | ||||||
| iShares MSCI EAFE Index Fund | 37,530 | 2,132,455 | ||||||
| iShares Core S&P 500 ETF | 2 | 286 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $34,427,499) | 35,847,010 | |||||||
| SHORT-TERM INVESTMENTS†† - 39.4% | ||||||||
| State Street General Account | ||||||||
| Money Market Fund | 24,477,694 | 24,477,694 | ||||||
| Total Short-Term Investments | ||||||||
| (Cost $24,477,694) | 24,477,694 | |||||||
| Total Investments - 97.0% | ||||||||
| (Cost $58,905,743) | $ | 60,325,607 | ||||||
| Other Assets & Liabilities, net - 3.0% | 1,855,856 | |||||||
| Total Net Assets - 100.0% | $ | 62,181,463 | ||||||
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| March 2013 MSCI EAFE Index Mini | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $6,247,010) | 77 | $ | 103,079 | |||||
| March 2013 S&P 500 Index Mini | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $9,454,638) | 133 | 64,726 | ||||||
| March 2013 Russell 2000 Index Mini | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $3,724,160) | 44 | 34,304 | ||||||
| March 2013 SPI 200 Index | ||||||||
| Futures Contracts†† | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,101,308) | 9 | 25,403 | ||||||
| January 2013 CAC40 10 Euro | ||||||||
| Index Futures Contracts†† | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,176,321) | 24 | 21,384 | ||||||
| Unrealized | ||||||||
| Contracts | Gain (Loss) | |||||||
| March 2013 FTSE 100 Index | ||||||||
| Futures Contracts†† | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,162,183) | 12 | $ | 11,548 | |||||
| March 2013 DAX Index | ||||||||
| Futures Contracts†† | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,018,934) | 4 | 8,517 | ||||||
| (Total Aggregate Value of Contracts $23,884,554) | $ | 268,961 | ||||||
| INTEREST RATE FUTURES CONTRACTS PURCHASED† | ||||||||
| March 2013 U.S. Treasury 2 Year | ||||||||
| Note Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $4,408,125) | 20 | $ | (29 | ) | ||||
| March 2013 U.S. Treasury 10 Year | ||||||||
| Note Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $12,178,500) | 92 | (94,637 | ) | |||||
| (Total Aggregate Value of Contracts $16,586,625) | $ | (94,666 | ) | |||||
| CURRENCY FUTURES CONTRACTS SOLD SHORT† | ||||||||
| March 2013 Euro FX Currency | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $2,145,487) | 13 | $ | 257 | |||||
| March 2013 Australian Dollar | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,137,070) | 11 | 192 | ||||||
| March 2013 British Pound | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,116,844) | 11 | (489 | ) | |||||
| March 2013 Canadian Dollar | ||||||||
| Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,106,600) | 11 | (1,484 | ) | |||||
| (Total Aggregate Value of Contracts $5,506,001) | $ | (1,524 | ) | |||||
| EQUITY FUTURES CONTRACTS SOLD SHORT† | ||||||||
| March 2013 S&P/TSX 60 IX | ||||||||
| Index Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,145,724) | 8 | $ | 3,201 | |||||
| March 2013 Nikkei 225 | ||||||||
| Index Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,213,825) | 23 | (1,022 | ) | |||||
| January 2013 Hang Seng | ||||||||
| Index Futures Contracts†† | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $1,335,044) | 9 | (13,964 | ) | |||||
| (Total Aggregate Value of Contracts $3,694,593) | $ | (11,785 | ) | |||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs, except as noted — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
plc — Public Limited Company
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 61 |
| SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| STATEMENT OF ASSETS | |
| AND LIABILITIES |
| December 31, 2012 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $58,905,743) | $ | 60,325,607 | ||
| Segregated cash with broker | 1,461,141 | |||
| Prepaid expenses | 1,426 | |||
| Receivables: | ||||
| Variation margin | 395,063 | |||
| Dividends | 86,516 | |||
| Foreign taxes reclaim | 8,708 | |||
| Fund shares sold | 2,573 | |||
| Total assets | 62,281,034 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Management fees | 34,156 | |||
| Fund shares redeemed | 23,224 | |||
| Custodian fees | 13,015 | |||
| Fund accounting/administration fees | 7,882 | |||
| Transfer agent/maintenance fees | 6,049 | |||
| Directors’ fees* | 358 | |||
| Miscellaneous | 14,887 | |||
| Total liabilities | 99,571 | |||
| Net assets | $ | 62,181,463 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 58,776,054 | ||
| Undistributed net investment income | 214,734 | |||
| Accumulated net realized gain on investments | 1,609,789 | |||
| Net unrealized appreciation on investments and foreign currency | 1,580,886 | |||
| Net assets | $ | 62,181,463 | ||
| Capital shares outstanding | 2,741,291 | |||
| Net asset value per share | $ | 22.68 | ||
| STATEMENT OF | |
| OPERATIONS |
| Year Ended December 31, 2012 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $11,848) | $ | 1,006,638 | ||
| Interest | 282,405 | |||
| Total investment income | 1,289,043 | |||
| Expenses: | ||||
| Management fees | 490,366 | |||
| Transfer agent/maintenance fees | 26,942 | |||
| Fund accounting/administration fees | 95,645 | |||
| Pricing service fees | 68,047 | |||
| Custodian fees | 66,384 | |||
| Directors’ fees* | 6,049 | |||
| Miscellaneous | 80,230 | |||
| Total expenses | 833,663 | |||
| Net investment income | 455,380 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 9,050,364 | |||
| Futures contracts | 1,312,287 | |||
| Foreign currency | (22,498 | ) | ||
| Net realized gain | 10,340,153 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | (2,939,093 | ) | ||
| Futures contracts | 160,986 | |||
| Foreign currency | 668 | |||
| Net change in unrealized appreciation (depreciation) | (2,777,439 | ) | ||
| Net realized and unrealized gain | 7,562,714 | |||
| Net increase in net assets resulting from operations | $ | 8,018,094 | ||
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| 62 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 455,380 | $ | 1,012,479 | ||||
| Net realized gain on investments and foreign currency | 10,340,153 | 3,379,777 | ||||||
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | (2,777,439 | ) | (4,071,560 | ) | ||||
| Net increase in net assets resulting from operations | 8,018,094 | 320,696 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 3,496,605 | 3,984,353 | ||||||
| Cost of shares redeemed | (13,108,279 | ) | (19,263,587 | ) | ||||
| Net decrease from capital share transactions | (9,611,674 | ) | (15,279,234 | ) | ||||
| Net decrease in net assets | (1,593,580 | ) | (14,958,538 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 63,775,043 | 78,733,581 | ||||||
| End of year | $ | 62,181,463 | $ | 63,775,043 | ||||
| Undistributed net investment income at end of year | $ | 214,734 | $ | 746,310 | ||||
| Capital share activity: | ||||||||
| Shares sold | 160,776 | 199,479 | ||||||
| Shares redeemed | (604,361 | ) | (973,315 | ) | ||||
| Net decrease in shares | (443,585 | ) | (773,836 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 63 |
| SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 20.02 | $ | 19.89 | $ | 17.99 | $ | 14.31 | $ | 19.67 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .15 | .28 | .26 | .27 | .34 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.51 | (.15 | ) | 1.64 | 3.41 | (5.70 | ) | |||||||||||||
| Total from investment operations | 2.66 | .13 | 1.90 | 3.68 | (5.36 | ) | ||||||||||||||
| Net asset value, end of period | $ | 22.68 | $ | 20.02 | $ | 19.89 | $ | 17.99 | $ | 14.31 | ||||||||||
| Total Returnb | 13.29 | % | 0.65 | % | 10.56 | % | 25.63 | % | (27.25 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 62,181 | $ | 63,775 | $ | 78,734 | $ | 79,432 | $ | 76,421 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 0.71 | % | 1.40 | % | 1.40 | % | 1.71 | % | 1.94 | % | ||||||||||
| Total expensesc | 1.31 | % | 1.56 | % | 1.50 | % | 1.66 | % | 1.52 | % | ||||||||||
| Portfolio turnover rate | 162 | % | 44 | % | 52 | % | 46 | % | 82 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| 64 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the fiscal year ended December 31, 2012, the Series O (All Cap Value Series) returned 15.50%, while the benchmark, the Russell 3000® Value Index, returned 17.55%.
Our strategy is to select securities of companies that appear undervalued by the overall market relative to assets, earnings, growth potential or cash flows. Our investment approach is a defined and disciplined process with three key philosophical tenets that drive our investment decisions: a valuation focus, a long-term investment horizon and an opportunistic approach.
Our investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a corresponding valuation target for each company. We construct the portfolio based on the level of conviction generated by the bottom-up analysis and the upside/downside profile associated with each company.
The portfolio’s performance was helped by stock selection in the Consumer Discretionary and Information Technology sectors, and an underweight in the Utilities sector, where the portfolio managers believe valuations are lofty. These benefits were not enough, however, to offset a slight underweight in the Energy and Information Technology sectors and poor stock selection in the Financials sector.
The holdings contributing most to portfolio performance over the period were Computer Sciences Corp. and Equifax, Inc. The top detractors were Hewlett-Packard Co. and Western Union Co.
We remain focused on searching for companies we think have good long-term fundamental prospects and attractive valuations that are likely to generate strong performance relative to the broader market, regardless of macroeconomic events.
We appreciate your business and the trust you place in us.
Sincerely,
James Schier, CFA, Portfolio Manager
Mark A. Mitchell, CFA, Portfolio
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 65 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES O (All CAP Value SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series O (All Cap Value Series) | 15.50 | % | 1.08 | % | 6.72 | % | ||||||
| Russell 3000 Value Index | 17.55 | % | 0.83 | % | 7.54 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: June 1, 1995
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Computer Sciences Corp. | 3.2 | % | ||
| TE Connectivity Ltd. | 2.9 | % | ||
| Chevron Corp. | 2.7 | % | ||
| Wells Fargo & Co. | 2.7 | % | ||
| Berkshire Hathaway, Inc. — Class B | 2.5 | % | ||
| Time Warner, Inc. | 2.4 | % | ||
| Aon plc | 2.4 | % | ||
| Edison International | 2.2 | % | ||
| Equifax, Inc. | 2.0 | % | ||
| Williams Companies, Inc. | 2.0 | % | ||
| Top Ten Total | 25.0 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 3000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. | |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 66 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES O (ALL CAP VALUE SERIES) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 98.8% | ||||||||
| FINANCIALS - 25.7% | ||||||||
| Wells Fargo & Co. | 102,633 | $ | 3,507,996 | |||||
| Berkshire Hathaway, Inc. — Class B* | 35,900 | 3,220,229 | ||||||
| Aon plc | 55,990 | 3,113,044 | ||||||
| JPMorgan Chase & Co. | 56,000 | 2,462,320 | ||||||
| American International Group, Inc.* | 67,292 | 2,375,408 | ||||||
| Allstate Corp. | 48,480 | 1,947,442 | ||||||
| State Street Corp. | 39,600 | 1,861,596 | ||||||
| U.S. Bancorp | 55,557 | 1,774,491 | ||||||
| BB&T Corp. | 59,200 | 1,723,313 | ||||||
| Hanover Insurance Group, Inc. | 44,320 | 1,716,957 | ||||||
| WR Berkley Corp. | 41,850 | 1,579,419 | ||||||
| Reinsurance Group of America, | ||||||||
| Inc. — Class A | 22,365 | 1,196,975 | ||||||
| American Financial Group, Inc. | 23,270 | 919,630 | ||||||
| Alleghany Corp.* | 2,513 | 842,910 | ||||||
| Employers Holdings, Inc. | 33,000 | 679,140 | ||||||
| Home Loan Servicing Solutions Ltd. | 30,642 | 579,134 | ||||||
| RenaissanceRe Holdings Ltd. | 6,450 | 524,127 | ||||||
| Ocwen Financial Corp.* | 14,737 | 509,753 | ||||||
| Citigroup, Inc. | 12,230 | 483,819 | ||||||
| Endurance Specialty Holdings Ltd. | 12,130 | 481,440 | ||||||
| Huntington Bancshares, Inc. | 61,170 | 390,876 | ||||||
| Zions Bancorporation | 11,800 | 252,520 | ||||||
| First Midwest Bancorp, Inc. | 18,845 | 235,939 | ||||||
| First Niagara Financial Group, Inc. | 29,660 | 235,204 | ||||||
| Wintrust Financial Corp. | 6,260 | 229,742 | ||||||
| City National Corp. | 4,550 | 225,316 | ||||||
| SVB Financial Group* | 3,860 | 216,044 | ||||||
| Citizens Republic Bancorp, Inc.* | 11,135 | 211,231 | ||||||
| Total Financials | 33,496,015 | |||||||
| ENERGY - 15.2% | ||||||||
| Chevron Corp. | 33,030 | 3,571,864 | ||||||
| Williams Companies, Inc. | 78,840 | 2,581,222 | ||||||
| McDermott International, Inc.* | 214,898 | 2,368,176 | ||||||
| Apache Corp. | 22,410 | 1,759,185 | ||||||
| ConocoPhillips | 29,400 | 1,704,906 | ||||||
| Halliburton Co. | 46,300 | 1,606,147 | ||||||
| Exxon Mobil Corp. | 11,020 | 953,781 | ||||||
| Whiting Petroleum Corp.* | 20,210 | 876,508 | ||||||
| Phillips 66 | 14,700 | 780,570 | ||||||
| Gulfport Energy Corp.* | 19,540 | 746,819 | ||||||
| Chesapeake Energy Corp. | 42,000 | 698,040 | ||||||
| SandRidge Energy, Inc.* | 87,511 | 555,695 | ||||||
| WPX Energy, Inc.* | 29,966 | 445,894 | ||||||
| Resolute Energy Corp.* | 46,000 | 373,980 | ||||||
| Goodrich Petroleum Corp.* | 32,356 | 301,558 | ||||||
| Oasis Petroleum, Inc.* | 8,280 | 263,304 | ||||||
| Superior Energy Services, Inc.* | 12,420 | 257,342 | ||||||
| USEC, Inc.* | 3,680 | 1,950 | ||||||
| Total Energy | 19,846,941 | |||||||
| INDUSTRIALS - 14.3% | ||||||||
| Equifax, Inc. | 48,600 | 2,630,232 | ||||||
| Republic Services, Inc. — Class A | 77,100 | 2,261,343 | ||||||
| Quanta Services, Inc.* | 82,120 | 2,241,055 | ||||||
| URS Corp. | 55,200 | 2,167,152 | ||||||
| United Technologies Corp. | 25,800 | 2,115,858 | ||||||
| Parker Hannifin Corp. | 18,590 | 1,581,265 | ||||||
| Covanta Holding Corp. | 67,000 | 1,234,140 | ||||||
| Aegion Corp. — Class A* | 42,010 | 932,202 | ||||||
| Saia, Inc.* | 39,000 | 901,680 | ||||||
| Orbital Sciences Corp.* | 48,821 | 672,265 | ||||||
| Navigant Consulting, Inc.* | 58,500 | 652,860 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 7,928 | 351,290 | ||||||
| ICF International, Inc.* | 11,100 | 260,184 | ||||||
| DryShips, Inc.* | 147,030 | 232,307 | ||||||
| General Cable Corp.* | 7,100 | 215,911 | ||||||
| United Stationers, Inc. | 4,990 | 154,640 | ||||||
| Total Industrials | 18,604,384 | |||||||
| INFORMATION TECHNOLOGY - 13.1% | ||||||||
| Computer Sciences Corp. | 103,150 | 4,131,157 | ||||||
| TE Connectivity Ltd. | 103,200 | 3,830,785 | ||||||
| Cisco Systems, Inc. | 106,700 | 2,096,655 | ||||||
| IXYS Corp. | 176,300 | 1,611,382 | ||||||
| Hewlett-Packard Co. | 76,352 | 1,088,016 | ||||||
| Cree, Inc.* | 29,430 | 1,000,031 | ||||||
| NetApp, Inc.* | 21,880 | 734,074 | ||||||
| Symmetricom, Inc.* | 110,721 | 638,860 | ||||||
| Maxwell Technologies, Inc.* | 68,700 | 569,523 | ||||||
| RF Micro Devices, Inc.* | 119,150 | 533,792 | ||||||
| Euronet Worldwide, Inc.* | 17,651 | 416,564 | ||||||
| Power-One, Inc.* | 62,655 | 257,512 | ||||||
| Mercury Systems, Inc.* | 19,910 | 183,172 | ||||||
| Total Information Technology | 17,091,523 | |||||||
| CONSUMER DISCRETIONARY - 8.0% | ||||||||
| Time Warner, Inc. | 66,046 | 3,158,981 | ||||||
| Lowe’s Companies, Inc. | 50,300 | 1,786,656 | ||||||
| Brown Shoe Company, Inc. | 52,392 | 962,441 | ||||||
| Chico’s FAS, Inc. | 42,690 | 788,057 | ||||||
| DeVry, Inc. | 28,700 | 681,051 | ||||||
| Cabela’s, Inc.* | 14,360 | 599,530 | ||||||
| Jack in the Box, Inc.* | 20,000 | 572,000 | ||||||
| Maidenform Brands, Inc.* | 24,850 | 484,327 | ||||||
| Scholastic Corp. | 14,500 | 428,620 | ||||||
| Jones Group, Inc. | 31,924 | 353,079 | ||||||
| Guess?, Inc. | 12,950 | 317,793 | ||||||
| Gentex Corp. | 14,970 | 281,735 | ||||||
| Total Consumer Discretionary | 10,414,270 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 67 |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES O (ALL CAP VALUE SERIES) |
| Shares | Value | |||||||
| HEALTH CARE - 7.9% | ||||||||
| Aetna, Inc. | 43,660 | $ | 2,021,458 | |||||
| Covidien plc | 32,280 | 1,863,847 | ||||||
| MEDNAX, Inc.* | 17,500 | 1,391,600 | ||||||
| UnitedHealth Group, Inc. | 21,000 | 1,139,040 | ||||||
| Teva Pharmaceutical Industries Ltd. ADR | 24,920 | 930,513 | ||||||
| Forest Laboratories, Inc.* | 24,550 | 867,106 | ||||||
| Community Health Systems, Inc. | 19,030 | 584,982 | ||||||
| Hologic, Inc.* | 24,443 | 489,593 | ||||||
| Universal Health Services, Inc. — Class B | 9,340 | 451,589 | ||||||
| Kindred Healthcare, Inc.* | 29,594 | 320,207 | ||||||
| Alere, Inc.* | 12,771 | 236,264 | ||||||
| Total Health Care | 10,296,199 | |||||||
| CONSUMER STAPLES - 6.8% | ||||||||
| CVS Caremark Corp. | 51,720 | 2,500,662 | ||||||
| Wal-Mart Stores, Inc. | 29,900 | 2,040,077 | ||||||
| Mondelez International, Inc. — Class A | 53,700 | 1,367,739 | ||||||
| Ralcorp Holdings, Inc.* | 12,012 | 1,076,876 | ||||||
| Kraft Foods Group, Inc. | 17,900 | 813,913 | ||||||
| Hormel Foods Corp. | 18,480 | 576,761 | ||||||
| Darling International, Inc.* | 27,525 | 441,501 | ||||||
| Total Consumer Staples | 8,817,529 | |||||||
| MATERIALS - 3.8% | ||||||||
| Dow Chemical Co. | 79,610 | 2,572,995 | ||||||
| Owens-Illinois, Inc.* | 47,630 | 1,013,090 | ||||||
| Sonoco Products Co. | 29,900 | 888,927 | ||||||
| Globe Specialty Metals, Inc. | 18,460 | 253,825 | ||||||
| Zoltek Companies, Inc.* | 30,900 | 239,475 | ||||||
| Total Materials | 4,968,312 | |||||||
| UTILITIES - 3.5% | ||||||||
| Edison International | 64,800 | 2,928,311 | ||||||
| Black Hills Corp. | 22,000 | 799,480 | ||||||
| Great Plains Energy, Inc. | 23,922 | 485,856 | ||||||
| MDU Resources Group, Inc. | 13,819 | 293,516 | ||||||
| Total Utilities | 4,507,163 | |||||||
| TELECOMMUNICATION SERVICES - 0.5% | ||||||||
| Windstream Corp. | 80,380 | 665,546 | ||||||
| Total Common Stocks | ||||||||
| (Cost $114,058,609) | 128,707,882 | |||||||
| Total Investments - 98.8% | ||||||||
| (Cost $114,058,609) | $ | 128,707,882 | ||||||
| Other Assets & Liabilities, net - 1.2% | 1,526,225 | |||||||
| Total Net Assets - 100.0% | $ | 130,234,107 | ||||||
| * | Non-income producing security. | |
| † | Value determined based on Level 1 inputs — See Note 4. |
ADR — American Depositary Receipt
plc — Public Limited Company
| 68 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES O (ALL CAP VALUE SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
December 31, 2012
| Assets: | ||||
| Investments, at value | ||||
| (cost $114,058,609) | $ | 128,707,882 | ||
| Cash | 1,686,256 | |||
| Prepaid expenses | 3,111 | |||
| Receivables: | ||||
| Dividends | 146,265 | |||
| Fund shares sold | 16,795 | |||
| Total assets | 130,560,309 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 116,427 | |||
| Fund shares redeemed | 95,584 | |||
| Management fees | 77,483 | |||
| Fund accounting/administration fees | 10,515 | |||
| Transfer agent/maintenance fees | 5,963 | |||
| Directors’ fees* | 192 | |||
| Miscellaneous | 20,038 | |||
| Total liabilities | 326,202 | |||
| Net assets | $ | 130,234,107 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 134,088,038 | ||
| Undistributed net investment income | 1,256,228 | |||
| Accumulated net realized loss on investments | (19,759,432 | ) | ||
| Net unrealized appreciation on investments | 14,649,273 | |||
| Net assets | $ | 130,234,107 | ||
| Capital shares outstanding | 5,280,922 | |||
| Net asset value per share | $ | 24.66 |
| STATEMENT OF |
| OPERATIONS |
Year Ended December 31, 2012
| Investment Income: | ||||
| Dividends | $ | 2,482,931 | ||
| Interest | 471 | |||
| Total investment income | 2,483,402 | |||
| Expenses: | ||||
| Management fees | 962,776 | |||
| Transfer agent/maintenance fees | 26,955 | |||
| Fund accounting/administration fees | 130,661 | |||
| Directors’ fees* | 15,034 | |||
| Custodian fees | 2,698 | |||
| Miscellaneous | 89,050 | |||
| Total expenses | 1,227,174 | |||
| Net investment income | 1,256,228 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 5,023,420 | |||
| Options written | 153,699 | |||
| Net realized gain | 5,177,119 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 13,635,330 | |||
| Options written | (161,964 | ) | ||
| Net change in unrealized appreciation (depreciation) | 13,473,366 | |||
| Net realized and unrealized gain | 18,650,485 | |||
| Net increase in net assets resulting from operations | $ | 19,906,713 |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 69 |
| SERIES O (ALL CAP VALUE SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,256,228 | $ | 1,075,134 | ||||
| Net realized gain on investments | 5,177,119 | 4,191,143 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 13,473,366 | (12,570,533 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 19,906,713 | (7,304,256 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 4,708,037 | 15,737,462 | ||||||
| Cost of shares redeemed | (32,174,771 | ) | (36,360,715 | ) | ||||
| Net decrease from capital share transactions | (27,466,734 | ) | (20,623,253 | ) | ||||
| Net decrease in net assets | (7,560,021 | ) | (27,927,509 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 137,794,128 | 165,721,637 | ||||||
| End of year | $ | 130,234,107 | $ | 137,794,128 | ||||
| Undistributed net investment income at end of year | $ | 1,256,228 | $ | 1,075,134 | ||||
| Capital share activity: | ||||||||
| Shares sold | 203,910 | 687,537 | ||||||
| Shares redeemed | (1,377,712 | ) | (1,656,071 | ) | ||||
| Net decrease in shares | (1,173,802 | ) | (968,534 | ) | ||||
| 70 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES O (ALL CAP VALUE SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008d | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 21.35 | $ | 22.32 | $ | 19.14 | $ | 14.39 | $ | 23.37 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .21 | .15 | .14 | .16 | .34 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 3.10 | (1.12 | ) | 3.04 | 4.59 | (9.32 | ) | |||||||||||||
| Total from investment operations | 3.31 | (.97 | ) | 3.18 | 4.75 | (8.98 | ) | |||||||||||||
| Net asset value, end of period | $ | 24.66 | $ | 21.35 | $ | 22.32 | $ | 19.14 | $ | 14.39 | ||||||||||
| Total Returnb | 15.50 | % | (4.35 | %) | 16.61 | % | 33.01 | % | (38.43 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 130,234 | $ | 137,794 | $ | 165,722 | $ | 161,918 | $ | 156,634 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 0.91 | % | 0.69 | % | 0.68 | % | 1.00 | % | 1.72 | % | ||||||||||
| Total expenses | 0.89 | % | 0.86 | % | 0.86 | % | 0.87 | % | 1.09 | % | ||||||||||
| Net expensesc | 0.89 | % | 0.86 | % | 0.86 | % | 0.85 | % | 1.07 | % | ||||||||||
| Portfolio turnover rate | 14 | % | 19 | % | 11 | % | 19 | % | 124 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Net expense information reflects the expense ratios after expense waivers. | |
| d | Security Investors, LLC became the advisor of Series O effective August 15, 2008. Prior to August 15, 2008, T. Rowe Price sub-advised the Series. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 71 |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders
Guggenheim Investments Series P (High Yield Series) is managed by a team of seasoned professionals, including B. Scott Minerd, Chief Investment Officer and a Managing Partner at Guggenheim Partners Investment Management, LLC (“GPIM”); Jeffrey B. Abrams, Senior Managing Director and Portfolio Manager at GPIM; and Kevin H. Gundersen, Managing Director and Portfolio Manager at GPIM. The Fund's portfolio managers changed In August 2012. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the 12-month period ended December 31, 2012.
For the one-year period ending December 31, 2012, the Series P (High Yield Series) returned 14.87%, compared with the 15.81% return of its benchmark, the Barclays U.S. High Yield® Index.
Effective August 2012, the Fund experienced a change in individuals managing the portfolio, although Guggenheim Investments continues to serve as the Fund’s investment manager. The change in the portfolio management team does not affect the investment objective of the Fund, which is to seek high current income, with capital appreciation as a secondary objective. The Fund pursues its objective by investing at least 80% of its assets, under normal market conditions, in a broad range of high yield, high risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization. Its investment approach combines a top-down macroeconomic view with a bottom-up process to identify high yield securities, emphasizing rigorous credit analysis and relative value in selecting securities.
Nominally low yields throughout the fixed income universe drove capital into the leveraged credit sector for the year, with issuers responding with record level supply. 2012 high yield bond issuance totaled $346 billion, the most ever, while the loan market had its highest level of issuance since 2007.
Since the new portfolio management team assumed responsibility for the portfolio in August 2012, it has been applying its philosophy of conducting high-level credit work on individual securities to ensure that the portfolio is built according to the team’s fundamental bottom-up standards. Among the changes being made by the team are adding bank loans to the portfolio; selectively going down the credit spectrum to add single B and high-quality CCC credits; and underweighting credits rated BB.
The management team believes that B-rated bank loans offer comparable risk profiles to BB-rated high yield credits, in addition to competitive or better yields, seniority in the capital structure and low sensitivity to interest rates. The team also believes single B and CCC credits offer better relative value than credits in the BB range, although no credit is added to the portfolio without undergoing Guggenheim Investments’ rigorous analysis. In addition, most securities rated BB are currently trading at a premium; with their strong correlation to U.S. Treasuries, the team sees greater value in other areas of the leveraged credit market. We expect relative performance of BB-rated bonds to suffer as the improving economy puts upward pressure on interest rates.
Historically, the team’s approach to the high yield sector has been to build tightly risk managed portfolios that are competitive in up markets, yet outperform in down markets due to the quality and strength of securities in the Fund. The changes the team has introduced should alter the characteristics of the portfolio, namely reducing the portfolio’s duration and lowering the portfolio’s overall risk. The team also aims for a yield advantage to the benchmark.
At the end of 2012, there was a noticeably cautious tenor surrounding the leveraged credit market. Since 2008, the high yield bond market and leveraged loan market have recorded annualized average returns of 22% and 14%, respectively, but record high prices, historically low yields and gradually deteriorating fundamentals have tempered forward expectations with forecasts calling for single digit returns.
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| 72 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES P (High Yield SERIES)
OBJECTIVE: Seeks high current income. Capital appreciation is a secondary objective.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series P (High Yield Series) | 14.87 | % | 9.90 | % | 9.88 | % | ||||||
| Barclays U.S. High Yield Index | 15.81 | % | 10.34 | % | 10.62 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: August 5, 1996
Portfolio Composition by Quality Rating
(Based on Standard and Poor’s Ratings)
| Rating** | ||||
| Fixed Income Instruments | ||||
| B | 45.1 | % | ||
| BB | 24.3 | % | ||
| CCC | 21.7 | % | ||
| BBB | 3.8 | % | ||
| Not Rated | 1.7 | % | ||
| A | 1.0 | % | ||
| Other Instruments | ||||
| Common Stocks | 0.9 | % | ||
| Preferred Stocks | 0.5 | % | ||
| Total Investments | 99.0 | % | ||
The chart above reflects percentages of the value of total investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Barclays U.S. High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. | |
| ** | Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “Not Rated” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, which are all a Nationally Recognized Statistical Rating Organization (“NRSRO”). For purposes of this presentation, when ratings are available from more than one agency, the highest rating is used. Guggenheim Investments has converted Moody’s and Fitch ratings to the equivalent S&P rating. Unrated securities do not necessarily indicate low credit quality. Security ratings are determined at the time of purchase and may change thereafter. | |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 73 |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES P (HIGH YIELD SERIES) |
| Shares | Value | |||||||
| COMMON STOCKS† - 0.9% | ||||||||
| ENERGY - 0.5% | ||||||||
| Stallion Oilfield Holdings Ltd.*,†††,1,2 | 19,265 | $ | 597,214 | |||||
| CONSUMER DISCRETIONARY - 0.2% | ||||||||
| Sonic Automotive, Inc. — Class A | 15,103 | 315,502 | ||||||
| Aimia, Inc. | 5 | 75 | ||||||
| MEDIQ, Inc.*,†††,1 | 92 | 1 | ||||||
| Total Consumer Discretionary | 315,578 | |||||||
| FINANCIALS - 0.2% | ||||||||
| CIT Group, Inc.* | 7,613 | 294,166 | ||||||
| Leucadia National Corp. | 247 | 5,876 | ||||||
| Adelphia Recovery Trust*,†††,1 | 5,270 | 53 | ||||||
| Total Financials | 300,095 | |||||||
| INDUSTRIALS - 0.0% | ||||||||
| Delta Air Lines, Inc.* | 1 | 12 | ||||||
| Chorus Aviation, Inc. | 3 | 12 | ||||||
| Total Industrials | 24 | |||||||
| Total Common Stocks | ||||||||
| (Cost $837,375) | 1,212,911 | |||||||
| PREFERRED STOCKS - 0.5% | ||||||||
| Citigroup Capital XIII | ||||||||
| 7.88% due 10/30/40† | 25,000 | 697,500 | ||||||
| U.S. Shipping Corp.*,†††,1 | 24,529 | 6,132 | ||||||
| Total Preferred Stocks | ||||||||
| (Cost $1,250,000) | 703,632 | |||||||
| WARRANTS†††- 0.0% | ||||||||
| Reader’s Digest Association, Inc. | ||||||||
| 02/19/14*,1 | 478 | 5 | ||||||
| Total Warrants | ||||||||
| (Cost $–) | 5 | |||||||
| Face | ||||||||
| Amount | ||||||||
| CORPORATE BONDS†† - 83.6% | ||||||||
| Consumer Discretionary - 22.7% | ||||||||
| Caesars Entertainment Operating | ||||||||
| Company, Inc. | ||||||||
| 9.00% due 02/15/202,3 | $ | 2,750,000 | 2,750,000 | |||||
| Rural/Metro Corp. | ||||||||
| 10.13% due 07/15/192,3 | 2,250,000 | 2,163,750 | ||||||
| Snoqualmie Entertainment Authority | ||||||||
| 9.13% due 02/01/152,3 | 2,125,000 | 2,135,625 | ||||||
| Sabre, Inc. | ||||||||
| 8.50% due 05/15/192,3 | 1,850,000 | 1,970,250 | ||||||
| WMG Acquisition Corp. | ||||||||
| 11.50% due 10/01/18 | 1,250,000 | 1,443,750 | ||||||
| 6.00% due 01/15/212,3 | 350,000 | 369,250 | ||||||
| Royal Caribbean Cruises Ltd. | ||||||||
| 5.25% due 11/15/22 | 1,500,000 | 1,586,250 | ||||||
| Wolverine World Wide, Inc. | ||||||||
| 6.13% due 10/15/202,3 | 1,500,000 | 1,575,000 | ||||||
| Laureate Education, Inc. | ||||||||
| 9.25% due 09/01/192,3 | 1,500,000 | 1,567,499 | ||||||
| Continental Airlines 2012-2 Class B | ||||||||
| Pass Through Trust | ||||||||
| 5.50% due 10/29/20 | 1,500,000 | 1,563,750 | ||||||
| Dufry Finance SCA 5.50% | ||||||||
| due 10/15/202,3 | 1,500,000 | 1,552,499 | ||||||
| Checkers Drive-In Restaurants, Inc. | ||||||||
| 11.00% due 12/01/172,3 | 1,500,000 | 1,522,500 | ||||||
| Logo Merger Sub Corp. | ||||||||
| 8.38% due 10/15/202,3 | 1,500,000 | 1,507,499 | ||||||
| Yonkers Racing Corp. | ||||||||
| 11.38% due 07/15/162,3 | 1,300,000 | 1,404,000 | ||||||
| Catalent Pharma Solutions, Inc. | ||||||||
| 7.88% due 10/15/182,3 | 1,250,000 | 1,259,375 | ||||||
| Travelport LLC | ||||||||
| 9.88% due 09/01/14 | 1,325,000 | 1,167,656 | ||||||
| Burlington Coat Factory | ||||||||
| Warehouse Corp. | ||||||||
| 10.00% due 02/15/19 | 950,000 | 1,026,000 | ||||||
| MDC Partners, Inc. | ||||||||
| 11.00% due 11/01/162,3 | 900,000 | 988,875 | ||||||
| GRD Holdings III Corp. | ||||||||
| 10.75% due 06/01/192,3 | 875,000 | 877,188 | ||||||
| INTCOMEX, Inc. | ||||||||
| 13.25% due 12/15/14 | 775,000 | 802,125 | ||||||
| Stanadyne Corp. | ||||||||
| 10.00% due 08/15/14 | 750,000 | 695,625 | ||||||
| ServiceMaster Co. | ||||||||
| 7.00% due 08/15/202,3 | 375,000 | 375,938 | ||||||
| 8.00% due 02/15/20 | 175,000 | 182,438 | ||||||
| American Standard Americas | ||||||||
| 10.75% due 01/15/162,3 | 520,000 | 509,600 | ||||||
| Suburban Propane Partners | ||||||||
| Limited Partnership/Suburban | ||||||||
| Energy Finance Corp. | ||||||||
| 7.50% due 10/01/18 | 253,000 | 272,608 | ||||||
| Stanadyne Holdings, Inc. | ||||||||
| 12.00% due 02/15/15 | 125,000 | 85,000 | ||||||
| Metaldyne Corp. | ||||||||
| 11.00% due 06/15/12†††,1,4 | 1,000,000 | — | ||||||
| Total Consumer Discretionary | 31,354,050 | |||||||
| ENERGY - 19.5% | ||||||||
| Targa Resources Partners | ||||||||
| Limited Partnership / Targa | ||||||||
| Resources Partners Finance Corp. | ||||||||
| 5.25% due 05/01/232,3 | 1,500,000 | 1,552,500 | ||||||
| 7.88% due 10/15/18 | 500,000 | 547,500 | ||||||
| Bill Barrett Corp. | ||||||||
| 7.00% due 10/15/22 | 1,250,000 | 1,287,500 | ||||||
| 7.63% due 10/01/19 | 595,000 | 627,725 | ||||||
| Exterran Holdings, Inc. | ||||||||
| 7.25% due 12/01/18 | 1,625,000 | 1,722,500 | ||||||
| Eagle Rock Energy Partners | ||||||||
| Limited Partnership / Eagle | ||||||||
| Rock Energy Finance Corp. | ||||||||
| 8.38% due 06/01/192,3 | 1,625,000 | 1,657,500 | ||||||
| Magnum Hunter Resources Corp. | ||||||||
| 9.75% due 05/15/202,3 | 1,585,000 | 1,644,438 | ||||||
| 74 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES P (HIGH YIELD SERIES) |
| Face | ||||||||
| Amount | Value | |||||||
| Bristow Group, Inc. | ||||||||
| 6.25% due 10/15/22 | $ | 1,500,000 | $ | 1,605,000 | ||||
| Hiland Partners Limited Partnership / | ||||||||
| Hiland Partners Finance Corp. | ||||||||
| 7.25% due 10/01/202,3 | 1,500,000 | 1,605,000 | ||||||
| Midstates Petroleum Company | ||||||||
| Incorporated / Midstates | ||||||||
| Petroleum Co LLC | ||||||||
| 10.75% due 10/01/202,3 | 1,500,000 | 1,593,750 | ||||||
| Penn Virginia Resource Partners | ||||||||
| Limited Partnership / Penn Virginia | ||||||||
| Resource Finance Corp. | ||||||||
| 8.25% due 04/15/18 | 1,500,000 | 1,590,000 | ||||||
| BreitBurn Energy Partners Limited | ||||||||
| Partnership / BreitBurn Finance Corp. | ||||||||
| 7.88% due 04/15/222,3 | 1,250,000 | 1,296,875 | ||||||
| 8.63% due 10/15/20 | 250,000 | 272,500 | ||||||
| Crestwood Midstream Partners | ||||||||
| Limited Partnership / Crestwood | ||||||||
| Midstream Finance Corp. | ||||||||
| 7.75% due 04/01/19 | 1,500,000 | 1,556,250 | ||||||
| Atlas Pipeline Partners Limited | ||||||||
| Partnership / Atlas Pipeline | ||||||||
| Finance Corp. | ||||||||
| 6.63% due 10/01/202,3 | 1,500,000 | 1,552,500 | ||||||
| EPL Oil & Gas, Inc. | ||||||||
| 8.25% due 02/15/182,3 | 1,500,000 | 1,541,250 | ||||||
| SandRidge Energy, Inc. | ||||||||
| 7.50% due 03/15/21 | 1,000,000 | 1,070,000 | ||||||
| 8.13% due 10/15/22 | 350,000 | 383,250 | ||||||
| Tesoro Logistics Limited | ||||||||
| Partnership / Tesoro | ||||||||
| Logistics Finance Corp. | ||||||||
| 5.88% due 10/01/202,3 | 1,100,000 | 1,141,250 | ||||||
| Drill Rigs Holdings, Inc. | ||||||||
| 6.50% due 10/01/172,3 | 1,115,000 | 1,109,425 | ||||||
| Stallion Oilfield Holdings Ltd. | ||||||||
| 10.50% due 02/15/15 | 500,000 | 531,250 | ||||||
| Access Midstream Partners Limited | ||||||||
| Partnership / ACMP Finance Corp. | ||||||||
| 4.88% due 05/15/23 | 425,000 | 431,375 | ||||||
| Legacy Reserves Limited | ||||||||
| Partnership / Finance Corp. | ||||||||
| 8.00% due 12/01/202,3 | 375,000 | 382,500 | ||||||
| SM Energy Co. | ||||||||
| 6.50% due 11/15/21 | 150,000 | 160,500 | ||||||
| Carrizo Oil & Gas, Inc. | ||||||||
| 7.50% due 09/15/20 | 150,000 | 154,125 | ||||||
| SemGroup, LP | ||||||||
| 8.75% due 11/15/15†††,1,4 | 1,700,000 | — | ||||||
| Total Energy | 27,016,463 | |||||||
| FINANCIALS - 10.4% | ||||||||
| Nelnet, Inc. 3.69% due 09/29/36 | 4,250,000 | 3,357,499 | ||||||
| Icahn Enterprises Limited | ||||||||
| Partnership / Icahn Enterprises | ||||||||
| Finance Corp. | ||||||||
| 8.00% due 01/15/18 | 2,000,000 | 2,147,500 | ||||||
| Nationstar Mortgage LLC / | ||||||||
| Nationstar Capital Corp. | ||||||||
| 7.88% due 10/01/202,3 | 1,500,000 | 1,582,500 | ||||||
| Nuveen Investments, Inc. | ||||||||
| 9.13% due 10/15/172,3 | 1,575,000 | 1,547,438 | ||||||
| Hub International Ltd. | ||||||||
| 8.13% due 10/15/182,3 | 1,500,000 | 1,537,500 | ||||||
| Lancashire Holdings Ltd. | ||||||||
| 5.70% due 10/01/222,3 | 1,500,000 | 1,489,935 | ||||||
| Rabobank Capital Funding Trust II | ||||||||
| 5.26% due 12/31/492,3,5 | 1,400,000 | 1,407,020 | ||||||
| Kennedy-Wilson, Inc. | ||||||||
| 8.75% due 04/01/192,3 | 1,175,000 | 1,251,375 | ||||||
| Total Financials | 14,320,767 | |||||||
| TELECOMMUNICATION SERVICES - 6.7% | ||||||||
| Zayo Group LLC / Zayo Capital, Inc. | ||||||||
| 10.13% due 07/01/20 | 1,500,000 | 1,706,250 | ||||||
| CyrusOne Limited Partnership / | ||||||||
| CyrusOne Finance Corp. | ||||||||
| 6.38% due 11/15/222,3 | 1,500,000 | 1,563,750 | ||||||
| Univision Communications, Inc. | ||||||||
| 6.75% due 09/15/222,3 | 1,500,000 | 1,548,750 | ||||||
| Griffey Intermediate | ||||||||
| Incorporated / Griffey | ||||||||
| Finance Sub LLC | ||||||||
| 7.00% due 10/15/202,3 | 1,500,000 | 1,533,750 | ||||||
| Avaya, Inc. | ||||||||
| 10.13% due 11/01/15 | 750,000 | 671,250 | ||||||
| 9.75% due 11/01/15 | 400,000 | 356,000 | ||||||
| Open Solutions, Inc. | ||||||||
| 9.75% due 02/01/152,3 | 1,250,000 | 1,003,125 | ||||||
| Unitymedia Hessen GmbH & Company KG / | ||||||||
| Unitymedia NRW GmbH | ||||||||
| 5.50% due 01/15/232,3 | 450,000 | 464,625 | ||||||
| Clearwire Communications | ||||||||
| LLC / Clearwire Finance, Inc. | ||||||||
| 12.00% due 12/01/152,3 | 300,000 | 322,500 | ||||||
| Baker & Taylor Acquisitions Corp. | ||||||||
| 15.00% due 04/01/172,3 | 140,000 | 96,600 | ||||||
| Sitel LLC / Sitel Finance Corp. | ||||||||
| 11.00% due 08/01/172,3 | 20,000 | 20,300 | ||||||
| Total Telecommunication Services | 9,286,900 | |||||||
| CONSUMER STAPLES - 6.0% | ||||||||
| Spectrum Brands Escrow Corp. | ||||||||
| 6.38% due 11/15/202,3 | 775,000 | 813,750 | ||||||
| 6.63% due 11/15/222,3 | 725,000 | 777,563 | ||||||
| Reynolds Group Issuer | ||||||||
| Incorporated / Reynolds | ||||||||
| Group Issuer LLC / Reynolds | ||||||||
| Group Issuer Lu | ||||||||
| 8.50% due 05/15/18 | 750,000 | 768,750 | ||||||
| 5.75% due 10/15/202,3 | 550,000 | 567,875 | ||||||
| Bumble Bee Acquisition Corp. | ||||||||
| 9.00% due 12/15/172,3 | 1,194,000 | 1,283,550 | ||||||
| US Foods, Inc. | ||||||||
| 8.50% due 06/30/192,3 | 1,025,000 | 1,045,500 | ||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 75 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES P (HIGH YIELD SERIES) | |
| Face | ||||||||
| Amount | Value | |||||||
| American Achievement Corp. | ||||||||
| 10.88% due 04/15/162,3 | $ | 1,050,000 | $ | 897,750 | ||||
| Harbinger Group, Inc. | ||||||||
| 7.88% due 07/15/192,3 | 800,000 | 793,000 | ||||||
| Bumble Bee Holdco SCA | ||||||||
| 9.63% due 03/15/182,3 | 600,000 | 594,000 | ||||||
| Pinnacle Foods Finance LLC / | ||||||||
| Pinnacle Foods Finance Corp. | ||||||||
| 8.25% due 09/01/17 | 500,000 | 532,500 | ||||||
| Armored Autogroup, Inc. | ||||||||
| 9.25% due 11/01/18 | 300,000 | 254,250 | ||||||
| Total Consumer Staples | 8,328,488 | |||||||
| INFORMATION TECHNOLOGY - 5.3% | ||||||||
| First Data Corp. | ||||||||
| 8.75% due 01/15/222,3 | 1,625,000 | 1,661,562 | ||||||
| ViaSat, Inc. | ||||||||
| 6.88% due 06/15/202,3 | 1,500,000 | 1,567,500 | ||||||
| Nuance Communications, Inc. | ||||||||
| 5.38% due 08/15/202,3 | 1,500,000 | 1,567,500 | ||||||
| Stream Global Services, Inc. | ||||||||
| 11.25% due 10/01/14 | 1,295,000 | 1,353,275 | ||||||
| Stratus Technologies Bermuda | ||||||||
| Limited / Stratus Technologies, Inc. | ||||||||
| 12.00% due 03/29/15 | 575,000 | 569,250 | ||||||
| IMS Health, Inc. | ||||||||
| 6.00% due 11/01/202,3 | 425,000 | 445,188 | ||||||
| IAC | ||||||||
| 4.75% due 12/15/222,3 | 225,000 | 223,875 | ||||||
| Total Information Technology | 7,388,150 | |||||||
| INDUSTRIALS - 4.9% | ||||||||
| CEVA Group plc | ||||||||
| 8.38% due 12/01/172,3 | 1,250,000 | 1,231,250 | ||||||
| Berry Plastics Corp. | ||||||||
| 9.50% due 05/15/18 | 1,000,000 | 1,100,000 | ||||||
| Huntington Ingalls Industries, Inc. | ||||||||
| 7.13% due 03/15/21 | 750,000 | 815,624 | ||||||
| FTI Consulting, Inc. | ||||||||
| 6.00% due 11/15/222,3 | 787,500 | 815,063 | ||||||
| Alion Science & Technology Corp. | ||||||||
| 10.25% due 02/01/15 | 1,500,000 | 768,750 | ||||||
| Thermadyne Holdings Corp. | ||||||||
| 9.00% due 12/15/17 | 625,000 | 665,625 | ||||||
| Coleman Cable, Inc. | ||||||||
| 9.00% due 02/15/18 | 550,000 | 591,250 | ||||||
| Covanta Holding Corp. | ||||||||
| 6.38% due 10/01/22 | 500,000 | 542,985 | ||||||
| American Railcar Industries, Inc. | ||||||||
| 7.50% due 03/01/14 | 132,000 | 132,990 | ||||||
| Triumph Group, Inc. | ||||||||
| 8.00% due 11/15/17 | 100,000 | 108,000 | ||||||
| Total Industrials | 6,771,537 | |||||||
| HEALTH CARE - 3.6% | ||||||||
| Apria Healthcare Group, Inc. | ||||||||
| 11.25% due 11/01/14 | 1,900,000 | 1,964,125 | ||||||
| Physiotherapy Associates Holdings, Inc. | ||||||||
| 11.88% due 05/01/192,3 | 1,230,000 | 1,094,700 | ||||||
| Biomet, Inc. | ||||||||
| 6.50% due 08/01/202,3 | 1,000,000 | 1,062,500 | ||||||
| Fresenius Medical Care US Finance, Inc. | ||||||||
| 5.75% due 02/15/212,3 | 500,000 | 535,000 | ||||||
| Symbion, Inc. | ||||||||
| 11.00% due 08/23/15 | 211,751 | 218,104 | ||||||
| Valeant Pharmaceuticals International | ||||||||
| 7.00% due 10/01/202,3 | 100,000 | 108,750 | ||||||
| Total Health Care | 4,983,179 | |||||||
| UTILITIES - 2.9% | ||||||||
| NRG Energy, Inc. | ||||||||
| 8.50% due 06/15/19 | 2,000,000 | 2,200,000 | ||||||
| Elwood Energy LLC | ||||||||
| 8.16% due 07/05/26 | 1,219,100 | 1,269,388 | ||||||
| Calpine Corp. | ||||||||
| 7.88% due 01/15/232,3 | 450,000 | 508,500 | ||||||
| Total utilities | 3,977,888 | |||||||
| MATERIALS - 1.6% | ||||||||
| IAMGOLD Corp. | ||||||||
| 6.75% due 10/01/202,3 | 1,500,000 | 1,462,499 | ||||||
| Eldorado Gold Corp. | ||||||||
| 6.13% due 12/15/202,3 | 465,000 | 473,138 | ||||||
| Sawgrass Merger Sub, Inc. | ||||||||
| 8.75% due 12/15/202,3 | 225,000 | 226,688 | ||||||
| Total Materials | 2,162,325 | |||||||
| Total Corporate Bonds | ||||||||
| (Cost $112,566,791) | 115,589,747 | |||||||
| SENIOR FLOATING RATE INTERESTS†† - 11.7% | ||||||||
| CONSUMER DISCRETIONARY - 3.9% | ||||||||
| Transtar Holdings Co. | ||||||||
| 9.75% due 10/09/19 | 1,500,000 | 1,514,999 | ||||||
| GCA Services Group, Inc. | ||||||||
| 9.25% due 11/01/20 | 1,500,000 | 1,481,250 | ||||||
| Intrawest Corp. | ||||||||
| 7.00% due 12/03/17 | 1,100,000 | 1,101,375 | ||||||
| Endurance International Group | ||||||||
| 10.25% due 05/08/20 | 750,000 | 746,250 | ||||||
| FleetPride Corp. | ||||||||
| 9.25% due 05/15/20 | 600,000 | 587,628 | ||||||
| Total Consumer Discretionary | 5,431,502 | |||||||
| 76 | THE GUGGENHEIM FUNDS ANNUAL REPORT | See Notes to Financial Statements. |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES P (HIGH YIELD SERIES) |
| Face | ||||||||
| Amount | Value | |||||||
| INFORMATION TECHNOLOGY - 3.2% | ||||||||
| Go Daddy Operating Company LLC | ||||||||
| 5.50% due 12/17/18 | $ | 1,500,000 | $ | 1,502,505 | ||||
| SumTotal Systems, Inc. | ||||||||
| 6.25% due 10/25/19 | 1,500,000 | 1,489,695 | ||||||
| Wall Street Systems Holdings, Inc. | ||||||||
| 9.25% due 04/24/20 | 750,000 | 747,503 | ||||||
| Associated Partners, Inc. | ||||||||
| 6.71% due 12/21/15 | 700,000 | 682,500 | ||||||
| Total Information Technology | 4,422,203 | |||||||
| CONSUMER STAPLES - 1.2% | ||||||||
| AdvancePierre Foods | ||||||||
| 9.50% due 10/02/17 | 1,600,000 | 1,622,000 | ||||||
| UTILITIES - 1.1% | ||||||||
| Astoria Generating Company | ||||||||
| Acquisitions LLC | ||||||||
| 8.50% due 10/26/17 | 1,500,000 | 1,503,435 | ||||||
| FINANCIALS - 0.9% | ||||||||
| Cunningham Lindsey U.S., Inc. | ||||||||
| 9.25% due 04/18/20 | 1,200,000 | 1,221,000 | ||||||
| HEALTH CARE - 0.7% | ||||||||
| One Call Medical, Inc. | ||||||||
| 7.00% due 08/22/19 | 748,125 | 748,125 | ||||||
| 8.00% due 08/22/19 | 1,875 | 1,875 | ||||||
| PRA International | ||||||||
| due 06/10/196 | 250,000 | 251,563 | ||||||
| Total Health Care | 1,001,563 | |||||||
| Energy - 0.5% | ||||||||
| Panda Sherman Power LLC | ||||||||
| 9.00% due 09/14/18 | 650,000 | 658,125 | ||||||
| Industrials - 0.2% | ||||||||
| Panolam Industries International, Inc. | ||||||||
| 7.25% due 08/23/17 | 309,563 | 307,241 | ||||||
| Total Senior Floating Rate Interests | ||||||||
| (Cost $15,879,639) | 16,167,069 | |||||||
| CONVERTIBLE BONDS†† - 2.3% | ||||||||
| INDUSTRIALS - 1.2% | ||||||||
| DryShips, Inc. | ||||||||
| 5.00% due 12/01/14 | 2,166,000 | 1,711,140 | ||||||
| ENERGY - 0.6% | ||||||||
| USEC, Inc. | ||||||||
| 3.00% due 10/01/14 | 2,050,000 | 779,000 | ||||||
| FINANCIALS - 0.5% | ||||||||
| E*TRADE Financial Corp. | ||||||||
| 0.00% due 08/31/19 | 750,000 | 669,844 | ||||||
| Total Convertible Bonds | ||||||||
| (Cost $4,403,879) | 3,159,984 | |||||||
| Total Investments - 99.0% | ||||||||
| (Cost $134,937,684) | 136,833,348 | |||||||
| Other Assets & Liabilities, net - 1.0% | 1,419,500 | |||||||
| Total Net Assets - 100.0% | $ | 138,252,848 | ||||||
| * | Non-income producing security. | |
| † | Value determined based on Level 1 inputs, except as noted — See Note 4. |
| †† | Value determined based on Level 2 inputs, except as noted — See Note 4. |
| ††† | Value determined based on Level 3 inputs — See Note 4. |
| 1 | Illiquid security. | |
| 2 | Security was acquired through a private placement. |
| 3 | Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $72,731,705 (cost $70,849,705), or 52.6% of total net assets. |
| 4 | Security is in default of interest and/or principal obligations. |
| 5 | Perpetual maturity. |
| 6 | Security with no rate was unsettled at December 31, 2012. |
plc — Public Limited Company
REIT — Real Estate Investment Trust
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 77 |
| SERIES P (HIGH YIELD SERIES) |
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 2012
| Assets: | ||||
| Investments, at value | ||||
| (cost $134,937,684) | $ | 136,833,348 | ||
| Cash | 906,398 | |||
| Prepaid expenses | 19,000 | |||
| Receivables: | ||||
| Interest | 2,440,485 | |||
| Fund shares sold | 34,206 | |||
| Other | 20,625 | |||
| Total assets | 140,254,062 | |||
| Liabilities: | ||||
| Unfunded loan commitment, at value (commitment fees received $17,500) | 17,500 | |||
| Payable for: | ||||
| Fund shares redeemed | 1,616,542 | |||
| Securities purchased | 245,000 | |||
| Management fees | 88,287 | |||
| Fund accounting/administration fees | 11,183 | |||
| Transfer agent/maintenance fees | 5,950 | |||
| Directors’ fees* | 66 | |||
| Miscellaneous | 16,686 | |||
| Total liabilities | 2,001,214 | |||
| Net assets | $ | 138,252,848 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 123,320,633 | ||
| Undistributed net investment income | 10,720,118 | |||
| Accumulated net realized gain on investments | 2,295,808 | |||
| Net unrealized appreciation on investments | 1,916,289 | |||
| Net assets | $ | 138,252,848 | ||
| Capital shares outstanding | 4,496,472 | |||
| Net asset value per share | $ | 30.75 |
STATEMENT OF
OPERATIONS
Year Ended December 31, 2012
| Investment Income: | ||||
| Interest | $ | 10,079,857 | ||
| Dividends | 106,359 | |||
| Total investment income | 10,186,216 | |||
| Expenses: | ||||
| Management fees | 967,344 | |||
| Transfer agent/maintenance fees | 26,921 | |||
| Fund accounting/administration fees | 122,529 | |||
| Directors’ fees* | 13,168 | |||
| Custodian fees | 8,790 | |||
| Miscellaneous | 88,393 | |||
| Total expenses | 1,227,145 | |||
| Net investment income | 8,959,071 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 4,777,534 | |||
| Net realized gain | 4,777,534 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 3,950,334 | |||
| Net change in unrealized appreciation (depreciation) | 3,950,334 | |||
| Net realized and unrealized gain | 8,727,868 | |||
| Net increase in net assets resulting from operations | $ | 17,686,939 |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| 78 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES P (HIGH YIELD SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 8,959,071 | $ | 9,242,551 | ||||
| Net realized gain on investments | 4,777,534 | 2,885,909 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 3,950,334 | (11,100,467 | ) | |||||
| Net increase in net assets resulting from operations | 17,686,939 | 1,027,993 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 67,473,900 | 62,415,591 | ||||||
| Cost of shares redeemed | (65,064,117 | ) | (83,736,331 | ) | ||||
| Net increase (decrease) from capital share transactions | 2,409,783 | (21,320,740 | ) | |||||
| Net increase (decrease) in net assets | 20,096,722 | (20,292,747 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 118,156,126 | 138,448,873 | ||||||
| End of year | $ | 138,252,848 | $ | 118,156,126 | ||||
| Undistributed net investment income at end of year | $ | 10,720,118 | $ | 11,992,669 | ||||
| Capital share activity: | ||||||||
| Shares sold | 2,354,539 | 2,320,705 | ||||||
| Shares redeemed | (2,272,280 | ) | (3,076,874 | ) | ||||
| Net increase (decrease) in shares | 82,259 | (756,169 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 79 |
| SERIES P (HIGH YIELD SERIES) |
FINANCIAL HIGHLIGHTS
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 26.77 | $ | 26.78 | $ | 23.20 | $ | 13.37 | $ | 19.18 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | 2.01 | 2.00 | 2.02 | 1.89 | 1.57 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 1.97 | (2.01 | ) | 1.56 | 7.94 | (7.38 | ) | |||||||||||||
| Total from investment operations | 3.98 | (.01 | ) | 3.58 | 9.83 | (5.81 | ) | |||||||||||||
| Net asset value, end of period | $ | 30.75 | $ | 26.77 | $ | 26.78 | $ | 23.20 | $ | 13.37 | ||||||||||
| Total Returnb | 14.87 | % | (0.40 | %) | 15.43 | % | 73.52 | % | (30.29 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 138,253 | $ | 118,156 | $ | 138,449 | $ | 139,132 | $ | 83,219 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 6.95 | % | 7.34 | % | 8.16 | % | 10.24 | % | 9.02 | % | ||||||||||
| Total expenses | 0.95 | % | 0.93 | % | 0.94 | % | 0.94 | % | 0.94 | % | ||||||||||
| Portfolio turnover rate | 95 | % | 64 | % | 56 | % | 48 | % | 33 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 80 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the fiscal year ended December 31, 2012, the Series Q (Small Cap Value Series) returned 19.51%, compared with the Russell 2000® Value Index, which returned 18.05%.
Our strategy is to select securities of companies that appear undervalued by the overall market relative to assets, earnings, growth potential or cash flows. Our investment approach is a defined and disciplined process with three key philosophical tenets that drive our investment decisions: a valuation focus, a long-term investment horizon and an opportunistic approach.
Our investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a corresponding valuation target for each company. We construct the portfolio based on the level of conviction generated by the bottom-up analysis and the upside/downside profile associated with each company.
The portfolio’s performance was driven by mostly by stock selection decisions in the Materials, Consumer Discretionary and Financials sectors. These benefits more than offset poor stock selection and an overweight in the Energy sector, which as a group had negative performance in the portfolio. The Fund was also hurt by an underweight to the strongly performing Financials sector. The Fund remained out of the REITS sub-sector, but shifted closer to market weight in the Banking sub-sector of Financials, closing the Financials underweight as the year progressed, which benefited the portfolio as banks staged a strong rally over 2012. The Fund’s portfolio managers continue to favor the insurance sub-sector over banks in the Financials area.
The holdings contributing most to portfolio performance over the period were Ocwen Financial Corp. and Cabela’s, Inc. The top detractors were Maxwell Technologies, Inc. and MGIC Investment Corp.
We remain focused on searching for companies we think have good long-term fundamental prospects and attractive valuations that are likely to generate strong performance relative to the broader market, regardless of macroeconomic events.
We appreciate your business and the trust you place in us.
Sincerely,
James Schier, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 81 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES Q (SMALL CAP VALUE SERIES)
OBJECTIVE: Seeks long-term capital appreciation.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series Q (Small Cap Value Series) | 19.51 | % | 5.88 | % | 13.22 | % | ||||||
| Russell 2000 Value Index | 18.05 | % | 3.55 | % | 9.50 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: May 1, 2000
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Hanover Insurance Group, Inc. | 3.6 | % | ||
| Covanta Holding Corp. | 2.2 | % | ||
| Reinsurance Group of America, Inc. — Class A | 2.2 | % | ||
| Horace Mann Educators Corp. | 2.1 | % | ||
| Home Loan Servicing Solutions Ltd. | 2.0 | % | ||
| Cree, Inc. | 2.0 | % | ||
| UGI Corp. | 1.9 | % | ||
| Global Cash Access Holdings, Inc. | 1.9 | % | ||
| Saia, Inc. | 1.7 | % | ||
| Brown Shoe Company, Inc. | 1.7 | % | ||
| Top Ten Total | 21.3 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 82 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| Schedule of Investments | December 31, 2012 |
| Series Q (Small Cap Value Series) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 98.9% | ||||||||
| Financials - 23.0% | ||||||||
| Hanover Insurance Group, Inc. | 104,960 | $ | 4,066,149 | |||||
| Reinsurance Group of America, | ||||||||
| Inc. — Class A | 46,365 | 2,481,454 | ||||||
| Horace Mann Educators Corp. | 117,000 | 2,335,320 | ||||||
| Home Loan Servicing Solutions Ltd. | 117,350 | 2,217,915 | ||||||
| Endurance Specialty Holdings Ltd. | 42,640 | 1,692,382 | ||||||
| Redwood Trust, Inc. | 93,420 | 1,577,864 | ||||||
| Ocwen Financial Corp.* | 38,851 | 1,343,856 | ||||||
| 1st Source Corp. | 59,470 | 1,313,693 | ||||||
| Bancorp, Inc.* | 113,300 | 1,242,901 | ||||||
| Safeguard Scientifics, Inc.* | 68,820 | 1,015,095 | ||||||
| Employers Holdings, Inc. | 47,910 | 985,988 | ||||||
| PrivateBancorp, Inc. | 63,522 | 973,157 | ||||||
| Lexington Realty Trust | 86,150 | 900,268 | ||||||
| Solar Senior Capital Ltd. | 45,479 | 848,638 | ||||||
| Navigators Group, Inc.* | 15,540 | 793,628 | ||||||
| AMERISAFE, Inc.* | 28,364 | 772,919 | ||||||
| BancFirst Corp. | 13,037 | 552,247 | ||||||
| MGIC Investment Corp.* | 176,742 | 470,134 | ||||||
| Total Financials | 25,583,608 | |||||||
| Industrials - 21.3% | ||||||||
| Covanta Holding Corp. | 134,960 | 2,485,964 | ||||||
| Saia, Inc.* | 81,530 | 1,884,973 | ||||||
| Aegion Corp. — Class A* | 82,408 | 1,828,633 | ||||||
| EnergySolutions, Inc.* | 495,020 | 1,544,462 | ||||||
| Celadon Group, Inc. | 84,479 | 1,526,535 | ||||||
| ICF International, Inc.* | 64,220 | 1,505,317 | ||||||
| General Cable Corp.* | 47,696 | 1,450,435 | ||||||
| Navigant Consulting, Inc.* | 122,180 | 1,363,529 | ||||||
| Orbital Sciences Corp.* | 89,421 | 1,231,327 | ||||||
| Great Lakes Dredge & Dock Corp. | 136,173 | 1,216,024 | ||||||
| Sterling Construction Company, Inc.* | 118,408 | 1,176,976 | ||||||
| Powell Industries, Inc.* | 27,650 | 1,148,305 | ||||||
| Energy Recovery, Inc.* | 303,190 | 1,030,846 | ||||||
| Dynamic Materials Corp. | 73,637 | 1,023,554 | ||||||
| Vitran Corporation, Inc. — Class A* | 144,500 | 702,270 | ||||||
| PMFG, Inc.* | 71,150 | 646,754 | ||||||
| GeoEye, Inc.* | 20,583 | 632,516 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 11,151 | 494,101 | ||||||
| Marten Transport Ltd. | 26,669 | 490,443 | ||||||
| DryShips, Inc.* | 247,320 | 390,766 | ||||||
| Total Industrials | 23,773,730 | |||||||
| Information Technology - 17.6% | ||||||||
| Cree, Inc.* | 65,020 | 2,209,379 | ||||||
| Global Cash Access Holdings, Inc.* | 262,880 | 2,060,979 | ||||||
| Insight Enterprises, Inc.* | 101,379 | 1,760,953 | ||||||
| Maxwell Technologies, Inc.* | 209,229 | 1,734,509 | ||||||
| IXYS Corp. | 169,800 | 1,551,972 | ||||||
| Carbonite, Inc.* | 161,020 | 1,489,435 | ||||||
| Digi International, Inc.* | 138,769 | 1,314,143 | ||||||
| RF Micro Devices, Inc.* | 267,320 | 1,197,594 | ||||||
| Global Payments, Inc. | 25,640 | 1,161,492 | ||||||
| Multi-Fineline Electronix, Inc.* | 49,410 | 998,576 | ||||||
| Silicon Graphics International Corp.* | 72,840 | 745,153 | ||||||
| Spansion, Inc. — Class A* | 53,430 | 743,211 | ||||||
| Semtech Corp.* | 22,920 | 663,534 | ||||||
| Power-One, Inc.* | 152,515 | 626,837 | ||||||
| Mercury Systems, Inc.* | 58,760 | 540,592 | ||||||
| Symmetricom, Inc.* | 93,094 | 537,152 | ||||||
| Euronet Worldwide, Inc.* | 10,508 | 247,989 | ||||||
| Total Information Technology | 19,583,500 | |||||||
| Consumer Discretionary - 13.6% | ||||||||
| Brown Shoe Company, Inc. | 101,000 | 1,855,370 | ||||||
| Chico’s FAS, Inc. | 97,640 | 1,802,434 | ||||||
| International Speedway Corp. — Class A | 62,060 | 1,714,097 | ||||||
| Maidenform Brands, Inc.* | 86,340 | 1,682,766 | ||||||
| Cabela’s, Inc.* | 31,980 | 1,335,165 | ||||||
| Coldwater Creek, Inc.* | 254,389 | 1,223,611 | ||||||
| iRobot Corp.* | 60,505 | 1,133,864 | ||||||
| DeVry, Inc. | 46,840 | 1,111,513 | ||||||
| Scholastic Corp. | 33,764 | 998,064 | ||||||
| Jones Group, Inc. | 81,877 | 905,560 | ||||||
| Guess?, Inc. | 32,040 | 786,262 | ||||||
| Gentex Corp. | 30,850 | 580,597 | ||||||
| Total Consumer Discretionary | 15,129,303 | |||||||
| Energy - 8.2% | ||||||||
| Gulfport Energy Corp.* | 47,755 | 1,825,196 | ||||||
| Abraxas Petroleum Corp.* | 798,690 | 1,749,131 | ||||||
| Clayton Williams Energy, Inc.* | 31,278 | 1,251,120 | ||||||
| PDC Energy, Inc.* | 33,382 | 1,108,616 | ||||||
| Resolute Energy Corp.* | 124,060 | 1,008,608 | ||||||
| Goodrich Petroleum Corp.* | 103,896 | 968,311 | ||||||
| Sanchez Energy Corp.* | 35,149 | 632,682 | ||||||
| Oasis Petroleum, Inc.* | 17,540 | 557,772 | ||||||
| USEC, Inc.* | 10,613 | 5,625 | ||||||
| Total Energy | 9,107,061 | |||||||
| Utilities - 6.1% | ||||||||
| UGI Corp. | 65,490 | 2,142,177 | ||||||
| Black Hills Corp. | 49,590 | 1,802,100 | ||||||
| Great Plains Energy, Inc. | 62,750 | 1,274,453 | ||||||
| South Jersey Industries, Inc. | 19,650 | 988,985 | ||||||
| MDU Resources Group, Inc. | 25,365 | 538,753 | ||||||
| Total Utilities | 6,746,468 | |||||||
| Health Care - 3.7% | ||||||||
| Invacare Corp. | 80,300 | 1,308,890 | ||||||
| Greatbatch, Inc.* | 48,521 | 1,127,628 | ||||||
| Kindred Healthcare, Inc.* | 65,010 | 703,408 | ||||||
| Alere, Inc.* | 27,045 | 500,333 | ||||||
| Horizon Pharma, Inc.* | 196,300 | 457,379 | ||||||
| Total Health Care | 4,097,638 | |||||||
| Materials - 3.0% | ||||||||
| Landec Corp.* | 161,844 | 1,535,899 | ||||||
| Zoltek Companies, Inc.* | 155,200 | 1,202,800 | ||||||
| Globe Specialty Metals, Inc. | 43,890 | 603,488 | ||||||
| Total Materials | 3,342,187 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 83 |
|
Schedule of Investments (concluded) |
December 31, 2012 |
| Series Q (Small Cap Value Series) |
| Shares | Value | |||||||
| CONSUMER STAPLES - 2.4% | ||||||||
| Central Garden and Pet Co. — Class A* | 145,502 | $ | 1,520,496 | |||||
| Darling International, Inc.* | 61,486 | 986,235 | ||||||
| Central Garden and Pet Co.* | 19,047 | 190,851 | ||||||
| Total Consumer Staples | 2,697,582 | |||||||
| Total Common Stocks | ||||||||
| (Cost $97,797,444) | 110,061,077 | |||||||
| CONVERTIBLE PREFERRED STOCKS†† - 0.0% | ||||||||
| Thermoenergy Corp.*,1 | 116,667 | 30,319 | ||||||
| Total Convertible Preferred Stocks | ||||||||
| (Cost $111,410) | 30,319 | |||||||
| WARRANTS†† - 0.0% | ||||||||
| Horizon Pharma, Inc. | ||||||||
| $4.58, 09/20/17* | 98,150 | 14,723 | ||||||
| Total Warrants | ||||||||
| (Cost $—) | 14,723 | |||||||
| Face | ||||||||
| Amount | Value | |||||||
| CONVERTIBLE BONDS†† - 0.4% | ||||||||
| Industrials - 0.4% | ||||||||
| DryShips, Inc. | ||||||||
| 5.00% due 12/01/14 | $ | 600,000 | $ | 474,000 | ||||
| Total Convertible Bonds | ||||||||
| (Cost $496,157) | 474,000 | |||||||
| Total Investments - 99.3% | ||||||||
| (Cost $98,405,011) | $ | 110,580,119 | ||||||
| Other Assets & Liabilities, net - 0.7% | 821,521 | |||||||
| Total Net Assets - 100.0% | $ | 111,401,640 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | PIPE (Private Investment in Public Equity) - Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering. |
| 84 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| Series Q (Small Cap Value Series) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
December 31, 2012
| Assets: | ||||
| Investments, at value | ||||
| (cost $98,405,011) | $ | 110,580,119 | ||
| Cash | 1,295,536 | |||
| Prepaid expenses | 2,411 | |||
| Receivables: | ||||
| Securities sold | 89,339 | |||
| Dividends | 52,976 | |||
| Fund shares sold | 45,014 | |||
| Interest | 2,555 | |||
| Total assets | 112,067,950 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 395,912 | |||
| Fund shares redeemed | 154,682 | |||
| Management fees | 88,688 | |||
| Fund accounting/administration fees | 8,868 | |||
| Transfer agent/maintenance fees | 5,845 | |||
| Directors’ fees* | 33 | |||
| Miscellaneous | 12,282 | |||
| Total liabilities | 666,310 | |||
| Net assets | $ | 111,401,640 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 86,067,545 | ||
| Undistributed net investment income | 4,846 | |||
| Accumulated net realized gain on investments | 13,154,141 | |||
| Net unrealized appreciation on investments | 12,175,108 | |||
| Net assets | $ | 111,401,640 | ||
| Capital shares outstanding | 2,904,831 | |||
| Net asset value per share | $ | 38.35 |
| STATEMENT OF |
| OPERATIONS |
Year Ended December 31, 2012
| Investment income: | ||||
| Dividends (net of foreign withholding tax of $4,473) | $ | 1,244,718 | ||
| Interest | 58,760 | |||
| Total investment income | 1,303,478 | |||
| Expenses: | ||||
| Management fees | 1,074,594 | |||
| Transfer agent/maintenance fees | 26,859 | |||
| Fund accounting/administration fees | 107,458 | |||
| Directors’ fees* | 12,003 | |||
| Custodian fees | 7,587 | |||
| Miscellaneous | 75,193 | |||
| Total expenses | 1,303,694 | |||
| Net investment loss | (216 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 12,877,332 | |||
| Options written | 255,560 | |||
| Net realized gain | 13,132,892 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 6,602,966 | |||
| Options written | (21,606 | ) | ||
| Net change in unrealized appreciation (depreciation) | 6,581,360 | |||
| Net realized and unrealized gain | 19,714,252 | |||
| Net increase in net assets resulting from operations | $ | 19,714,036 |
* Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 85 |
| Series Q (Small Cap Value Series) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (216 | ) | $ | (351,101 | ) | ||
| Net realized gain on investments | 13,132,892 | 22,043,374 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 6,581,360 | (28,172,801 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 19,714,036 | (6,480,528 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 24,611,705 | 29,722,322 | ||||||
| Cost of shares redeemed | (40,510,807 | ) | (42,482,171 | ) | ||||
| Net decrease from capital share transactions | (15,899,102 | ) | (12,759,849 | ) | ||||
| Net increase (decrease) in net assets | 3,814,934 | (19,240,377 | ) | |||||
| Net assets: | ||||||||
| Beginning of year | 107,586,706 | 126,827,083 | ||||||
| End of year | $ | 111,401,640 | $ | 107,586,706 | ||||
| Undistributed net investment income at end of year | $ | 4,846 | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | 684,270 | 862,428 | ||||||
| Shares redeemed | (1,132,592 | ) | (1,278,876 | ) | ||||
| Net decrease in shares | (448,322 | ) | (416,448 | ) | ||||
| 86 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| Series Q (Small Cap Value Series) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009e | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 32.09 | $ | 33.64 | $ | 27.60 | $ | 17.70 | $ | 28.82 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment income (loss)a | (— | )b | (.10 | ) | (.06 | ) | (.01 | ) | .06 | |||||||||||
| Net gain (loss) on investments (realized and unrealized) | 6.26 | (1.45 | ) | 6.10 | 9.91 | (11.18 | ) | |||||||||||||
| Total from investment operations | 6.26 | (1.55 | ) | 6.04 | 9.90 | (11.12 | ) | |||||||||||||
| Net asset value, end of period | $ | 38.35 | $ | 32.09 | $ | 33.64 | $ | 27.60 | $ | 17.70 | ||||||||||
| Total Returnc | 19.51 | % | (4.61 | %) | 21.88 | % | 55.93 | % | (38.58 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 111,402 | $ | 107,587 | $ | 126,827 | $ | 125,460 | $ | 85,944 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income (loss) | (0.00 | %)d | (0.29 | %) | (0.22 | %) | (0.02 | %) | 0.24 | % | ||||||||||
| Total expenses | 1.15 | % | 1.12 | % | 1.12 | % | 1.14 | % | 1.19 | % | ||||||||||
| Portfolio turnover rate | 44 | % | 51 | % | 38 | % | 126 | % | 25 | % | ||||||||||
| a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
| b | Net investment loss is less than $0.01 per share. |
| c | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| d | Net investment loss ratio is less than 0.01%. |
| e | Security Investors, LLC became the advisor of Series Q effective February 9, 2009. Prior to February 9, 2009, Wells Capital Management, Inc. sub-advised the Series. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 87 |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series V (Mid Cap Value Series) returned 17.12%, compared with the Russell 2500® Value Index, which returned 19.21%.
Our strategy is to select securities of companies that appear undervalued by the overall market relative to assets, earnings, growth potential or cash flows. Our investment approach is a defined and disciplined process with three key philosophical tenets that drive our investment decisions: a valuation focus, a long-term investment horizon and an opportunistic approach.
Our investment process is fundamentally driven and quantitatively aided. We use proprietary screens to identify potential companies for investment and then perform rigorous fundamental analysis to identify the best ideas. Through this fundamental research, we determine an estimate of intrinsic value and a corresponding valuation target for each company. We construct the portfolio based on the level of conviction generated by the bottom-up analysis and the upside/downside profile associated with each company.
Stock selection was broadly neutral to performance, with strong selection in Consumer Discretionary offsetting poor selection in Industrials. The Fund’s underperformance relative to the benchmark was more directly impacted by allocation decisions—primarily being overweight in the underperforming Energy sector and underweight in the strongly performing Financials sector. The Fund remained out of the REITS sub-sector, but shifted closer to market weight in the Banking sub-sector of Financials, closing the Financials underweight as the year progressed, which benefited the portfolio as banks staged a strong rally over 2012. The Fund’s portfolio managers continue to favor the insurance sub-sector over banks in the Financials area. Also affecting performance was that the benchmark was tough to beat, being one of the top-returning equity indices for the year.
The holdings contributing most to portfolio performance over the period were Ocwen Financial Corp. and Computer Sciences Corp. The top detractors were Maxwell Technologies, Inc. and MGIC Investment Corp.
We remain focused on searching for companies we think have good long-term fundamental prospects and attractive valuations that are likely to generate strong performance relative to the broader market, regardless of macroeconomic events.
We appreciate your business and the trust you place in us.
Sincerely,
James Schier, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| 88 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES V (MID CAP VALUE SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
| Average Annual Returns* | ||||||||||||
| Periods Ended 12/31/121 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series V (Mid Cap Value Series) | 17.12 | % | 5.61 | % | 13.32 | % | ||||||
| Russell 2500 Value Index | 19.21 | % | 4.54 | % | 10.20 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Date: May 1, 1997 | ||||
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Hanover Insurance Group, Inc. | 3.9 | % | ||
| Computer Sciences Corp. | 3.2 | % | ||
| WR Berkley Corp. | 2.6 | % | ||
| Covanta Holding Corp. | 2.5 | % | ||
| Reinsurance Group of America, Inc. — Class A | 2.3 | % | ||
| Quanta Services, Inc. | 2.3 | % | ||
| Owens-Illinois, Inc. | 2.2 | % | ||
| Ralcorp Holdings, Inc. | 2.1 | % | ||
| American Financial Group, Inc. | 2.1 | % | ||
| Cree, Inc. | 2.0 | % | ||
| Top Ten Total | 25.2 | % | ||
| “Ten Largest Holdings” exclude any temporary cash or derivative investments. | ||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2500 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 89 |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES V (MID CAP VALUE SERIES) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 99.1% | ||||||||
| FINANCIALS - 26.1% | ||||||||
| Hanover Insurance Group, Inc. | 249,360 | $ | 9,660,206 | |||||
| WR Berkley Corp. | 169,380 | 6,392,401 | ||||||
| Reinsurance Group of America, | ||||||||
| Inc. — Class A | 106,227 | 5,685,269 | ||||||
| American Financial Group, Inc. | 130,380 | 5,152,618 | ||||||
| Alleghany Corp.* | 13,617 | 4,567,414 | ||||||
| Northern Trust Corp. | 78,400 | 3,932,544 | ||||||
| Ocwen Financial Corp.* | 88,671 | 3,067,129 | ||||||
| RenaissanceRe Holdings Ltd. | 37,400 | 3,039,124 | ||||||
| Endurance Specialty Holdings Ltd. | 72,896 | 2,893,242 | ||||||
| Lexington Realty Trust | 254,053 | 2,654,854 | ||||||
| Huntington Bancshares, Inc. | 376,830 | 2,407,944 | ||||||
| Employers Holdings, Inc. | 98,600 | 2,029,188 | ||||||
| Home Loan Servicing Solutions Ltd. | 98,753 | 1,866,432 | ||||||
| Zions Bancorporation | 64,180 | 1,373,452 | ||||||
| First Midwest Bancorp, Inc. | 102,473 | 1,282,962 | ||||||
| Wintrust Financial Corp. | 34,030 | 1,248,901 | ||||||
| City National Corp. | 24,780 | 1,227,106 | ||||||
| SVB Financial Group* | 21,020 | 1,176,489 | ||||||
| Investors Real Estate Trust | 133,340 | 1,164,058 | ||||||
| Citizens Republic Bancorp, Inc.* | 60,595 | 1,149,487 | ||||||
| First Niagara Financial Group, Inc. | 144,430 | 1,145,330 | ||||||
| MGIC Investment Corp.* | 412,163 | 1,096,354 | ||||||
| Redwood Trust, Inc. | 61,138 | 1,032,621 | ||||||
| Bimini Capital Management, | ||||||||
| Inc. — Class A* | 132,897 | 16,612 | ||||||
| Total Financials | 65,261,737 | |||||||
| INDUSTRIALS - 18.4% | ||||||||
| Covanta Holding Corp. | 339,720 | 6,257,642 | ||||||
| Quanta Services, Inc.* | 207,260 | 5,656,125 | ||||||
| URS Corp. | 123,270 | 4,839,580 | ||||||
| Aegion Corp. — Class A* | 200,700 | 4,453,533 | ||||||
| Navigant Consulting, Inc.* | 347,040 | 3,872,966 | ||||||
| General Cable Corp.* | 108,366 | 3,295,410 | ||||||
| Equifax, Inc. | 58,760 | 3,180,091 | ||||||
| Orbital Sciences Corp.* | 209,464 | 2,884,320 | ||||||
| Saia, Inc.* | 110,200 | 2,547,824 | ||||||
| ICF International, Inc.* | 88,000 | 2,062,720 | ||||||
| Babcock & Wilcox Co. | 70,442 | 1,845,580 | ||||||
| GeoEye, Inc.* | 47,158 | 1,449,165 | ||||||
| Atlas Air Worldwide Holdings, Inc.* | 28,109 | 1,245,510 | ||||||
| United Stationers, Inc. | 37,810 | 1,171,732 | ||||||
| DryShips, Inc.* | 578,750 | 914,425 | ||||||
| Thermoenergy Corp.* | 905,961 | 80,631 | ||||||
| Total Industrials | 45,757,254 | |||||||
| INFORMATION TECHNOLOGY - 12.4% | ||||||||
| Computer Sciences Corp. | 201,640 | 8,075,681 | ||||||
| Cree, Inc.* | 150,620 | 5,118,067 | ||||||
| IXYS Corp. | 488,690 | 4,466,626 | ||||||
| Maxwell Technologies, Inc.* | 387,650 | 3,213,619 | ||||||
| Global Payments, Inc. | 58,780 | 2,662,734 | ||||||
| RF Micro Devices, Inc.* | 580,670 | 2,601,402 | ||||||
| Power-One, Inc.* | 355,641 | 1,461,685 | ||||||
| Semtech Corp.* | 49,360 | 1,428,972 | ||||||
| Symmetricom, Inc.* | 214,141 | 1,235,594 | ||||||
| Euronet Worldwide, Inc.* | 24,083 | 568,359 | ||||||
| Total Information Technology | 30,832,739 | |||||||
| CONSUMER DISCRETIONARY - 10.8% | ||||||||
| Brown Shoe Company, Inc. | 255,611 | 4,695,574 | ||||||
| Chico’s FAS, Inc. | 253,770 | 4,684,594 | ||||||
| Cabela’s, Inc.* | 78,830 | 3,291,153 | ||||||
| Maidenform Brands, Inc.* | 142,060 | 2,768,749 | ||||||
| Jack in the Box, Inc.* | 86,000 | 2,459,600 | ||||||
| Scholastic Corp. | 78,384 | 2,317,031 | ||||||
| Jones Group, Inc. | 189,844 | 2,099,675 | ||||||
| Guess?, Inc. | 74,560 | 1,829,702 | ||||||
| DeVry, Inc. | 63,027 | 1,495,631 | ||||||
| Gentex Corp. | 71,730 | 1,349,959 | ||||||
| HydroGen Corp.*,3 | 672,346 | 8,337 | ||||||
| Total Consumer Discretionary | 27,000,005 | |||||||
| ENERGY - 8.7% | ||||||||
| Gulfport Energy Corp.* | 109,677 | 4,191,855 | ||||||
| SandRidge Energy, Inc.* | 609,574 | 3,870,795 | ||||||
| Whiting Petroleum Corp.* | 74,720 | 3,240,606 | ||||||
| McDermott International, Inc.* | 233,141 | 2,569,214 | ||||||
| Resolute Energy Corp.* | 254,600 | 2,069,898 | ||||||
| Goodrich Petroleum Corp.* | 219,877 | 2,049,254 | ||||||
| Oasis Petroleum, Inc.* | 40,210 | 1,278,678 | ||||||
| Sanchez Energy Corp.* | 69,513 | 1,251,234 | ||||||
| Superior Energy Services, Inc.* | 59,700 | 1,236,984 | ||||||
| USEC, Inc.* | 23,395 | 12,399 | ||||||
| Total Energy | 21,770,917 | |||||||
| HEALTH CARE - 6.7% | ||||||||
| Community Health Systems, Inc. | 103,730 | 3,188,660 | ||||||
| Hologic, Inc.* | 146,044 | 2,925,261 | ||||||
| Forest Laboratories, Inc.* | 76,380 | 2,697,742 | ||||||
| MEDNAX, Inc.* | 33,475 | 2,661,932 | ||||||
| Universal Health Services, Inc. — Class B | 51,140 | 2,472,619 | ||||||
| Kindred Healthcare, Inc.* | 160,530 | 1,736,935 | ||||||
| Alere, Inc.* | 61,986 | 1,146,741 | ||||||
| Total Health Care | 16,829,890 | |||||||
| 90 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES V (MID CAP VALUE SERIES) | |
| Shares | Value | |||||||
| MATERIALS - 5.8% | ||||||||
| Owens-Illinois, Inc.* | 256,010 | $ | 5,445,332 | |||||
| Sonoco Products Co. | 143,300 | 4,260,309 | ||||||
| Landec Corp.* | 187,400 | 1,778,426 | ||||||
| Zoltek Companies, Inc.* | 214,990 | 1,666,173 | ||||||
| Globe Specialty Metals, Inc. | 99,240 | 1,364,550 | ||||||
| Total Materials | 14,514,790 | |||||||
| UTILITIES - 5.4% | ||||||||
| Black Hills Corp. | 106,800 | 3,881,112 | ||||||
| Great Plains Energy, Inc. | 188,305 | 3,824,476 | ||||||
| UGI Corp. | 77,999 | 2,551,347 | ||||||
| Pepco Holdings, Inc. | 94,127 | 1,845,830 | ||||||
| MDU Resources Group, Inc. | 63,731 | 1,353,646 | ||||||
| Total Utilities | 13,456,411 | |||||||
| CONSUMER STAPLES - 4.8% | ||||||||
| Ralcorp Holdings, Inc.* | 57,689 | 5,171,819 | ||||||
| Hormel Foods Corp. | 86,300 | 2,693,423 | ||||||
| Darling International, Inc.* | 142,147 | 2,280,038 | ||||||
| JM Smucker Co. | 20,830 | 1,796,379 | ||||||
| Total Consumer Staples | 11,941,659 | |||||||
| Total Common Stocks | ||||||||
| (Cost $218,339,116) | 247,365,402 | |||||||
| CONVERTIBLE PREFERRED STOCKS†† - 0.0% | ||||||||
| Thermoenergy Corp.*,1 | 308,333 | 80,130 | ||||||
| Total Convertible Preferred Stocks | ||||||||
| (Cost $294,438) | 80,130 | |||||||
| Face | ||||||||
| Amount | Value | |||||||
| CONVERTIBLE BONDS†† - 0.9% | ||||||||
| INDUSTRIALS - 0.4% | ||||||||
| DryShips, Inc. | ||||||||
| 5.00% due 12/01/14 | $ | 1,450,000 | $ | 1,145,500 | ||||
| ENERGY - 0.5% | ||||||||
| USEC, Inc. | ||||||||
| 3.00% due 10/01/14 | 3,000,000 | 1,140,000 | ||||||
| Total Convertible Bonds | ||||||||
| (Cost $4,210,572) | 2,285,500 | |||||||
| REPURCHASE AGREEMENT††,2 - 2.4% | ||||||||
| UMB Financial Corp. | ||||||||
| issued 12/31/12 at 0.07% | ||||||||
| due 01/02/13 | 5,953,000 | 5,953,000 | ||||||
| Total Repurchase Agreement | ||||||||
| (Cost $5,953,000) | 5,953,000 | |||||||
| Total Investments - 102.4% | ||||||||
| (Cost $228,797,126) | $ | 255,684,032 | ||||||
| Other Assets & Liabilities, net - (2.4)% | (5,877,962 | ) | ||||||
| Total Net Assets - 100.0% | $ | 249,806,070 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| 1 | PIPE (Private Investment in Public Equity) — Stock issued by a company in the secondary market as a means of raising capital more quickly and less expensively than through registration of a secondary public offering. |
| 2 | Repurchase Agreement — See Note 5. |
| 3 | Affiliated issuer— See Note 10. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 91 |
| SERIES V (MID CAP VALUE SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments in unaffiliated issuers, at value | ||||
| (cost $220,272,551) | $ | 249,722,695 | ||
| Investments in affiliated issuers, at value | ||||
| (cost $2,571,575) | 8,337 | |||
| Repurchase agreements, at value | ||||
| (cost $5,953,000) | 5,953,000 | |||
| Total investments | ||||
| (cost $228,797,126) | 255,684,032 | |||
| Cash | 23,407 | |||
| Prepaid expenses | 5,365 | |||
| Receivables: | ||||
| Securities sold | 841,719 | |||
| Dividends | 181,817 | |||
| Fund shares sold | 30,700 | |||
| Interest | 28,933 | |||
| Total assets | 256,795,973 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 5,901,164 | |||
| Securities purchased | 670,259 | |||
| Management fees | 161,110 | |||
| Fund accounting/administration fees | 20,407 | |||
| Transfer agent/maintenance fees | 6,004 | |||
| Directors’ fees* | 359 | |||
| Miscellaneous | 230,600 | |||
| Total liabilities | 6,989,903 | |||
| Net assets | $ | 249,806,070 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 204,475,374 | ||
| Undistributed net investment income | 1,085,462 | |||
| Accumulated net realized gain on investments | 17,358,328 | |||
| Net unrealized appreciation on investments | 26,886,906 | |||
| Net assets | $ | 249,806,070 | ||
| Capital shares outstanding | 3,990,502 | |||
| Net asset value per share | $ | 62.60 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Dividends | $ | 3,193,687 | ||
| Interest | 268,520 | |||
| Total investment income | 3,462,207 | |||
| Expenses: | ||||
| Management fees | 1,914,886 | |||
| Transfer agent/maintenance fees | 27,072 | |||
| Fund accounting/administration fees | 242,550 | |||
| Directors’ fees* | 28,219 | |||
| Custodian fees | 12,068 | |||
| Miscellaneous | 151,950 | |||
| Total expenses | 2,376,745 | |||
| Net investment income | 1,085,462 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments in unaffiliated issuers | 16,708,716 | |||
| Options written | 685,961 | |||
| Net realized gain | 17,394,677 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments in unaffiliated issuers | 22,222,598 | |||
| Investments in affiliated issuers | 1,546 | |||
| Options written | (336,297 | ) | ||
| Net change in unrealized appreciation (depreciation) | 21,887,847 | |||
| Net realized and unrealized gain | 39,282,524 | |||
| Net increase in net assets resulting from operations | $ | 40,367,986 |
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| 92 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES V (MID CAP VALUE SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 1,085,462 | $ | 748,307 | ||||
| Net realized gain on investments | 17,394,677 | 22,872,796 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 21,887,847 | (44,373,384 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 40,367,986 | (20,752,281 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 18,437,679 | 20,299,766 | ||||||
| Cost of shares redeemed | (59,619,776 | ) | (65,345,769 | ) | ||||
| Net decrease from capital share transactions | (41,182,097 | ) | (45,046,003 | ) | ||||
| Net decrease in net assets | (814,111 | ) | (65,798,284 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 250,620,181 | 316,418,465 | ||||||
| End of year | $ | 249,806,070 | $ | 250,620,181 | ||||
| Undistributed net investment income at end of year | $ | 1,085,462 | $ | 748,307 | ||||
| Capital share activity: | ||||||||
| Shares sold | 310,203 | 353,775 | ||||||
| Shares redeemed | (1,008,533 | ) | (1,141,272 | ) | ||||
| Net decrease in shares | (698,330 | ) | (787,497 | ) | ||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 93 |
| SERIES V (MID CAP VALUE SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 53.45 | $ | 57.78 | $ | 49.05 | $ | 34.08 | $ | 47.64 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .25 | .15 | .39 | .38 | .49 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | 8.90 | (4.48 | ) | 8.34 | 14.59 | (14.05 | ) | |||||||||||||
| Total from investment operations | 9.15 | (4.33 | ) | 8.73 | 14.97 | (13.56 | ) | |||||||||||||
| Net asset value, end of period | $ | 62.60 | $ | 53.45 | $ | 57.78 | $ | 49.05 | $ | 34.08 | ||||||||||
| Total Returnb | 17.12 | % | (7.49 | %) | 17.80 | % | 43.93 | % | (28.46 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 249,806 | $ | 250,620 | $ | 316,418 | $ | 304,730 | $ | 244,884 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 0.43 | % | 0.26 | % | 0.75 | % | 0.97 | % | 1.15 | % | ||||||||||
| Total expenses | 0.93 | % | 0.90 | % | 0.90 | % | 0.91 | % | 0.91 | % | ||||||||||
| Portfolio turnover rate | 24 | % | 28 | % | 25 | % | 29 | % | 56 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 94 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series X (Small Cap Growth Series) returned 11.56%, compared with the benchmark, the Russell 2000® Growth Index, which returned 14.59%.
The Fund seeks to deliver long-term growth of capital by investing in securities of small-sized companies that have solid potential for long-term growth. The Fund selects companies that appear to have sustainable revenue and earnings growth, a competitive advantage, superior financial characteristics and strong management.
The Fund uses a combination of a qualitative macroeconomic approach in reviewing growth trends that is based on several fixed income factors, such as bond spreads and interest rates, along with a quantitative, fundamental bottom-up approach.
The portfolio’s performance was helped by stock selection in Consumer Discretionary and Materials. Poor stock selection was a factor in Health Care and Energy, which were the largest detractors from return.
The holdings contributing most to portfolio performance over the period were Jarden Corp. and Solutia, Inc. Leading detractors from performance were Superior Energy Services, Inc. and LogMeIn, Inc.
Our fixed income indicators, including the slope of the yield curve and corporate bond spreads, continue to point to a modest economic environment but a decent risk environment. Strong corporate debt issuance, coupled with historically tight bond spreads, confirms a healthy risk appetite with fixed-income markets, which we believe is a leading indicator of the risk environment for equities. We will focus our attention on secular growth names in the year to come, with an eye towards more cyclical names if the global economy can find firmer footing.
We appreciate your business and the trust you place in us.
Sincerely,
Joseph O’Connor, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 95 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES X (SMALL CAP GROWTH SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
| Average Annual Returns* | ||||||||||||
| Periods Ended 12/31/121 | ||||||||||||
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series X (Small Cap Growth Series) | 11.56 | % | 0.30 | % | 8.31 | % | ||||||
| Russell 2000 Growth Index | 14.59 | % | 3.49 | % | 9.80 | % | ||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Date: October 15, 1997 | ||||
| Ten Largest Holdings (% of Total Net Assets) | ||||
| iShares Russell 2000 Growth Index Fund | 7.9 | % | ||
| Ashland, Inc. | 2.8 | % | ||
| PowerShares S&P SmallCap Health Care Portfolio | 2.7 | % | ||
| IBERIABANK Corp. | 2.2 | % | ||
| Triumph Group, Inc. | 2.2 | % | ||
| Oil States International, Inc. | 2.1 | % | ||
| Jarden Corp. | 2.0 | % | ||
| B/E Aerospace, Inc. | 1.9 | % | ||
| Cadence Design Systems, Inc. | 1.8 | % | ||
| Alliance Data Systems Corp. | 1.8 | % | ||
| Top Ten Total | 27.4 | % | ||
| “Ten Largest Holdings” exclude any temporary cash or derivative investments. | ||||
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 2000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 96 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES X (SMALL CAP GROWTH SERIES) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 85.9% | ||||||||
| CONSUMER DISCRETIONARY - 18.0% | ||||||||
| Jarden Corp. | 12,240 | $ | 632,808 | |||||
| Hanesbrands, Inc.* | 15,080 | 540,165 | ||||||
| Oxford Industries, Inc. | 11,360 | 526,649 | ||||||
| Life Time Fitness, Inc.* | 8,560 | 421,237 | ||||||
| Pier 1 Imports, Inc. | 20,700 | 414,000 | ||||||
| Penn National Gaming, Inc.* | 7,565 | 371,517 | ||||||
| Pinnacle Entertainment, Inc.* | 22,186 | 351,204 | ||||||
| Monro Muffler Brake, Inc. | 9,710 | 339,559 | ||||||
| MDC Partners, Inc. — Class A | 29,700 | 335,610 | ||||||
| Lennar Corp. — Class A | 7,505 | 290,218 | ||||||
| Ulta Salon Cosmetics & Fragrance, Inc. | 2,865 | 281,515 | ||||||
| Sonic Corp.* | 25,300 | 263,373 | ||||||
| Vail Resorts, Inc. | 4,585 | 248,003 | ||||||
| Warnaco Group, Inc.* | 2,675 | 191,450 | ||||||
| WMS Industries, Inc.* | 10,600 | 185,500 | ||||||
| HomeAway, Inc.* | 6,900 | 151,800 | ||||||
| SodaStream International Ltd.* | 3,075 | 138,037 | ||||||
| Select Comfort Corp.* | 3,300 | 86,361 | ||||||
| Total Consumer Discretionary | 5,769,006 | |||||||
| INFORMATION TECHNOLOGY - 16.4% | ||||||||
| Cadence Design Systems, Inc.* | 43,570 | 588,631 | ||||||
| Alliance Data Systems Corp.* | 3,990 | 577,592 | ||||||
| Nuance Communications, Inc.* | 20,080 | 448,186 | ||||||
| Cavium, Inc.* | 12,950 | 404,170 | ||||||
| Aruba Networks, Inc.* | 18,200 | 377,650 | ||||||
| Aspen Technology, Inc.* | 13,500 | 373,140 | ||||||
| IAC/InterActiveCorp | 6,547 | 309,673 | ||||||
| FEI Co. | 5,350 | 296,711 | ||||||
| Nanometrics, Inc.* | 19,965 | 287,895 | ||||||
| Harmonic, Inc.* | 53,400 | 270,738 | ||||||
| Lattice Semiconductor Corp.* | 55,400 | 221,046 | ||||||
| Ciena Corp.* | 13,350 | 209,595 | ||||||
| Sourcefire, Inc.* | 3,770 | 178,019 | ||||||
| Riverbed Technology, Inc.* | 8,808 | 173,701 | ||||||
| SYNNEX Corp.* | 5,000 | 171,900 | ||||||
| QLIK Technologies, Inc.* | 7,301 | 158,578 | ||||||
| Rofin-Sinar Technologies, Inc.* | 5,110 | 110,785 | ||||||
| Pactera Technology International | ||||||||
| Ltd. ADR* | 11,150 | 88,531 | ||||||
| Total Information Technology | 5,246,541 | |||||||
| HEALTH CARE - 14.3% | ||||||||
| Health Management Associates, | ||||||||
| Inc. — Class A* | 42,530 | 396,380 | ||||||
| Haemonetics Corp.* | 9,530 | 389,205 | ||||||
| Endo Health Solutions, Inc.* | 13,260 | 348,340 | ||||||
| Endologix, Inc.* | 24,400 | 347,456 | ||||||
| Hologic, Inc.* | 16,610 | 332,698 | ||||||
| BioMarin Pharmaceutical, Inc.* | 5,370 | 264,472 | ||||||
| AngioDynamics, Inc.* | 23,660 | 260,023 | ||||||
| athenahealth, Inc.* | 3,260 | 239,447 | ||||||
| Acorda Therapeutics, Inc.* | 8,750 | 217,525 | ||||||
| Auxilium Pharmaceuticals, Inc.* | 11,185 | 207,258 | ||||||
| Exact Sciences Corp.* | 18,650 | 197,504 | ||||||
| Pharmacyclics, Inc.* | 3,150 | 182,385 | ||||||
| NxStage Medical, Inc.* | 15,850 | 178,313 | ||||||
| Halozyme Therapeutics, Inc.* | 25,740 | 172,715 | ||||||
| HeartWare International, Inc.* | 1,750 | 146,913 | ||||||
| Incyte Corp.* | 8,350 | 138,694 | ||||||
| HMS Holdings Corp.* | 4,725 | 122,472 | ||||||
| Ariad Pharmaceuticals, Inc.* | 6,300 | 120,834 | ||||||
| Cepheid, Inc.* | 3,185 | 107,685 | ||||||
| Questcor Pharmaceuticals, Inc. | 2,950 | 78,824 | ||||||
| CardioNet, Inc.* | 30,915 | 70,486 | ||||||
| Achillion Pharmaceuticals, Inc.* | 7,400 | 59,348 | ||||||
| Total Health Care | 4,578,977 | |||||||
| INDUSTRIALS - 13.1% | ||||||||
| Triumph Group, Inc. | 10,550 | 688,916 | ||||||
| B/E Aerospace, Inc.* | 12,600 | 622,440 | ||||||
| Kansas City Southern | 6,115 | 510,480 | ||||||
| AECOM Technology Corp.* | 17,970 | 427,686 | ||||||
| Hexcel Corp.* | 12,850 | 346,436 | ||||||
| Regal-Beloit Corp. | 4,830 | 340,370 | ||||||
| Colfax Corp.* | 7,950 | 320,783 | ||||||
| Crane Co. | 5,911 | 273,561 | ||||||
| IDEX Corp. | 5,702 | 265,314 | ||||||
| Acuity Brands, Inc. | 2,600 | 176,098 | ||||||
| Wabtec Corp. | 2,010 | 175,955 | ||||||
| PMFG, Inc.* | 6,825 | 62,039 | ||||||
| Total Industrials | 4,210,078 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 97 |
| SCHEDULE OF INVESTMENTS (concluded) | December 31, 2012 |
| SERIES X (SMALL CAP GROWTH SERIES) | |
| Shares | Value | |||||||
| MATERIALS - 8.7% | ||||||||
| Ashland, Inc. | 11,350 | $ | 912,654 | |||||
| HB Fuller Co. | 14,420 | 502,104 | ||||||
| Albemarle Corp. | 7,325 | 455,029 | ||||||
| Kaiser Aluminum Corp. | 6,630 | 409,005 | ||||||
| Cytec Industries, Inc. | 5,027 | 346,008 | ||||||
| Silgan Holdings, Inc. | 3,700 | 153,883 | ||||||
| Total Materials | 2,778,683 | |||||||
| ENERGY - 5.8% | ||||||||
| Oil States International, Inc.* | 9,460 | 676,769 | ||||||
| McDermott International, Inc.* | 32,250 | 355,395 | ||||||
| Superior Energy Services, Inc.* | 15,820 | 327,790 | ||||||
| Energy XXI Bermuda Ltd. | 9,692 | 311,985 | ||||||
| Stone Energy Corp.* | 8,400 | 172,368 | ||||||
| Total Energy | 1,844,307 | |||||||
| FINANCIALS - 5.1% | ||||||||
| IBERIABANK Corp. | 14,205 | 697,750 | ||||||
| Amtrust Financial Services, Inc. | 16,610 | 476,541 | ||||||
| Texas Capital Bancshares, Inc.* | 6,950 | 311,499 | ||||||
| Stifel Financial Corp.* | 5,152 | 164,709 | ||||||
| Total Financials | 1,650,499 | |||||||
| TELECOMMUNICATION SERVICES - 1.6% | ||||||||
| SBA Communications Corp. — | ||||||||
| Class A* | 7,370 | 523,417 | ||||||
| UTILITIES - 1.6% | ||||||||
| NorthWestern Corp. | 14,385 | 499,591 | ||||||
| CONSUMER STAPLES – 1.3% | ||||||||
| J&J Snack Foods Corp. | 3,325 | 212,601 | ||||||
| Boulder Brands, Inc.* | 15,050 | 194,145 | ||||||
| Total Consumer Staples | 406,746 | |||||||
| Total Common Stocks | ||||||||
| (Cost $25,449,404) | 27,507,845 | |||||||
| EXCHANGE TRADED FUNDS† - 10.6% | ||||||||
| iShares Russell 2000 Growth | ||||||||
| Index Fund | 26,515 | 2,527,145 | ||||||
| PowerShares S&P SmallCap Health | ||||||||
| Care Portfolio | 24,780 | 878,203 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $3,367,594) | 3,405,348 | |||||||
| Total Investments - 96.5% | ||||||||
| (Cost $28,816,998) | $ | 30,913,193 | ||||||
| Other Assets & Liabilities, net - 3.5% | 1,124,047 | |||||||
| Total Net Assets - 100.0% | $ | 32,037,240 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
ADR — American Depositary Receipt
| 98 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES X (SMALL CAP GROWTH SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $28,816,998) | $ | 30,913,193 | ||
| Cash | 928,268 | |||
| Prepaid expenses | 1,344 | |||
| Receivables: | ||||
| Securities sold | 264,622 | |||
| Dividends | 7,213 | |||
| Fund shares sold | 388 | |||
| Total assets | 32,115,028 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Fund shares redeemed | 35,436 | |||
| Management fees | 22,821 | |||
| Professional fees | 8,529 | |||
| Transfer agent/maintenance fees | 5,823 | |||
| Fund accounting/administration fees | 2,551 | |||
| Directors’ fees* | 786 | |||
| Miscellaneous | 1,842 | |||
| Total liabilities | 77,788 | |||
| Net assets | $ | 32,037,240 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 34,238,019 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (4,296,974 | ) | ||
| Net unrealized appreciation on investments | 2,096,195 | |||
| Net assets | $ | 32,037,240 | ||
| Capital shares outstanding | 1,550,385 | |||
| Net asset value per share | $ | 20.66 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $4,011) | $ | 204,195 | ||
| Interest | 116 | |||
| Total investment income | 204,311 | |||
| Expenses: | ||||
| Management fees | 296,608 | |||
| Transfer agent/maintenance fees | 26,722 | |||
| Fund accounting/administration fees | 33,150 | |||
| Directors’ fees* | 4,306 | |||
| Custodian fees | 3,059 | |||
| Miscellaneous | 34,907 | |||
| Total expenses | 398,752 | |||
| Net investment loss | (194,441 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 4,568,903 | |||
| Net realized gain | 4,568,903 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | (544,759 | ) | ||
| Net change in unrealized appreciation (depreciation) | (544,759 | ) | ||
| Net realized and unrealized gain | 4,024,144 | |||
| Net increase in net assets resulting from operations | $ | 3,829,703 |
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 99 |
| SERIES X (SMALL CAP GROWTH SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (194,441 | ) | $ | (272,778 | ) | ||
| Net realized gain on investments | 4,568,903 | 6,867,850 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | (544,759 | ) | (7,888,658 | ) | ||||
| Net increase (decrease) in net assets resulting from operations | 3,829,703 | (1,293,586 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 2,875,146 | 15,638,648 | ||||||
| Cost of shares redeemed | (10,378,761 | ) | (24,783,255 | ) | ||||
| Net decrease from capital share transactions | (7,503,615 | ) | (9,144,607 | ) | ||||
| Net decrease in net assets | (3,673,912 | ) | (10,438,193 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 35,711,152 | 46,149,345 | ||||||
| End of year | $ | 32,037,240 | $ | 35,711,152 | ||||
| Undistributed net investment income at end of year | $ | — | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | 141,633 | 818,023 | ||||||
| Shares redeemed | (519,758 | ) | (1,332,009 | ) | ||||
| Net decrease in shares | (378,125 | ) | (513,986 | ) | ||||
| 100 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES X (SMALL CAP GROWTH SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008d | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 18.52 | $ | 18.89 | $ | 14.52 | $ | 10.74 | $ | 20.35 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment lossa | (.11 | ) | (.12 | ) | (.10 | ) | (.04 | ) | (.12 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.25 | (.25 | ) | 4.47 | 3.82 | (9.49 | ) | |||||||||||||
| Total from investment operations | 2.14 | (.37 | ) | 4.37 | 3.78 | (9.61 | ) | |||||||||||||
| Net asset value, end of period | $ | 20.66 | $ | 18.52 | $ | 18.89 | $ | 14.52 | $ | 10.74 | ||||||||||
| Total Returnb | 11.56 | % | (1.96 | %) | 30.10 | % | 35.20 | % | (47.22 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 32,037 | $ | 35,711 | $ | 46,149 | $ | 35,396 | $ | 30,284 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment loss | (0.56 | %) | (0.63 | %) | (0.65 | %) | (0.30 | %) | (0.80 | %) | ||||||||||
| Total expensesc | 1.14 | % | 1.08 | % | 1.09 | % | 1.10 | % | 1.24 | % | ||||||||||
| Portfolio turnover rate | 72 | % | 91 | % | 88 | % | 100 | % | 209 | % | ||||||||||
| a | Net investment loss per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| d | Security Investors, LLC became the advisor of Series X effective December 1, 2008. Prior to December 1, 2008, RS Investments, Inc. sub-advised the Series. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 101 |
| MANAGER’S COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series Y (Large Cap Concentrated Growth Series) returned 10.71%, compared with the benchmark, the Russell 1000® Growth Index, which gained 15.26%.
The Fund seeks to deliver long-term growth of capital by investing in securities that have demonstrated consistent above-average returns. It primarily invests in stocks of large companies that appear to have solid potential for growth. The Fund uses a combination of a qualitative top down approach in reviewing growth trends that are based on several fixed income factors, such as bond spreads and interest rates, along with a quantitative fundamental bottom-up approach. The portfolio is constructed with 25-30 names; holdings are replaced when the fundamentals of a company or the original thesis for selecting the security changes.
The portfolio’s performance was helped by its stock selection in the Consumer Discretionary sector and by an overweight in Financials and an underweight in Consumer Staples. However, this was not enough to offset the effects of poor stock selection in the Health Care, Industrials and Information Technology sectors.
The holdings contributing most to portfolio performance over the period were Apple, Inc. and Comcast Corp. Leading detractors to performance were Caterpillar, Inc. and Express Scripts Holding Co.
Our fixed income indicators, including the slope of the yield curve and corporate bond spreads, continue to point to a modest economic environment but a decent risk environment. Strong corporate debt issuance, coupled with historically tight bond spreads, confirms a healthy risk appetite with fixed-income markets, which we believe is a leading indicator of the risk environment for equities. We will focus our attention on secular growth names in the year to come, with an eye towards more cyclical names if the global economy can find firmer footing.
We appreciate your business and the trust you place in us.
Sincerely,
Mark Bronzo, CFA, Portfolio Manager
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| 102 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| 1 Year | 5 Year | 10 Year | ||||||||||
| Series Y (Large Cap Concentrated Growth) | 10.71% | 0.72% | 4.39% | |||||||||
| Russell 1000 Growth Index | 15.26% | 3.12% | 7.52% | |||||||||
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
| Inception Date: May 3, 1999 | ||||
| Ten Largest Holdings (% of Total Net Assets) | ||||
| Apple, Inc. | 7.6 | % | ||
| Financial Select Sector SPDR Fund | 4.3 | % | ||
| Health Care Select Sector SPDR Fund | 4.0 | % | ||
| Google, Inc. — Class A | 3.5 | % | ||
| International Business Machines Corp. | 3.1 | % | ||
| Microsoft Corp. | 3.0 | % | ||
| Starbucks Corp. | 3.0 | % | ||
| eBay, Inc. | 3.0 | % | ||
| TJX Companies, Inc. | 3.0 | % | ||
| Coca-Cola Co. | 3.0 | % | ||
| Top Ten Total | 37.5 | % | ||
“Ten Largest Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 103 |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 81.2% | ||||||||
| INFORMATION TECHNOLOGY - 27.5% | ||||||||
| Apple, Inc. | 5,178 | $ | 2,760,030 | |||||
| Google, Inc. — Class A* | 1,770 | 1,255,585 | ||||||
| International Business Machines Corp. | 5,831 | 1,116,928 | ||||||
| Microsoft Corp. | 41,278 | 1,103,361 | ||||||
| eBay, Inc.* | 21,569 | 1,100,450 | ||||||
| Oracle Corp. | 30,354 | 1,011,395 | ||||||
| EMC Corp.* | 36,428 | 921,628 | ||||||
| Broadcom Corp. — Class A | 21,495 | 713,849 | ||||||
| Total Information Technology | 9,983,226 | |||||||
| CONSUMER DISCRETIONARY - 19.2% | ||||||||
| Starbucks Corp. | 20,538 | 1,101,247 | ||||||
| TJX Companies, Inc. | 25,739 | 1,092,621 | ||||||
| Comcast Corp. — Class A | 28,915 | 1,080,843 | ||||||
| Home Depot, Inc. | 17,306 | 1,070,376 | ||||||
| Walt Disney Co. | 21,010 | 1,046,088 | ||||||
| BorgWarner, Inc.* | 11,384 | 815,322 | ||||||
| Wynn Resorts Ltd. | 6,732 | 757,283 | ||||||
| Total Consumer Discretionary | 6,963,780 | |||||||
| INDUSTRIALS - 9.6% | ||||||||
| Honeywell International, Inc. | 15,008 | 952,557 | ||||||
| Deere & Co. | 10,764 | 930,225 | ||||||
| AMETEK, Inc. | 22,350 | 839,690 | ||||||
| Boeing Co. | 10,117 | 762,417 | ||||||
| Total Industrials | 3,484,889 | |||||||
| CONSUMER STAPLES - 7.9% | ||||||||
| Coca-Cola Co. | 29,906 | 1,084,093 | ||||||
| Mondelez International, Inc. — Class A | 41,713 | 1,062,430 | ||||||
| JM Smucker Co. | 8,268 | 713,032 | ||||||
| Total Consumer Staples | 2,859,555 | |||||||
| HEALTH CARE - 7.7% | ||||||||
| Covidien plc | 13,225 | 763,612 | ||||||
| Abbott Laboratories | 11,094 | 726,657 | ||||||
| Gilead Sciences, Inc.* | 9,883 | 725,906 | ||||||
| Biogen Idec, Inc.* | 3,900 | 572,013 | ||||||
| Total Health Care | 2,788,188 | |||||||
| ENERGY - 5.2% | ||||||||
| Ensco plc — Class A | 16,188 | 959,625 | ||||||
| Schlumberger Ltd. | 13,094 | 907,283 | ||||||
| Total Energy | 1,866,908 | |||||||
| FINANCIALS - 2.1% | ||||||||
| JPMorgan Chase & Co. | 17,166 | 754,789 | ||||||
| MATERIALS - 2.0% | ||||||||
| CF Industries Holdings, Inc. | 3,500 | 711,060 | ||||||
| Total Common Stocks | ||||||||
| (Cost $27,631,865) | 29,412,395 | |||||||
| EXCHANGE TRADED FUNDS† - 14.5% | ||||||||
| Financial Select Sector SPDR Fund | 94,600 | 1,551,440 | ||||||
| Health Care Select Sector SPDR Fund | 36,314 | 1,450,744 | ||||||
| Materials Select Sector SPDR Fund | 21,026 | 789,316 | ||||||
| Industrial Select Sector SPDR Fund | 20,261 | 767,892 | ||||||
| Consumer Staples Select Sector | ||||||||
| SPDR Fund | 20,263 | 705,760 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $5,193,464) | 5,265,152 | |||||||
| Total Investments - 95.7% | ||||||||
| (Cost $32,825,329) | $ | 34,677,547 | ||||||
| Other Assets & Liabilities, net - 4.3% | 1,566,140 | |||||||
| Total Net Assets - 100.0% | $ | 36,243,687 | ||||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 inputs — See Note 4. |
plc — Public Limited Company
| 104 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES) |
| STATEMENT OF ASSETS |
| AND LIABILITIES |
| December 31, 2012 |
| Assets: | ||||
| Investments, at value | ||||
| (cost $32,825,329) | $ | 34,677,547 | ||
| Cash | 2,767,150 | |||
| Prepaid expenses | 844 | |||
| Receivables: | ||||
| Securities sold | 125,851 | |||
| Dividends | 55,083 | |||
| Fund shares sold | 19,480 | |||
| Total assets | 37,645,955 | |||
| Liabilities: | ||||
| Payable for: | ||||
| Securities purchased | 1,350,636 | |||
| Management fees | 22,219 | |||
| Fund shares redeemed | 10,274 | |||
| Transfer agent/maintenance fees | 5,830 | |||
| Fund accounting/administration fees | 2,814 | |||
| Directors’ fees* | 24 | |||
| Miscellaneous | 10,471 | |||
| Total liabilities | 1,402,268 | |||
| Net assets | $ | 36,243,687 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 40,974,720 | ||
| Undistributed net investment income | 242,457 | |||
| Accumulated net realized loss on investments | (6,825,708 | ) | ||
| Net unrealized appreciation on investments | 1,852,218 | |||
| Net assets | $ | 36,243,687 | ||
| Capital shares outstanding | 3,437,169 | |||
| Net asset value per share | $ | 10.54 |
| STATEMENT OF |
| OPERATIONS |
| Year Ended December 31, 2012 |
| Investment Income: | ||||
| Dividends | $ | 629,938 | ||
| Interest | 185 | |||
| Total investment income | 630,123 | |||
| Expenses: | ||||
| Management fees | 286,494 | |||
| Transfer agent/maintenance fees | 26,730 | |||
| Fund accounting/administration fees | 36,289 | |||
| Custodian fees | 4,922 | |||
| Directors’ fees* | 3,843 | |||
| Miscellaneous | 29,388 | |||
| Total expenses | 387,666 | |||
| Net investment income | 242,457 | |||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,474,207 | |||
| Net realized gain | 3,474,207 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 225,235 | |||
| Net change in unrealized appreciation (depreciation) | 225,235 | |||
| Net realized and unrealized gain | 3,699,442 | |||
| Net increase in net assets resulting from operations | $ | 3,941,899 |
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 105 |
| SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES) |
| STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment income | $ | 242,457 | $ | 79,982 | ||||
| Net realized gain on investments | 3,474,207 | 2,231,026 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 225,235 | (3,803,150 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 3,941,899 | (1,492,142 | ) | |||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | 8,568,903 | 9,477,854 | ||||||
| Cost of shares redeemed | (14,397,614 | ) | (13,425,947 | ) | ||||
| Net decrease from capital share transactions | (5,828,711 | ) | (3,948,093 | ) | ||||
| Net decrease in net assets | (1,886,812 | ) | (5,440,235 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 38,130,499 | 43,570,734 | ||||||
| End of year | $ | 36,243,687 | $ | 38,130,499 | ||||
| Undistributed net investment income at end of year | $ | 242,457 | $ | 79,982 | ||||
| Capital share activity: | ||||||||
| Shares sold | 814,296 | 981,487 | ||||||
| Shares redeemed | (1,382,567 | ) | (1,357,067 | ) | ||||
| Net decrease in shares | (568,271 | ) | (375,580 | ) | ||||
| 106 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SERIES Y (LARGE CAP CONCENTRATED GROWTH SERIES) |
| FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 9.52 | $ | 9.95 | $ | 8.53 | $ | 6.40 | $ | 10.17 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment incomea | .07 | .02 | .08 | .03 | .01 | |||||||||||||||
| Net gain (loss) on investments (realized and unrealized) | .95 | (.45 | ) | 1.34 | 2.10 | (3.78 | ) | |||||||||||||
| Total from investment operations | 1.02 | (.43 | ) | 1.42 | 2.13 | (3.77 | ) | |||||||||||||
| Net asset value, end of period | $ | 10.54 | $ | 9.52 | $ | 9.95 | $ | 8.53 | $ | 6.40 | ||||||||||
| Total Returnb | 10.71 | % | (4.32 | %) | 16.65 | % | 33.28 | % | (37.07 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 36,244 | $ | 38,130 | $ | 43,571 | $ | 41,338 | $ | 33,584 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment income | 0.63 | % | 0.20 | % | 0.96 | % | 0.37 | % | 0.14 | % | ||||||||||
| Total expensesc | 1.01 | % | 0.98 | % | 0.96 | % | 1.00 | % | 0.97 | % | ||||||||||
| Portfolio turnover rate | 187 | % | 153 | % | 182 | % | 151 | % | 214 | % | ||||||||||
| a | Net investment income per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 107 |
| MANAGERS’ COMMENTARY (Unaudited) | December 31, 2012 |
To Our Shareholders:
For the 12-month period ended December 31, 2012, the Series Z (Alpha Opportunity Series) gained 13.40%, compared with its benchmark, the S&P 500® Index, which gained 16.00%.
Long U.S. Strategy Performance
As of December 31, 2012, approximately 47% of the Fund’s assets, consisting of long positions in U.S companies, are held as short sale collateral in a special custody account and are deemed illiquid due to the Fund’s exposure to Lehman Brothers International Europe (LBIE). These securities contributed positive performance to the Fund over the past year.
Domestic Long/Short Strategy Performance
As of December 31, 2012, approximately 40% of the Fund’s assets were invested according to the Fund’s domestic long/short strategy which seeks to use fundamental and technical methods of analysis to identify quality securities trading at attractive valuations. This strategy uses a top-down perspective to formulate long-term themes and a bottom-up approach to identify individual securities.
In the domestic long/short strategy, favorable stock selection in the Consumer Discretionary, Industrials, and Materials sectors was offset by selection within the Technology sector and cash allocation (averaged 21%-22%).
Leaders in the strategy during 2012 were USG Corp., U.S. Airways Group, Inc. and Georgia Gulf Corp. Skyworks Solutions Inc. and Mastercard Inc. detracted from results in the Technology sector.
Looking forward, our expectation for the market overall is modest, but we see many opportunities to outperform. The U.S. housing/ construction theme emerged as a strong performer for Mainstream during the year and we remain focused on this group. Other areas of focus include global cyclicals and precious metals stocks within the Materials sector. Accommodative global monetary policy and an underinvested public continue to provide support for the equity markets.
Broad Market Tracking
The investment manager for this portion of the portfolio, which represents approximately 13% of the Fund’s assets as of December 31, 2012, seeks investment returns that are similar to those of the S&P 500 Index by primarily investing in equity derivatives, such as futures contracts, options on futures contracts, and equity options. The results of derivatives use during the period were within our expectations and contributed to the Fund’s performance.
The Fund primarily used S&P 500 e-mini futures for the portion of Fund assets that is intended to track the S&P 500 Index. Equity markets rallied strongly throughout the past year and the S&P 500 Index approached its highest level since the financial crisis.
As referenced in Note 12 of the Notes to Financials in this shareholder report, Guggenheim Investments is seeking to resolve certain outstanding short-sale transactions with Lehman Brothers International Europe (LBIE) and its administrator. The Fund’s exposure to LBIE due to these transactions consists of short sale proceeds held by LBIE and long positions held as collateral at the Fund’s custodian. Release of the collateral requires the consent of LBIE and Lehman Brothers, Inc., an entity that is subject to a liquidation proceeding. Due to the valuations assigned to the short positions, which are based on certain assumptions, resolution of these matters could ultimately result in the Fund’s realizing values that are materially different from those indicated in this report, which would materially affect the Fund’s net asset value. Guggenheim Investments is uncertain when it will resume its full investment program.
| 108 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| MANAGERS’ COMMENTARY (Unaudited) (concluded) | December 31, 2012 |
We appreciate your business and the trust you place in us.
Sincerely,
Bill Jenkins, CFA, Portfolio Manager
Mainstream Investment Advisers
Charles Craig, CFA, Portfolio Manager
Mainstream Investment Advisers
Michael Byrum, CFA, Portfolio Manager
Guggenheim Investments
Michael Dellapa, CFA, CAIA, Portfolio Manager
Guggenheim Investments
Ryan Harder, CFA, Portfolio Manager
Guggenheim Investments
Mainstream Investment Advisors, LLC is not affiliated with Guggenheim Partners, LLC or Security Investors, LLC.
Performance displayed represents past performance, which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 109 |
| PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2012 |
SERIES Z (ALPHA OPPORTUNITY SERIES)
OBJECTIVE: Seeks long-term growth of capital.
Cumulative Fund Performance*
Average Annual Returns*
Periods Ended 12/31/121
| Since Inception | ||||||||||||
| 1 Year | 5 Year | (07/07/03) | ||||||||||
| Series Z (Alpha Opportunity Series) | 13.40% | 3.45% | 8.93% | |||||||||
| S&P 500 Index | 16.00% | 1.66% | 5.91% | |||||||||
Holdings Diversification (Market Exposure as % of Net Assets)
| ** | Substantially all of the short holdings were fair valued by the Valuation Committee at December 31, 2012 due to exposure to LBIE — See Note 12. The total market value of fair valued securities amounts to (50%) of total net assets. |
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Date: July 7, 2003
| Ten Largest Long Holdings (% of Total Net Assets) | ||||
| Philip Morris International, Inc. | 5.6 | % | ||
| Altria Group, Inc. | 3.6 | % | ||
| Trinity Industries, Inc. | 2.5 | % | ||
| AT&T, Inc. | 2.4 | % | ||
| Johnson & Johnson | 2.4 | % | ||
| Lockheed Martin Corp. | 2.4 | % | ||
| AO Smith Corp. | 2.1 | % | ||
| CA, Inc. | 2.1 | % | ||
| TJX Companies, Inc. | 2.1 | % | ||
| Joy Global, Inc. | 2.0 | % | ||
| Top Ten Total | 27.2 | % | ||
“Ten Largest Long Holdings” exclude any temporary cash or derivative investments.
| * | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
| 1 | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| 110 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| SCHEDULE OF INVESTMENTS | December 31, 2012 |
| SERIES Z (ALPHA OPPORTUNITY SERIES) | |
| Shares | Value | |||||||
| COMMON STOCKS† - 85.4% | ||||||||
| INDUSTRIALS - 19.1% | ||||||||
| Trinity Industries, Inc.1,2 | 10,800 | $ | 386,857 | |||||
| Lockheed Martin Corp.1,2 | 3,993 | 368,514 | ||||||
| AO Smith Corp.1,2 | 5,269 | 332,315 | ||||||
| Joy Global, Inc.1,2 | 4,800 | 306,144 | ||||||
| Armstrong World Industries, Inc. | 3,094 | 156,959 | ||||||
| Valmont Industries, Inc. | 1,037 | 141,603 | ||||||
| Towers Watson & Co. — Class A1,2 | 2,400 | 134,904 | ||||||
| Fortune Brands Home & Security, Inc.* | 4,464 | 130,438 | ||||||
| Watts Water Technologies, Inc. — | ||||||||
| Class A1,2 | 3,000 | 128,970 | ||||||
| US Airways Group, Inc.* | 7,373 | 99,536 | ||||||
| General Electric Co.1,2 | 4,500 | 94,455 | ||||||
| USG Corp.* | 2,822 | 79,214 | ||||||
| Northrop Grumman Corp.1,2 | 1,100 | 74,338 | ||||||
| Celadon Group, Inc. | 3,312 | 59,848 | ||||||
| Stanley Black & Decker, Inc. | 806 | 59,620 | ||||||
| Snap-on, Inc. | 725 | 57,268 | ||||||
| Con-way, Inc.1,2 | 1,800 | 50,076 | ||||||
| Masco Corp. | 2,851 | 47,498 | ||||||
| Builders FirstSource, Inc.* | 8,372 | 46,716 | ||||||
| Trex Company, Inc.* | 1,011 | 37,640 | ||||||
| Hubbell, Inc. — Class B | 392 | 33,174 | ||||||
| Primoris Services Corp. | 2,160 | 32,487 | ||||||
| Allegiant Travel Co. — Class A | 403 | 29,584 | ||||||
| Beacon Roofing Supply, Inc.* | 584 | 19,435 | ||||||
| Knight Transportation, Inc. | 1,267 | 18,536 | ||||||
| Rollins, Inc. | 547 | 12,056 | ||||||
| Rush Enterprises, Inc. — Class A* | 573 | 11,844 | ||||||
| Thermon Group Holdings, Inc.* | 518 | 11,671 | ||||||
| Huntington Ingalls Industries, Inc.1,2 | 183 | 7,931 | ||||||
| Pike Electric Corp. | 806 | 7,697 | ||||||
| Swift Transportation Co. — Class A* | 317 | 2,891 | ||||||
| Total Industrials | 2,980,219 | |||||||
| CONSUMER DISCRETIONARY - 18.3% | ||||||||
| TJX Companies, Inc.1,2 | 7,600 | 322,621 | ||||||
| Limited Brands, Inc.1,2 | 5,400 | 254,124 | ||||||
| Ross Stores, Inc.1,2 | 4,600 | 249,090 | ||||||
| Family Dollar Stores, Inc.1,2 | 3,900 | 247,299 | ||||||
| Walt Disney Co.1,2 | 4,322 | 215,192 | ||||||
| The Gap, Inc.1,2 | 6,300 | 195,552 | ||||||
| Pier 1 Imports, Inc. | 7,431 | 148,620 | ||||||
| DR Horton, Inc. | 7,229 | 142,990 | ||||||
| Target Corp. | 2,175 | 128,695 | ||||||
| Jack in the Box, Inc.*,1,2 | 4,200 | 120,119 | ||||||
| Williams-Sonoma, Inc. | 2,582 | 113,014 | ||||||
| Toll Brothers, Inc.* | 3,226 | 104,297 | ||||||
| PVH Corp.1,2 | 900 | 99,909 | ||||||
| Whirlpool Corp. | 832 | 84,656 | ||||||
| Asbury Automotive Group, Inc.* | 2,444 | 78,281 | ||||||
| Lennar Corp. — Class A | 1,526 | 59,010 | ||||||
| Cabela’s, Inc.* | 1,267 | 52,898 | ||||||
| Comcast Corp. — Class A | 1,218 | 45,529 | ||||||
| Starbucks Corp. | 806 | 43,218 | ||||||
| Aaron’s, Inc. | 1,325 | 37,471 | ||||||
| Meritage Homes Corp.* | 605 | 22,597 | ||||||
| Chuy’s Holdings, Inc.* | 1,008 | 22,519 | ||||||
| MDC Holdings, Inc. | 605 | 22,240 | ||||||
| Mattel, Inc. | 419 | 15,344 | ||||||
| RadioShack Corp.1,2 | 5,500 | 11,660 | ||||||
| Cavco Industries, Inc.* | 183 | 9,146 | ||||||
| Perfumania Holdings, Inc.* | 809 | 3,980 | ||||||
| Total Consumer Discretionary | 2,850,071 | |||||||
| CONSUMER STAPLES - 13.3% | ||||||||
| Philip Morris International, Inc.1,2 | 10,500 | 878,220 | ||||||
| Altria Group, Inc.1,2 | 17,800 | 559,276 | ||||||
| Bunge Ltd. | 2,463 | 179,035 | ||||||
| Herbalife Ltd.1,2 | 5,200 | 171,288 | ||||||
| Wal-Mart Stores, Inc.1,2 | 2,300 | 156,929 | ||||||
| Safeway, Inc.1,2 | 4,200 | 75,978 | ||||||
| Smithfield Foods, Inc.* | 1,008 | 21,742 | ||||||
| Sanderson Farms, Inc. | 403 | 19,163 | ||||||
| Cal-Maine Foods, Inc. | 403 | 16,209 | ||||||
| Total Consumer Staples | 2,077,840 | |||||||
| HEALTH CARE - 11.2% | ||||||||
| Johnson & Johnson1,2 | 5,300 | 371,530 | ||||||
| ViroPharma, Inc.*,1,2 | 10,500 | 238,980 | ||||||
| Amgen, Inc.1,2 | 1,900 | 164,007 | ||||||
| Life Technologies Corp.*,1,2 | 3,000 | 147,240 | ||||||
| AstraZeneca plc††,1,2 | 2,800 | 132,721 | ||||||
| Forest Laboratories, Inc.*,1,2 | 3,600 | 127,152 | ||||||
| Baxter International, Inc.1,2 | 1,900 | 126,654 | ||||||
| GlaxoSmithKline plc††,1,2 | 5,500 | 119,750 | ||||||
| WellCare Health Plans, Inc.*,1,2 | 2,400 | 116,856 | ||||||
| Owens & Minor, Inc.1,2 | 2,800 | 79,828 | ||||||
| Charles River Laboratories | ||||||||
| International, Inc.*,1,2 | 2,100 | 78,687 | ||||||
| Kindred Healthcare, Inc.*,1,2 | 4,100 | 44,362 | ||||||
| Acadia Healthcare Company, Inc.* | 9 | 210 | ||||||
| Total Health Care | 1,747,977 | |||||||
| INFORMATION TECHNOLOGY - 6.7% | ||||||||
| CA, Inc.1,2 | 14,900 | 327,501 | ||||||
| Symantec Corp.*,1,2 | 6,300 | 118,503 | ||||||
| Facebook, Inc. — Class A* | 4,438 | 118,184 | ||||||
| Apple, Inc. | 202 | 107,672 | ||||||
| Arrow Electronics, Inc.*,1,2 | 2,800 | 106,624 | ||||||
| Avnet, Inc.*,1,2 | 3,200 | 97,952 | ||||||
| Harmonic, Inc.*,1,2 | 11,700 | 59,319 | ||||||
| Amkor Technology, Inc.*,1,2 | 9,800 | 41,650 | ||||||
| Aruba Networks, Inc.* | 1,941 | 40,276 | ||||||
| QUALCOMM, Inc. | 461 | 28,591 | ||||||
| Total Information Technology | 1,046,272 | |||||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 111 |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES Z (ALPHA OPPORTUNITY SERIES) | |
| Shares | Value | |||||||
| FINANCIALS - 5.4% | ||||||||
| Amtrust Financial Services, Inc.1,2 | 6,930 | $ | 198,822 | |||||
| Potlatch Corp. | 4,032 | 158,014 | ||||||
| Endurance Specialty Holdings Ltd.1,2 | 3,200 | 127,008 | ||||||
| Weyerhaeuser Co. | 4,349 | 120,989 | ||||||
| Deutsche Bank AG | 1,266 | 56,071 | ||||||
| Genworth Financial, Inc. — Class A*,1,2 | 4,200 | 31,542 | ||||||
| Arthur J Gallagher & Co. | 805 | 27,893 | ||||||
| St. Joe Co.* | 1,066 | 24,603 | ||||||
| Alexander & Baldwin, Inc.* | 691 | 20,295 | ||||||
| Fannie Mae* | 78,409 | 19,994 | ||||||
| Cresud S.A. ADR | 1,825 | 15,184 | ||||||
| Wells Fargo & Co. | 403 | 13,775 | ||||||
| Home Loan Servicing Solutions Ltd. | 490 | 9,261 | ||||||
| Rayonier, Inc. | 173 | 8,967 | ||||||
| Irish Bank Resolution | ||||||||
| Corporation Ltd.*,†††,3 | 16,638 | — | ||||||
| Total Financials | 832,418 | |||||||
| ENERGY - 4.4% | ||||||||
| Anadarko Petroleum Corp.1,2 | 2,930 | 217,729 | ||||||
| Range Resources Corp. | 2,015 | 126,602 | ||||||
| Rex Energy Corp.* | 7,162 | 93,249 | ||||||
| ConocoPhillips1,2 | 1,500 | 86,985 | ||||||
| Ultra Petroleum Corp.* | 2,832 | 51,344 | ||||||
| Phillips 66 | 750 | 39,825 | ||||||
| Continental Resources, Inc.* | 442 | 32,483 | ||||||
| Magnum Hunter Resources Corp.* | 6,653 | 26,545 | ||||||
| Oasis Petroleum, Inc.* | 365 | 11,607 | ||||||
| Total Energy | 686,369 | |||||||
| MATERIALS - 3.5% | ||||||||
| Georgia Gulf Corp. | 3,917 | 161,693 | ||||||
| Goldcorp, Inc. | 1,929 | 70,794 | ||||||
| Eldorado Gold Corp. | 3,847 | 49,549 | ||||||
| Deltic Timber Corp. | 634 | 44,773 | ||||||
| Franco-Nevada Corp. | 605 | 34,588 | ||||||
| Texas Industries, Inc.* | 665 | 33,922 | ||||||
| Royal Gold, Inc. | 348 | 28,296 | ||||||
| Huntsman Corp. | 1,613 | 25,647 | ||||||
| Braskem S.A. ADR | 1,780 | 23,763 | ||||||
| Southern Copper Corp. | 605 | 22,905 | ||||||
| IAMGOLD Corp. | 1,757 | 20,153 | ||||||
| Caesar Stone Sdot Yam Ltd.* | 835 | 13,485 | ||||||
| Schnitzer Steel Industries, Inc. — Class A | 288 | 8,735 | ||||||
| Stillwater Mining Co.* | 648 | 8,281 | ||||||
| Total Materials | 546,584 | |||||||
| TELECOMMUNICATION SERVICES - 2.5% | ||||||||
| AT&T, Inc.1,2 | 11,300 | 380,923 | ||||||
| UTILITIES - 1.0% | ||||||||
| Exelon Corp.1,2 | 5,022 | 149,354 | ||||||
| Total Common Stocks | ||||||||
| (Cost $12,152,004) | 13,298,027 | |||||||
| EXCHANGE TRADED FUNDS† - 0.3% | ||||||||
| Market Vectors Junior Gold Miners ETF | 1,820 | 36,036 | ||||||
| SPDR S&P Metals & Mining ETF | 403 | 18,191 | ||||||
| Total Exchange Traded Funds | ||||||||
| (Cost $61,330) | 54,227 | |||||||
| SHORT-TERM INVESTMENTS†† - 0.3% | ||||||||
| State Street General Account U.S. | ||||||||
| Government Fund | 45,298 | 45,298 | ||||||
| Total Short-Term Investments | ||||||||
| (Cost $45,298) | 45,298 | |||||||
| Face | ||||||||
| Amount | ||||||||
| FEDERAL AGENCY DISCOUNT NOTES†† - 10.9% | ||||||||
| Federal Home Loan Bank4 | ||||||||
| 0.14% due 06/05/13 | $ | 1,100,000 | 1,099,528 | |||||
| Freddie Mac5 | ||||||||
| 0.11% due 06/18/13 | 600,000 | 599,722 | ||||||
| Total Federal Agency Discount Notes | ||||||||
| (Cost $1,699,032) | 1,699,250 | |||||||
| REPURCHASE AGREEMENT††,6 - 17.6% | ||||||||
| State Street | ||||||||
| issued 12/31/12 at 0.01% | ||||||||
| due 01/02/13 | 2,739,059 | 2,739,059 | ||||||
| Total Repurchase Agreement | ||||||||
| (Cost $2,739,059) | 2,739,059 | |||||||
| Total Long Investments - 114.5% | ||||||||
| (Cost $16,696,723) | $ | 17,835,861 | ||||||
| Shares | ||||||||
| COMMON STOCKS SOLD SHORT - (50.3)% | ||||||||
| ENERGY - (0.3)% | ||||||||
| Riversdale Mining Ltd.*,†††,3,7 | 7,100 | (54,029 | ) | |||||
| CONSUMER STAPLES - (0.6)% | ||||||||
| Bridgford Foods Corp.† | 306 | (2,081 | ) | |||||
| Monster Beverage Corp.*,†††,3,7 | 3,270 | (96,825 | ) | |||||
| Total Consumer Staples | (98,906 | ) | ||||||
| UTILITIES - (1.7)% | ||||||||
| Korea Electric Power Corp. ADR*,†††,3,7 | 19,460 | (263,294 | ) | |||||
| TELECOMMUNICATION SERVICES - (1.9)% | ||||||||
| Clearwire Corp. — Class A*,†††,3,7 | 2,660 | (30,138 | ) | |||||
| Global Crossing Ltd.*,†††,3,7 | 2,520 | (40,244 | ) | |||||
| Leap Wireless International, Inc.*,†††,3,7 | 1,600 | (69,440 | ) | |||||
| SBA Communications Corp. — | ||||||||
| Class A*,†††,3,7 | 2,600 | (74,854 | ) | |||||
| SAVVIS, Inc.*,†††,3,7 | 5,900 | (86,966 | ) | |||||
| Total Telecommunication Services | (301,642 | ) | ||||||
| ENERGY - (2.5)% | ||||||||
| Aquila Resources Ltd.*,†††,3,7 | 2,860 | (22,783 | ) | |||||
| Arrow Energy Holdings Pty Ltd.*,†††,3,7 | 9,500 | (24,514 | ) | |||||
| 112 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
| SCHEDULE OF INVESTMENTS (continued) | December 31, 2012 |
| SERIES Z (ALPHA OPPORTUNITY SERIES) | |
| Shares | Value | |||||||
| Modec, Inc.†††,3,7 | 1,000 | $ | (25,772 | ) | ||||
| Sevan Marine ASA*,†††,3,7 | 6,300 | (33,049 | ) | |||||
| Trican Well Service Ltd.†††,3,7 | 2,200 | (37,448 | ) | |||||
| Queensland Gas Company Ltd.*,†††,3,7 | 13,600 | (52,898 | ) | |||||
| Imperial Energy Corporation plc*,†††,3,7 | 4,200 | (83,657 | ) | |||||
| BPZ Resources, Inc.*,†††,3,7 | 6,000 | (112,800 | ) | |||||
| Total Energy | (392,921 | ) | ||||||
| MATERIALS - (2.9)% | ||||||||
| SunCoke Energy, Inc.*,† | 638 | (9,946 | ) | |||||
| China National Building Material | ||||||||
| Company Ltd. — Class H†††,3,7 | 17,300 | (23,432 | ) | |||||
| Anhui Conch Cement Company | ||||||||
| Ltd. — Class H†††,3,7 | 5,500 | (24,761 | ) | |||||
| Shougang Fushan Resources | ||||||||
| Group Ltd.†††,3,7 | 70,000 | (25,165 | ) | |||||
| Sino Gold Mining Ltd.*,†††,3,7 | 9,100 | (37,425 | ) | |||||
| Turquoise Hill Resources Ltd.*,†††,3,7 | 4,780 | (39,865 | ) | |||||
| Western Areas NL†††,3,7 | 6,600 | (47,325 | ) | |||||
| Zoltek Companies, Inc.*,†††,3,7 | 2,900 | (52,867 | ) | |||||
| Silver Wheaton Corp.†††,3,7 | 6,500 | (68,245 | ) | |||||
| Agnico-Eagle Mines Ltd.†††,3,7 | 1,900 | (125,612 | ) | |||||
| Total Materials | (454,643 | ) | ||||||
| INFORMATION TECHNOLOGY - (4.4)% | ||||||||
| Varian Semiconductor Equipment | ||||||||
| Associates, Inc.*,†††,3,7 | 1,270 | (33,299 | ) | |||||
| VeriSign, Inc.*,†††,3,7 | 1,300 | (33,319 | ) | |||||
| Access Company Ltd.*,†††,3,7 | 18 | (34,682 | ) | |||||
| Electronic Arts, Inc.*,†††,3,7 | 900 | (36,720 | ) | |||||
| Intermec, Inc.*,†††,3,7 | 2,570 | (50,937 | ) | |||||
| Baidu, Inc. ADR*,†††,3,7 | 200 | (53,726 | ) | |||||
| Riverbed Technology, Inc.*,†††,3,7 | 4,100 | (54,530 | ) | |||||
| Rambus, Inc.*,†††,3,7 | 3,680 | (56,451 | ) | |||||
| Red Hat, Inc.*,†††,3,7 | 3,300 | (58,905 | ) | |||||
| VMware, Inc. — Class A*,†††,3,7 | 2,500 | (71,450 | ) | |||||
| Equinix, Inc.*,†††,3,7 | 1,000 | (79,940 | ) | |||||
| Cree, Inc.*,†††,3,7 | 4,200 | (115,332 | ) | |||||
| Total Information Technology | (679,291 | ) | ||||||
| INDUSTRIALS - (6.9)% | ||||||||
| China Communications Construction | ||||||||
| Company Ltd. — Class H†††,3,7 | 16,000 | (16,571 | ) | |||||
| China Merchants Holdings | ||||||||
| International Company Ltd.†††,3,7 | 4,900 | (17,461 | ) | |||||
| China National Materials Company | ||||||||
| Ltd. — Class H†††,3,7 | 37,600 | (19,168 | ) | |||||
| Japan Steel Works Ltd.†††,3,7 | 1,600 | (22,196 | ) | |||||
| Ausenco Ltd.†††,3,7 | 2,300 | (24,817 | ) | |||||
| Toyo Tanso Company Ltd.†††,3,7 | 600 | (32,408 | ) | |||||
| Ryanair Holdings plc†††,3,7 | 10,200 | (38,219 | ) | |||||
| Meyer Burger Technology AG*,†††,3,7 | 200 | (49,879 | ) | |||||
| USG Corp.*,†††,3,7 | 5,580 | (160,259 | ) | |||||
| Beijing Capital International Airport | ||||||||
| Company Ltd. — Class H†††,3,7 | 232,000 | (200,659 | ) | |||||
| Brisa Auto-Estradas de | ||||||||
| Portugal S.A.*,†††,3,7 | 47,200 | (490,927 | ) | |||||
| Total Industrials | (1,072,564 | ) | ||||||
| FINANCIALS - (8.0)% | ||||||||
| Cohen & Steers, Inc.† | 395 | (12,036 | ) | |||||
| C C Land Holdings Ltd.†††,3,7 | 53,000 | (14,782 | ) | |||||
| Franshion Properties China Ltd.†††,3,7 | 84,600 | (23,552 | ) | |||||
| Mizuho Trust & Banking | ||||||||
| Company Ltd.*,†††,3,7 | 18,800 | (26,216 | ) | |||||
| Aozora Bank Ltd.†††,3,7 | 17,300 | (27,861 | ) | |||||
| Monex Group, Inc.†††,3,7 | 83 | (29,140 | ) | |||||
| Mizuho Financial Group, Inc.†††,3,7 | 12,000 | (49,593 | ) | |||||
| Aeon Mall Company Ltd.†††,3,7 | 1,900 | (58,221 | ) | |||||
| PrivateBancorp, Inc.†††,3,7 | 2,400 | (103,200 | ) | |||||
| Erste Group Bank AG*,†††,3,7 | 5,500 | (337,971 | ) | |||||
| Wells Fargo & Co.†††,3,7 | 12,937 | (565,621 | ) | |||||
| Total Financials | (1,248,193 | ) | ||||||
| HEALTH CARE - (9.2)% | ||||||||
| Sepracor, Inc.*,†††,3,7 | 1,350 | (23,625 | ) | |||||
| Exelixis, Inc.*,†††,3,7 | 4,700 | (30,127 | ) | |||||
| Intuitive Surgical, Inc.*,†††,3,7 | 200 | (56,100 | ) | |||||
| Zeltia S.A.*,†††,3,7 | 8,500 | (57,969 | ) | |||||
| Savient Pharmaceuticals, Inc.*,†††,3,7 | 3,240 | (64,282 | ) | |||||
| Sequenom, Inc.*,†††,3,7 | 3,140 | (64,715 | ) | |||||
| Luminex Corp.*,†††,3,7 | 2,700 | (68,823 | ) | |||||
| Auxilium Pharmaceuticals, Inc.*,†††,3,7 | 1,960 | (72,167 | ) | |||||
| Vertex Pharmaceuticals, Inc.*,†††,3,7 | 2,700 | (74,709 | ) | |||||
| Align Technology, Inc.*,†††,3,7 | 6,300 | (76,860 | ) | |||||
| Acorda Therapeutics, Inc.*,†††,3,7 | 2,900 | (77,575 | ) | |||||
| Intercell AG*,†††,3,7 | 2,000 | (78,778 | ) | |||||
| Rigel Pharmaceuticals, Inc.*,†††,3,7 | 3,070 | (78,838 | ) | |||||
| XenoPort, Inc.*,†††,3,7 | 1,790 | (82,036 | ) | |||||
| Regeneron Pharmaceuticals, Inc.*,†††,3,7 | 3,810 | (82,715 | ) | |||||
| AMAG Pharmaceuticals, Inc.*,†††,3,7 | 1,900 | (82,954 | ) | |||||
| Basilea Pharmaceutica*,†††,3,7 | 500 | (83,364 | ) | |||||
| Cepheid, Inc.*,†††,3,7 | 5,500 | (84,700 | ) | |||||
| Alnylam Pharmaceuticals, Inc.*,†††,3,7 | 3,000 | (88,230 | ) | |||||
| athenahealth, Inc.*,†††,3,7 | 2,700 | (96,795 | ) | |||||
| Total Health Care | (1,425,362 | ) | ||||||
| CONSUMER DISCRETIONARY - (11.9)% | ||||||||
| Tokyo Broadcasting System Holdings, Inc.†††,3,7 | 1,300 | (21,836 | ) | |||||
| Harman International Industries, Inc.† | 638 | (28,480 | ) | |||||
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 113 |
| Schedule of Investments (concluded) | December 31, 2012 |
| Series Z (Alpha Opportunity Series) |
| Shares | Value | |||||||
| Genting Singapore plc†††,3,7 | 132,800 | $ | (43,724 | ) | ||||
| bwin Interactive | ||||||||
| Entertainment AG*,†††,3,7 | 1,700 | (48,431 | ) | |||||
| Bwin.Party Digital | ||||||||
| Entertainment plc*,†††,3,7 | 16,200 | (60,974 | ) | |||||
| Sky Deutschland AG*,†††,3,7 | 4,200 | (68,952 | ) | |||||
| Focus Media Holding Ltd. ADR†††,3,7 | 2,500 | (75,000 | ) | |||||
| Marui Group Company Ltd.†††,3,7 | 31,000 | (233,861 | ) | |||||
| Pool Corp.†††,3,7 | 12,350 | (305,663 | ) | |||||
| Electrolux AB†††,3,7 | 32,100 | (422,058 | ) | |||||
| Volkswagen AG†††,3,7 | 1,300 | (539,373 | ) | |||||
| Total Consumer Discretionary | (1,848,352 | ) | ||||||
| Total Common Stock Sold Short | ||||||||
| (Proceeds $7,670,998) | (7,839,197 | ) | ||||||
| EXCHANGE TRADED FUNDS SOLD SHORT† - (0.4)% | ||||||||
| United States Oil Fund, LP* | 1,702 | (56,778 | ) | |||||
| Total Exchange Traded Funds Sold Short | ||||||||
| (Proceeds $56,227) | (56,778 | ) | ||||||
| Total Securities Sold Short- (50.7)% | ||||||||
| (Proceeds $7,727,225) | $ | (7,895,975 | ) | |||||
| Other Assets & Liabilities, net - 36.2% | 5,631,522 | |||||||
| Total Net Assets - 100.0% | $ | 15,571,408 | ||||||
| Unrealized | ||||||||
| Contracts | Gain | |||||||
| EQUITY FUTURES CONTRACTS PURCHASED† | ||||||||
| March 2013 S&P 500 Index | ||||||||
| Mini Futures Contracts | ||||||||
| (Aggregate Value of | ||||||||
| Contracts $2,203,713) | 31 | $ | 19,335 | |||||
| * | Non-income producing security. |
| † | Value determined based on Level 1 input, except as noted — See Note 4. |
| †† | Value determined based on Level 2 inputs — See Note 4. |
| ††† | Value determined based on Level 3 inputs — See Note 4. |
| 1 | All or a portion of this security is pledged as short security collateral at December 31, 2012. |
| 2 | All or a portion of the security is deemed illiquid due to the Fund’s exposure to Lehman Brothers International Europe (“LBIE”) prime brokerage services. The total market value of illiquid securities is $9,066,866 (cost $7,803,138), or 58.2% of total net assets. The security was deemed liquid at the time of purchase. |
| 3 | Illiquid security. |
| 4 | The issuer operates under a Congressional charter; its securities are neither issued nor guaranteed by the U.S. Government. |
| 5 | On September 7, 2008, the issuer was placed in conservatorship by the Federal Housing Finance Agency (FHFA). As conservator, the FHFA has full powers to control the assets and operations of the firm. |
| 6 | Repurchase Agreement — See Note 5. |
| 7 | All or a portion of this security was fair valued by the Valuation Committee at December 31, 2012. The total market value of fair valued securities amounts to $(7,786,654) (proceeds $7,620,060), or (50.0%) of total net assets. |
ADR — American Depositary Receipt
plc — Public Limited Company
| 114 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
Series Z (Alpha Opportunity Series)
| STATEMENT OF ASSETS AND LIABILITIES | ||||
| December 31, 2012 | ||||
| Assets: | ||||
| Investments, at value | ||||
| (cost $13,957,664) | $ | 15,096,802 | ||
| Repurchase agreements, at value | ||||
| (cost $2,739,059) | 2,739,059 | |||
| Total investments | ||||
| (cost $16,696,723) | 17,835,861 | |||
| Restricted cash denominated in a foreign currency, at value | ||||
| (cost $3,622,900) † | 3,784,074 | |||
| Restricted cash† | 2,126,948 | |||
| Segregated cash with broker | 108,500 | |||
| Cash | 21,065 | |||
| Prepaid expenses | 369 | |||
| Receivables: | ||||
| Securities sold | 178,211 | |||
| Variation margin | 58,512 | |||
| Dividends | 21,710 | |||
| Interest | 41 | |||
| Total assets | 24,135,291 | |||
| Liabilities: | ||||
| Securities sold short, at value | ||||
| (proceeds $7,727,225) | 7,895,975 | |||
| Payable for: | ||||
| Securities purchased | 597,856 | |||
| Fund shares redeemed | 28,510 | |||
| Management fees | 16,737 | |||
| Transfer agent/maintenance fees | 5,860 | |||
| Fund accounting/administration fees | 2,008 | |||
| Directors’ fees* | 212 | |||
| Miscellaneous | 16,725 | |||
| Total liabilities | 8,563,883 | |||
| Net assets | $ | 15,571,408 | ||
| Net assets consist of: | ||||
| Paid in capital | $ | 18,283,984 | ||
| Undistributed net investment income | — | |||
| Accumulated net realized loss on investments | (3,863,514 | ) | ||
| Net unrealized appreciation on investments and foreign currency | 1,150,938 | |||
| Net assets | $ | 15,571,408 | ||
| Capital shares outstanding | 796,362 | |||
| Net asset value per share | $ | 19.55 | ||
| STATEMENT OF OPERATIONS | ||||
| Year Ended December 31, 2012 | ||||
| Investment Income: | ||||
| Dividends (net of foreign withholding tax of $1,933) | $ | 300,288 | ||
| Interest | 2,014 | |||
| Other income | 324 | |||
| Total investment income | 302,626 | |||
| Expenses: | ||||
| Management fees | 209,044 | |||
| Transfer agent/maintenance fees | 26,664 | |||
| Fund accounting/administration fees | 25,085 | |||
| Legal fees | 36,062 | |||
| Custodian fees | 24,021 | |||
| Prime broker interest expense | 15,942 | |||
| Short sales dividend expense | 10,453 | |||
| Directors’ fees* | 1,294 | |||
| Miscellaneous | 23,075 | |||
| Total expenses | 371,640 | |||
| Net investment loss | (69,014 | ) | ||
| Net Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 3,421,476 | |||
| Futures contracts | 451,107 | |||
| Foreign currency | (424 | ) | ||
| Securities sold short | (2,065,536 | ) | ||
| Net increase from payments by affiliates | 26,975 | |||
| Net realized gain | 1,833,598 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 420,089 | |||
| Securities sold short | (1,823 | ) | ||
| Futures contracts | (31,831 | ) | ||
| Foreign currency | (15,274 | ) | ||
| Net change in unrealized appreciation (depreciation) | 371,161 | |||
| Net realized and unrealized gain | 2,204,759 | |||
| Net increase in net assets resulting from operations | $ | 2,135,745 | ||
| † | All or portion of this amount represents values related to Lehman Brothers International Europe prime brokerage services — See Note 12. |
| * | Relates to Directors not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 115 |
Series Z (Alpha Opportunity Series)
STATEMENTS OF CHANGES IN NET ASSETS
| Year Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Increase (Decrease) In Net Assets From Operations: | ||||||||
| Net investment loss | $ | (69,014 | ) | $ | (127,079 | ) | ||
| Net realized gain (loss) on investments and foreign currency | 1,806,623 | (157,188 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments and foreign currency | 371,161 | 650,762 | ||||||
| Net increase from payments by affiliates | 26,975 | — | ||||||
| Net increase in net assets resulting from operations | 2,135,745 | 366,495 | ||||||
| Capital share transactions: | ||||||||
| Proceeds from sale of shares | — | — | ||||||
| Cost of shares redeemed | (3,724,902 | ) | (4,355,083 | ) | ||||
| Net decrease from capital share transactions | (3,724,902 | ) | (4,355,083 | ) | ||||
| Net decrease in net assets | (1,589,157 | ) | (3,988,588 | ) | ||||
| Net assets: | ||||||||
| Beginning of year | 17,160,565 | 21,149,153 | ||||||
| End of year | $ | 15,571,408 | $ | 17,160,565 | ||||
| Undistributed net investment income at end of year | $ | — | $ | — | ||||
| Capital share activity: | ||||||||
| Shares sold | — | — | ||||||
| Shares redeemed | (198,873 | ) | (250,452 | ) | ||||
| Net decrease in shares | (198,873 | ) | (250,452 | ) | ||||
| 116 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
Series Z (Alpha Opportunity Series)
Financial Highlights
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008g | ||||||||||||||||
| Per Share Data | ||||||||||||||||||||
| Net asset value, beginning of period | $ | 17.24 | $ | 16.98 | $ | 14.03 | $ | 10.76 | $ | 16.50 | ||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||
| Net investment lossa | (.08 | ) | (.12 | ) | (.10 | ) | (.06 | ) | (.16 | ) | ||||||||||
| Net gain (loss) on investments (realized and unrealized) | 2.36 | .38 | 3.05 | 3.33 | (5.58 | ) | ||||||||||||||
| Net increase from payments by affiliates | .03 | f | — | — | — | — | ||||||||||||||
| Total from investment operations | 2.31 | .26 | 2.95 | 3.27 | (5.74 | ) | ||||||||||||||
| Net asset value, end of period | $ | 19.55 | $ | 17.24 | $ | 16.98 | $ | 14.03 | $ | 10.76 | ||||||||||
| Total Returnb | 13.40 | %f | 1.77 | % | 20.74 | % | 30.39 | % | (34.79 | %) | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 15,571 | $ | 17,161 | $ | 21,149 | $ | 22,633 | $ | 26,977 | ||||||||||
| Ratios to average net assets: | ||||||||||||||||||||
| Net investment loss | (0.41 | %) | (0.66 | %) | (0.89 | %) | (0.52 | %) | (1.09 | %) | ||||||||||
| Total expensesc | 2.22 | % | 2.29 | % | 2.27 | % | 2.85 | % | 2.79 | % | ||||||||||
| Net expensesd,e | 2.22 | % | 2.29 | % | 2.07 | % | 1.74 | % | 2.79 | % | ||||||||||
| Portfolio turnover rate | 720 | % | 730 | % | 768 | % | 555 | % | 990 | % | ||||||||||
| a | Net investment loss per share was computed using average shares outstanding throughout the period. |
| b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of SBL Fund are available only through the purchase of such products. |
| c | Does not include expenses of the underlying funds in which the Fund invests. |
| d | Net expense information reflects the expense ratios after expense waivers, and may include interest or dividend expense. |
| e | Excluding interest and dividend expense related to short sales, the operating expense ratios for the years ended December 31 would be: |
| 2012 | 2011 | 2010 | 2009 | 2008 |
| 2.06% | 2.21% | 1.90% | 1.69% | 2.70% |
| f | For the year ended December 31, 2012, 0.17% of the Series total return consisted of a voluntary reimbursement by the advisor for losses incurred during fund trading. Excluding this item, total return would have been 13.23% for the Series. |
| g | Security Global Investors, LLC became the sub-advisor of 37.5% of the assets of Series Z effective August 18, 2008. Also effective August 18, 2008, Mainstream Investment Advisers, LLC (Mainstream) sub-advised 37.5% of the assets and Security Investors, LLC (SI) managed 25%. Prior to August 18, 2008, Mainstream sub-advised 60% of the assets and SI managed the remaining 40% of the assets. |
| SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 117 |
1. Organization, and Significant Accounting Policies
Organization
SBL Fund (the “Trust”), a Kansas business trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund (collectively the “Funds”). The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately. Security Benefit Life Insurance Company (“SBL”) and SBL’s affiliated life insurance company as well as unaffiliated life insurance companies purchase shares of the Funds for their variable annuity and variable life insurance separate accounts.
At December 31, 2012, the Trust consisted of fourteen separate Funds.
Guggenheim Investments (“GI”) provides advisory, administrative and accounting services to the Funds. Rydex Fund Services, LLC (“RFS”) acts as the transfer agent to the Funds. Guggenheim Distributors, LLC (“GDL”) acts as principal underwriter to the Funds. GI, RFS and GDL are affiliated entities.
Mainstream Investment Advisers, LLC serves as investment sub-advisor on behalf of Series Z (Alpha Opportunity Series). The sub-advisor furnishes investment advisory services, supervises and arranges for the purchase and sale of securities and provides for the compilation and maintenance of records pertaining to such investment advisory services, subject to the control and supervision of the Board of Directors of the Trust and GI.
Prior to April 30, 2012, T. Rowe Price (“T. Rowe”) acted as a sub-adviser to Series N. Effective May 1, 2012, the Board of Directors of the Fund terminated the sub-advisory agreement with T. Rowe and the Investment Manager assumed all advisory obligations and responsibilities.
Significant Accounting Policies
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
A. Valuations of the Funds’ securities are supplied by pricing services approved by the Board of Directors. The Trust’s officers, through the Valuation Committee under the general supervision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing services.
Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on such day, the security is valued at the closing bid price on such day.
Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker/dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition and repurchase agreements are valued at amortized cost, which approximates market value.
Listed options are valued at the Official Settlement Price listed by the exchange, usually as of 4:00 p.m. Long options are valued using the bid price and short options are valued using the ask price. In the event that a settlement price is not available, fair valuation is enacted. Over-the-counter options are valued using the average bid price (for long options), or average ask price (for short options) obtained from one or more security dealers.
The senior floating rate interests (loans) in which certain Funds invest are not listed on any securities exchange or board of trade. Accordingly, determinations of the value of loans may be based on infrequent and dated trades. Typically loans are valued using information provided by an independent third party pricing service which uses broker quotes in a non-active market, or price derived from significant observable inputs and is also compared to broker quote (matrixed). If the pricing service cannot or does not provide a valuation for a particular loan or such valuation is deemed unreliable, such loan is fair valued by the Valuation Committee. In determining fair value, consideration is given to several factors, which may include, among others, one or more of the following: the fundamental business data relating to the issuer or borrower; an evaluation of the forces which influence the market in which these loans are purchased and sold; type of holding; financial statements of the borrower; cost at date of purchase; size of holding;
| 118 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
credit worthiness and cash flow of issuer; information as to any transactions in, or offers for, the holding; price and extent of public trading in similar securities (or equity securities) of the issuer/ borrower, or comparable companies; coupon payments; quality, value and salability of collateral securing the loan; business prospects of the issuer/borrower, including any ability to obtain money or resources from a parent or affiliate; the portfolio manager’s and/ or the market’s assessment of the borrower’s management; prospects for the borrower’s industry, and multiples (of earnings and/ or cash flow) being paid for similar businesses in that industry; borrower’s competitive position within the industry; borrower’s ability to access additional liquidity through public and/or private markets; and other relevant factors.
The value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.
Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the NYSE. The values of foreign securities are determined as of the close of such foreign markets or the close of the NYSE, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of business. Investments in foreign securities may involve risks not present in domestic investments. The Valuation Committee will determine the current value of such foreign securities by taking into consideration certain factors which may include those discussed above, as well as the following factors, among others: the value of the securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign securities such as World Equity Benchmark Securities. In addition, the Board of Directors has authorized the Valuation Committee and GI to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.
Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Directors using methods established or ratified by the Board of Directors. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; (ii) in connection with futures contracts and options thereupon, and other derivative investments, obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market; and (iii) obtaining other information and considerations, including current values in related markets.
Premiums received from options written are entered in the Fund’s accounting records as an asset and equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the option written. When an option written expires, or if a Fund enters into a closing purchase transaction, it realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold).
B. Securities transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discount, is accrued on a daily basis. Distributions received from investments in REITs are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. Interest income also includes paydown gains and losses on mortgage-backed and asset-backed securities and senior and subordinated loans. Amendment fees are earned as compensation for evaluating and accepting changes to the original loan agreement and are recognized when received.
C. The Funds may purchase and sell interests in securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Funds actually take delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of acquiring such securities, they may sell such securities before the settlement date.
D. The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship of these foreign currencies to the
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 119 |
NOTES TO FINANCIAL STATEMENTS (continued)
U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments.
The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Reported net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the trade and settlement dates on investment transactions. Net unrealized exchange gains and losses arise from changes in the fair values of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
E. The Funds are required by the Internal Revenue Code to distribute substantially all income and capital gains to shareholders. Each year, the Funds determine whether to declare and pay actual dividends or whether to secure consent of its shareholders to report and deduct a consent dividend. A consent dividend is treated for tax purposes as a distribution to shareholders occur-ring on the last day of the Fund’s taxable year and a shareholder contribution to capital occurring on the same day. It is the Trust’s current practice to utilize the consent dividend procedures. The character of any distributions made from net investment income and net realized gains may differ from their ultimate characterization for income tax purposes.
F. When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.
Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the treasury obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Funds may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
G. Upon entering into a futures contract, a Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is affected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
H. Expenses directly attributable to a Fund are charged directly to the Fund. Other expenses common to various funds within the fund complex are generally allocated amongst such funds on the basis of average net assets.
I. Under the fee arrangement with the custodian, the Funds may earn credits based on overnight custody cash balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statement of Operations are before the reduction in expense from the related earnings credits, if any. For the year ended December 31, 2012, there were no earnings credits received.
J. Under the Funds’ organizational documents, its Officers and Directors are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/ or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
2. Financial Instruments
As part of their investment strategy, certain Funds may utilize short sales and a variety of derivative instruments including futures and options. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities.
Series Z (Alpha Opportunity Series) may make short sales “against the box,” in which the Fund enters into a short sale of a security it owns. At no time will more than 15% of the value of the Funds’ net assets be in deposits on short sales against the box. When a Fund makes a short sale, the Fund does not immediately deliver the securities sold from its own account, or receive the proceeds from the sale. To complete the sale, the Fund must borrow the security (generally from the broker through which the short sale
| 120 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
is made) in order to make delivery to the buyer. The Fund must replace the security borrowed by purchasing it at the market price at the time of replacement or delivering the security from its own portfolio. The Fund is said to have a “short position” in securities sold until it delivers them to the broker, at which time it receives the proceeds of the sale. Certain Funds may make short sales that are not “against the box,” which create opportunities to increase the Funds’ return but, at the same time, involve specific risk considerations and may be considered a speculative technique. Such short sales theoretically involve unlimited loss potential, as the market price of securities sold short may continually increase, although a Fund may mitigate such losses by replacing the securities sold short before the market price has increased significantly.
A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s or an underlying fund’s use of futures contracts and related options, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counter-party credit risk to the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default.
Certain Funds wrote call options on a covered basis and put options on securities that are traded on recognized securities exchanges and over-the-counter markets. Call and put options on securities give the writer the obligation to sell or purchase a security at a specified price, until a certain date. The risk in writing a covered call option is that a 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 a Fund 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.
In conjunction with the use of short sales, futures and options, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, dis-count notes, or the repurchase agreements allocated to each Fund.
The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.
3. Fees and Other Transactions with Affiliates
Management fees are paid monthly to GI, based on the following annual rates. GI pays the sub-advisor out of the advisory fees it receives.
| Management Fees | ||||
| Fund | (as a % of net assets) | |||
| Series A (Large Cap Core Series) | 0.75 | % | ||
| Series B (Large Cap Value Series) | 0.65 | % | ||
| Series C (Money Market Series) | 0.50 | % | ||
| Series D (MSCI EAFE Equal Weight Series) | 0.70 | % | ||
| Series E (U.S. Intermediate Bond Series) | 0.75 | % | ||
| Series J (Mid Cap Growth Series) | 0.75 | % | ||
| Series N (Managed Asset Allocation Series)* | 0.65 | % | ||
| Series O (All Cap Value Series) | 0.70 | % | ||
| Series P (High Yield Series) | 0.75 | % | ||
| Series Q (Small Cap Value Series) | 0.95 | % | ||
| Series V (Mid Cap Value Series) | 0.75 | % | ||
| Series X (Small Cap Growth Series) | 0.85 | % | ||
| Series Y (Large Cap Concentrated Growth Series) | 0.75 | % | ||
| Series Z (Alpha Opportunity Series) | 1.25 | % | ||
| * | Effective April 30, 2012, the management fee payable by Series N to the Investment Manager is 0.65%. Prior to April 30, 2012, the management fee payable by Series N to the Investment Manager was 1.00%. |
GI also acts as the administrative agent for the Funds, and as such performs administrative functions and the bookkeeping, accounting and pricing functions for each Fund. For these services, GI receives the following:
| Fund Accounting/ | ||||
| Administrative Fees | ||||
| Fund | (as a % of net assets)* | |||
| Series A (Large Cap Core Series) | 0.095 | % | ||
| Series B (Large Cap Value Series) | 0.095 | % | ||
| Series C (Money Market Series) | 0.095 | % | ||
| Series D (MSCI EAFE Equal Weight Series) | 0.150 | % | ||
| Series E (U.S. Intermediate Bond Series) | 0.095 | % | ||
| Series J (Mid Cap Growth Series) | 0.095 | % | ||
| Series N (Managed Asset Allocation Series) | 0.150 | % | ||
| Series O (All Cap Value Series) | 0.095 | % | ||
| Series P (High Yield Series) | 0.095 | % | ||
| Series Q (Small Cap Value Series) | 0.095 | % | ||
| Series V (Mid Cap Value Series) | 0.095 | % | ||
| Series X (Small Cap Growth Series) | 0.095 | % | ||
| Series Y (Large Cap Concentrated Growth Series) | 0.095 | % | ||
| Series Z (Alpha Opportunity Series) | 0.150 | % | ||
| * | The minimum annual charge for administrative fees is $25,000 for Series A, B, C, E, J, O, P, Q, V, X, Y and Z and $60,000 for Series D and N. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 121 |
NOTES TO FINANCIAL STATEMENTS (continued)
RFS is paid the following for providing transfer agent services to the Funds:
| Annual charge per account | $5.00 – $8.00 | |||
| Transaction fee | $0.60 – $1.10 | |||
| Minimum annual charge per Fund | $25,000 | |||
| Certain out-of-pocket charges | Varies |
The investment advisory contracts for the following Funds provide that the total expenses be limited to a percentage of average net assets for each Fund, exclusive of brokerage costs, dividends on securities sold short, expenses of other investment companies in which a Fund invests, interest, taxes, litigation, indemnification and extraordinary expenses (as determined under U.S. GAAP). The limits are listed below:
| Contract | ||||||||
| Fund | Limit | Effective Date | End Date | |||||
| Series E (U.S. Intermediate Bond Series) | 0.81% | 11/30/2012 | 05/01/2014 | |||||
| Series O (All Cap Value Series) | 1.00% | 11/30/2012 | 05/01/2014 | |||||
| Series Z (Alpha Opportunity Series) | 2.35% | 11/30/2012 | 05/01/2014 | |||||
GI is entitled to reimbursement by the Funds for fees waived or expenses reimbursed during any of the previous 36 months, beginning on the date of the expense limitation agreement, if on any day the estimated operating expenses are less than the indicated percentages. At December 31, 2012, the amount of fees waived or expenses reimbursed that are subject to recoupment are presented in the following table:
| Expires | Expires | Expires | Fund | |||||||||||||
| Fund | 2013 | 2014 | 2015 | Total | ||||||||||||
| Series E (U.S. Intermediate Bond Series) | $ | 162,543 | $ | 142,582 | $ | 154,822 | $ | 459,947 | ||||||||
| Series O (All Cap Value Series) | — | — | — | — | ||||||||||||
| Series Z (Alpha Opportunity Series) | 44,725 | — | — | 44,725 | ||||||||||||
For the year ended December 31, 2012, no amounts were recouped by GI.
On May 11, 2012, GI voluntarily made a capital contribution of $26,975 to Series Z (Alpha Opportunity Series) for losses incurred during fund trading.
Certain officers and directors of the Trust are also officers of GI, RFS and GDL.
At December 31, 2012, Security Benefit Life Insurance Company, through their insurance company separate accounts, owned shares of the Funds, as follows:
| Percent of outstanding | ||||
| Fund | shares owned | |||
| Series A (Large Cap Core Series) | 100 | % | ||
| Series B (Large Cap Value Series) | 100 | % | ||
| Series C (Money Market Series) | 100 | % | ||
| Series D (MSCI EAFE Equal Weight Series) | 99 | % | ||
| Series E (U.S. Intermediate Bond Series) | 100 | % | ||
| Series J (Mid Cap Growth Series) | 99 | % | ||
| Series N (Mananged Asset Allocation Series) | 99 | % | ||
| Series O (All Cap Value Series) | 98 | % | ||
| Series P (High Yield Series) | 95 | % | ||
| Series Q (Small Cap Value Series) | 97 | % | ||
| Series V (Mid Cap Value Series) | 98 | % | ||
| Series X (Small Cap Growth Series) | 98 | % | ||
| Series Y (Large Cap Concentrated Growth Series) | 98 | % | ||
| Series Z (Alpha Opportunity Series) | 100 | % | ||
4. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. A three-tier hierarchy is utilized to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Funds’ investments. The inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3 — significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments).
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| 122 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table summarizes the inputs used to value the Funds’ net assets at December 31, 2012:
| Level 1 | Level 1 | Level 2 | Level 2 | Level 3 | ||||||||||||||||||||
| Investments | Other Financial | Investments | Other Financial | Investments | ||||||||||||||||||||
| In Securities | Instruments* | In Securities | Instruments* | In Securities | Total | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Series A (Large Cap Core Series) | $ | 192,463,884 | $ | — | $ | 4,142,000 | $ | — | $ | — | $ | 196,605,884 | ||||||||||||
| Series B (Large Cap Value Series) | 240,808,573 | — | 5,245,000 | — | — | 246,053,573 | ||||||||||||||||||
| Series C (Money Market Series) | — | — | 72,641,273 | — | — | 72,641,273 | ||||||||||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 11,606,631 | — | 173,554,320 | — | 587 | 185,161,538 | ||||||||||||||||||
| Series E (U.S. Intermediate Bond Series) | 2,549,976 | — | 108,460,483 | — | 212,552 | 111,223,011 | ||||||||||||||||||
| Series J (Mid Cap Growth Series) | 131,721,045 | — | 8,118,000 | — | — | 139,839,045 | ||||||||||||||||||
| Series N (Managed Asset Allocation Series) | 35,847,010 | 205,759 | 24,478,597 | 66,852 | — | 60,598,218 | ||||||||||||||||||
| Series O (All Cap Value Series) | 128,707,882 | — | — | — | — | 128,707,882 | ||||||||||||||||||
| Series P (High Yield Series) | 1,313,143 | — | 134,916,800 | — | 603,405 | 136,833,348 | ||||||||||||||||||
| Series Q (Small Cap Value Series) | 110,061,077 | — | 519,042 | — | — | 110,580,119 | ||||||||||||||||||
| Series V (Mid Cap Value Series) | 247,365,402 | — | 8,318,630 | — | — | 255,684,032 | ||||||||||||||||||
| Series X (Small Cap Growth Series) | 30,913,193 | — | — | — | — | 30,913,193 | ||||||||||||||||||
| Series Y (Large Cap Concentrated Growth Series) | 34,677,547 | — | — | — | — | 34,677,547 | ||||||||||||||||||
| Series Z (Alpha Opportunity Series) | 13,099,783 | 19,335 | 4,736,078 | — | — | 17,855,196 | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Series N (Managed Asset Allocation Series) | $ | — | $ | 97,661 | $ | — | $ | 13,964 | $ | — | $ | 111,625 | ||||||||||||
| Series Z (Alpha Opportunity Series) | 109,321 | — | — | — | 7,786,654 | 7,895,975 | ||||||||||||||||||
* Other financial instruments may include futures contracts which are reported as unrealized gain/loss at period end.
Financial assets and liabilities categorized as Level 2 for Series E (U.S. Intermediate Bond Series) and Series P (High Yield Series) consist primarily of debt. Fixed income investments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the Funds and others are willing to pay for an asset. Ask prices represent the lowest price that the Funds and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in the bid-ask range. Debt securities (including asset-backed securities, collateralized mortgage obligations and term loans) are valued at the last available bid price. If bids are not available, debt securities are estimated using valuation models that incorporate market data that may include assumptions relating to current yields, timing of cash flows, dealer quotes, prepayment risk, value of underlying collateral, general market conditions, liquidity and prices of other debt securities with comparable coupon rates, maturities/duration, and credit quality.
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. The Funds recognize transfers between the levels as of the beginning of the period. As of December 31, 2012, Series D (MSCI EAFE Equal Weight Series) had securities with a total value of $172,825,026 transfer from Level 1 to Level 2 due to developments that occurred between the time of closing of the foreign markets on which those securities trade and the close of business on the exchange. In addition, the Fund had a security with a total value of $587 transfer from Level 1 to Level 3 as a result of bankruptcy. Series P (High Yield Series) had a security with a total value of $53 transfer from Level 1 to Level 3. The fair market value of this security was adjusted as a result of a lack of trade activity due to a stale price. There were no other securities that transferred between levels.
Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2012:
LEVEL 3 – Fair value measurement using significant unobservable inputs
| Total | ||||
| Series Z (Alpha Opportunities Series) (See Note 12) | ||||
| Liabilities: | ||||
| Beginning Balance | $ | (7,786,654 | ) | |
| Ending Balance | $ | (7,786,654 | ) | |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 123 |
NOTES TO FINANCIAL STATEMENTS (continued)
5. Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds’ policy that their custodian takes possession of the underlying collateral. The collateral is in the possession of the Funds’ custodian and is evaluated to ensure that its market value exceeds, at a minimum, 102% of the original face amount of the repurchase agreements.
At December 31, 2012, the repurchase agreements were as follows:
| Counterparty and | Repurchase | |||||||||||||||||||
| Fund | Terms of Agreement | Face Value | Price | Collateral | Par Value | Fair Value | ||||||||||||||
| Series A (Large Cap Core Series) | UMB Financial Corp. | Ginnie Mae | ||||||||||||||||||
| 0.07% | 3.00% | |||||||||||||||||||
| Due 01/02/13 | $ | 4,142,000 | $ | 4,142,016 | 05/20/37 | $ | 4,114,517 | $ | 4,224,856 | |||||||||||
| Series B (Large Cap Value Series) | UMB Financial Corp. | Ginnie Mae | ||||||||||||||||||
| 0.07% | 1.83% | |||||||||||||||||||
| Due 01/02/13 | 5,245,000 | 5,245,020 | 10/16/47 | 4,145,000 | 4,161,680 | |||||||||||||||
| U.S. Treasury Note | ||||||||||||||||||||
| 0.50% | ||||||||||||||||||||
| 07/31/17 | 1,194,400 | 1,188,221 | ||||||||||||||||||
| Series C (Money Market Series) | UMB Financial Corp. | Fannie Mae | ||||||||||||||||||
| 0.07% | 2.50% | |||||||||||||||||||
| Due 01/02/13 | 28,846,000 | 28,846,112 | 02/01/27 | 25,771,279 | 27,010,641 | |||||||||||||||
| Freddie Mac | ||||||||||||||||||||
| 2.50% | ||||||||||||||||||||
| 03/15/27 | 2,295,642 | 2,412,449 | ||||||||||||||||||
| Series J (Mid Cap Growth Series) | UMB Financial Corp. | Ginnie Mae | ||||||||||||||||||
| 0.07% | 1.90% | |||||||||||||||||||
| Due 01/02/13 | 8,118,000 | 8,118,032 | 11/16/52 | 8,124,000 | 8,281,271 | |||||||||||||||
| Series V (Mid Cap Value Series) | UMB Financial Corp. | Ginnie Mae | ||||||||||||||||||
| 0.07% | 1.83% | |||||||||||||||||||
| Due 01/02/13 | 5,953,000 | 5,953,023 | 10/16/47 | 6,048,000 | 6,072,338 | |||||||||||||||
| Series Z (Alpha Opportunity Series) | State Street | U.S. Treasury Bond | ||||||||||||||||||
| 0.01% | 4.50% | |||||||||||||||||||
| Due 01/02/13 | 2,739,059 | 2,739,060 | 02/15/36 | 2,095,000 | 2,803,372 | |||||||||||||||
In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment advisor, acting under the supervision of the Board of Directors, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.
6. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the Funds use derivative instruments, how these derivative instruments are accounted for and their effects on the Funds’ financial position and results of operations.
The following Funds utilized derivatives for the following purposes:
| Fund | Index Exposure | Liquidity | Speculation |
| Series N (Managed Asset Allocation Series) | x | x | |
| Series O (All Cap Value Series) | x | ||
| Series Q (Small Cap Value Series) | x | ||
| Series V (Mid Cap Value Series) | x | ||
| Series Z (Alpha Opportunity Series) | x |
The following table represents the notional amount of futures contracts outstanding, as an approximate percentage of the Funds’ net assets on a daily basis.
| Approximate percentage of | ||||||||
| Fund’s net assets on a daily basis | ||||||||
| Fund | long | Short | ||||||
| Series N (Managed Asset Allocation Series) | 65 | % | 15 | % | ||||
| Series Z (Alpha Opportunity Series) | 15 | % | — | |||||
| 124 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2012:
| Derivative Investment Type | Asset Derivatives | Liability Derivatives |
| Equity/Interest Rate/Currency contracts | Variation margin | Variation margin |
The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2012:
Asset Derivative Investments Value
| Futures | Futures | Futures | Total Value at | |||||||||||||
| Equity | currency | Interest Rate | December 31, | |||||||||||||
| Fund | contracts* | contracts* | contracts* | 2012 | ||||||||||||
| Series N (Managed Asset Allocation Series) | $ | 272,162 | $ | 449 | $ | — | $ | 272,611 | ||||||||
| Series Z (Alpha Opportunity Series) | 19,335 | — | — | 19,335 | ||||||||||||
| Liability Derivative Investments Value | ||||||||||||||||
| Futures | Futures | Futures | Total Value at | |||||||||||||
| Equity | currency | Interest Rate | December 31, | |||||||||||||
| Fund | contracts* | contracts* | contracts* | 2012 | ||||||||||||
| Series N (Managed Asset Allocation Series) | $ | 14,986 | $ | 1,973 | $ | 94,666 | $ | 111,625 | ||||||||
| * | Includes cumulative appreciation (depreciation) of futures contracts as reported on the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2012:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives |
| Equity/Interest Rate/Currency contracts | Net realized gain (loss) on futures contracts |
| Net change in unrealized appreciation (depreciation) on futures contracts | |
| Equity contracts | Net realized gain (loss) on options written |
| Net change in unrealized appreciation (depreciation) on options written |
The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended December 31, 2012:
Realized Gain(Loss) on Derivative Investments Recognized on the Statements of Operations
| Futures | Futures | Futures | Options | |||||||||||||||||
| Equity | Currency | Interest Rate | Written Equity | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Series N (Managed Asset Allocation Series) | $ | 1,277,694 | $ | (19,141 | ) | $ | 53,734 | $ | — | $ | 1,312,287 | |||||||||
| Series O (All Cap Value Series) | — | — | — | 153,699 | 153,699 | |||||||||||||||
| Series Q (Small Cap Value Series) | — | — | — | 255,560 | 255,560 | |||||||||||||||
| Series V (Mid Cap Value Series) | — | — | — | 685,961 | 685,961 | |||||||||||||||
| Series Z (Alpha Opportunity Series) | 451,107 | — | — | — | 451,107 | |||||||||||||||
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations
| Futures | Futures | Futures | Options | |||||||||||||||||
| Equity | Currency | Interest Rate | Written Equity | |||||||||||||||||
| Fund | Contracts | Contracts | Contracts | Contracts | Total | |||||||||||||||
| Series N (Managed Asset Allocation Series) | $ | 257,176 | $ | (1,524 | ) | $ | (94,666 | ) | $ | — | $ | 160,986 | ||||||||
| Series O (All Cap Value Series) | — | — | — | (161,964 | ) | (161,964 | ) | |||||||||||||
| Series Q (Small Cap Value Series) | — | — | — | (21,606 | ) | (21,606 | ) | |||||||||||||
| Series V (Mid Cap Value Series) | — | — | — | (336,297 | ) | (336,297 | ) | |||||||||||||
| Series Z (Alpha Opportunity Series) | (31,831 | ) | — | — | — | (31,831 | ) | |||||||||||||
7. Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 125 |
NOTES TO FINANCIAL STATEMENTS (continued)
threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years (fiscal years 2009 – 2012), and has concluded that no provision for income tax is required in the Funds’ financial statements.
The RIC Modernization Act of 2010 was signed into law on December 22, 2010 and simplified some of the tax provisions applicable to regulated investment companies and the tax reporting to their shareholders, and improved the tax efficiency of certain fund structures. The changes were generally effective for taxable years beginning after the date of enactment.
One of the more prominent changes addresses capital loss carryforwards. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. Under pre-enactment law, capital losses could be carried forward for eight years, and carried forward as short-term capital, irrespective of the character of the original loss. As a result of this ordering rule, pre-enactment capital loss carryforwards may potentially expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Tax basis capital losses in excess of capital gains are carried forward to offset future net capital gains. For the year ended December 31, 2012, the following capital loss carryforward amounts expired, were used, or were permanently lost due to loss limitation rules in Section 382 of the Internal Revenue Code:
| Fund | Amount | |||
| Series A (Large Cap Core Series) | $ | 8,855,698 | ||
| Series B (Large Cap Value Series) | 9,384,214 | |||
| Series E (U.S. Intermediate Bond Series) | 3,298,678 | |||
| Series J (Mid Cap Growth Series) | 5,795,514 | |||
| Series N (Managed Asset Allocation Series) | 2,942,348 | |||
| Series O (All Cap Value Series) | 5,806,574 | |||
| Series X (Small Cap Growth Series) | 1,455,499 | |||
| Series Y (Large Cap Concentrated Growth Series) | 1,598,274 | |||
| Series Z (Alpha Opportunity Series) | 1,569,084 | |||
During 2012, the Funds declared ordinary and long-term capital gain consent dividends, effective for the year ended December 31, 2011, as shown below:
| Ordinary | Long-Term | |||||||||||
| Income | Capital Gain | Total | ||||||||||
| Consent | Consent | Consent | ||||||||||
| Fund | Dividends | Dividends | Dividends | |||||||||
| Series A (Large Cap Core Series) | $ | 1,309,773 | $ | 264,353 | $ | 1,574,126 | ||||||
| Series B (Large Cap Value Series) | 2,783,403 | — | 2,783,403 | |||||||||
| Series C (Money Market Series) | — | — | — | |||||||||
| Series D (MSCI EAFE Equal Weight Series) | 18,636,317 | 18,035,555 | 36,671,872 | |||||||||
| Series E (U.S. Intermediate Bond Series) | 3,506,317 | — | 3,506,317 | |||||||||
| Series J (Mid Cap Growth Series) | — | 9,048,164 | 9,048,164 | |||||||||
| Series N (Managed Asset Allocation Series) | 1,067,054 | 113,994 | 1,181,048 | |||||||||
| Series O (All Cap Value Series) | 1,075,134 | — | 1,075,134 | |||||||||
| Series P (High Yield Series) | 10,795,692 | 4,422,739 | 15,218,431 | |||||||||
| Series Q (Small Cap Value Series) | — | 7,479,607 | 7,479,607 | |||||||||
| Series V (Mid Cap Value Series) | 796,197 | 3,157,899 | 3,954,096 | |||||||||
| Series X (Small Cap Growth Series) | 325,519 | 4,946,763 | 5,272,282 | |||||||||
| Series Y (Large Cap Concentrated Growth Series) | 79,982 | 1,231,110 | 1,311,092 | |||||||||
| Series Z (Alpha Opportunity Series) | — | — | — | |||||||||
Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
| 126 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
The tax character of distributable earnings/(accumulated losses) at December 31, 2012 was as follows:
| Undistributed | Undistributed | Net Unrealized | ||||||||||||||
| Ordinary | Long-Term | Appreciation/ | Capital Loss | |||||||||||||
| Fund | Income | Capital Gain | Depreciation | Carryforward | ||||||||||||
| Series A (Large Cap Core Series) | $ | 1,952,226 | $ | 2,471,434 | $ | 19,857,805 | $ | (44,071,716 | )1 | |||||||
| Series B (Large Cap Value Series) | 3,229,551 | — | 41,374,327 | (47,991,196 | )1 | |||||||||||
| Series C (Money Market Series) | — | — | 3,484 | — | ||||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 8,768,672 | — | (737,847 | ) | (82,740,129 | )1 | ||||||||||
| Series E (U.S. Intermediate Bond Series) | 3,491,775 | — | 3,638,454 | (12,568,741 | )1 | |||||||||||
| Series J (Mid Cap Growth Series) | 500,810 | 12,227,488 | 5,658,277 | (31,694,814 | )1 | |||||||||||
| Series N (Managed Asset Allocation Series) | 529,482 | 6,340,386 | 1,125,108 | (4,589,567 | )1 | |||||||||||
| Series O (All Cap Value Series) | 1,256,228 | — | 13,953,646 | (19,063,805 | )1 | |||||||||||
| Series P (High Yield Series) | 10,529,284 | 1,234,994 | 3,167,937 | — | ||||||||||||
| Series Q (Small Cap Value Series) | 665,033 | 13,040,288 | 11,628,774 | — | ||||||||||||
| Series V (Mid Cap Value Series) | 1,209,794 | 17,275,347 | 26,845,555 | — | ||||||||||||
| Series X (Small Cap Growth Series) | — | 3,127,824 | 1,948,891 | (7,277,494 | )1 | |||||||||||
| Series Y (Large Cap Concentrated Growth Series) | 242,457 | 1,219,245 | 1,798,636 | (7,991,371 | )1 | |||||||||||
| Series Z (Alpha Opportunity Series) | — | 120,551 | 1,070,555 | (3,903,682 | )1 | |||||||||||
Capital Loss Carryforward amounts may be limited due to Federal income tax regulations.
1 A summary of the expiration of the aforementioned Capital Loss Carryforward is as follows:
| Expires in | Expires in | Expires in | Unlimited | Capital Loss | ||||||||||||||||||||
| Fund | 2016 | 2017 | 2018 | Short-Term | Long-Term | Carryforward | ||||||||||||||||||
| Series A (Large Cap Core Series) | $ | (14,983,912 | ) | $ | (29,087,804 | ) | $ | — | $ | — | $ | — | $ | (44,071,716 | ) | |||||||||
| Series B (Large Cap Value Series) | (20,090,121 | ) | (27,901,075 | ) | — | — | — | (47,991,196 | ) | |||||||||||||||
| Series D (MSCI EAFE Equal Weight Series) | (43,071,596 | ) | (15,850,751 | ) | — | (9,590,081 | ) | (14,227,701 | ) | (82,740,129 | ) | |||||||||||||
| Series E (U.S. Intermediate Bond Series) | — | (12,208,585 | ) | (360,156 | ) | — | — | (12,568,741 | ) | |||||||||||||||
| Series J (Mid Cap Growth Series) | (19,679,896 | ) | (12,014,918 | ) | — | — | — | (31,694,814 | ) | |||||||||||||||
| Series N (Managed Asset Allocation Series) | — | (4,589,567 | ) | — | — | — | (4,589,567 | ) | ||||||||||||||||
| Series O (All Cap Value Series) | (6,265,658 | ) | (12,798,147 | ) | — | — | — | (19,063,805 | ) | |||||||||||||||
| Series X (Small Cap Growth Series) | (5,821,995 | ) | (1,455,499 | ) | — | — | — | (7,277,494 | ) | |||||||||||||||
| Series Y (Large Cap Concentrated Growth Series) | (6,393,097 | ) | (1,598,274 | ) | — | — | — | (7,991,371 | ) | |||||||||||||||
| Series Z (Alpha Opportunity Series) | (3,122,946 | ) | (780,736 | ) | — | — | — | (3,903,682 | ) | |||||||||||||||
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to deferred ordinary and capital losses, losses deferred due to wash sales, foreign currency gains and losses, and the “mark-to-market” of certain passive foreign investment companies (PFICs) for tax purposes. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise.
On the Statements of Assets and Liabilities the following adjustments were made for permanent book/tax differences:
| Undistributed | Accumulated | |||||||||||
| Paid In | Net Investment | Net Realized | ||||||||||
| Fund | Capital | Income | Gain (Loss) | |||||||||
| Series A (Large Cap Core Series) | $ | 1,574,126 | $ | (1,309,773 | ) | $ | (264,353 | ) | ||||
| Series B (Large Cap Value Series) | 2,783,404 | (2,783,403 | ) | (1 | ) | |||||||
| Series C (Money Market Series) | (465,869 | ) | 465,869 | — | ||||||||
| Series D (MSCI EAFE Equal Weight Series) | 36,671,872 | 2,479,683 | (39,151,555 | ) | ||||||||
| Series E (U.S. Intermediate Bond Series) | 3,506,317 | (3,187,995 | ) | (318,322 | ) | |||||||
| Series J (Mid Cap Growth Series) | 9,048,164 | — | (9,048,164 | ) | ||||||||
| Series N (Managed Asset Allocation Series) | 1,178,399 | (986,956 | ) | (191,443 | ) | |||||||
| Series O (All Cap Value Series) | 1,075,134 | (1,075,134 | ) | — | ||||||||
| Series P (High Yield Series) | 15,218,431 | (10,231,622 | ) | (4,986,809 | ) | |||||||
| Series Q (Small Cap Value Series) | 7,383,797 | 5,062 | (7,388,859 | ) | ||||||||
| Series V (Mid Cap Value Series) | 3,949,094 | (748,307 | ) | (3,200,787 | ) | |||||||
| Series X (Small Cap Growth Series) | 5,077,841 | 194,441 | (5,272,282 | ) | ||||||||
| Series Y (Large Cap Concentrated Growth Series) | 1,311,092 | (79,982 | ) | (1,231,110 | ) | |||||||
| Series Z (Alpha Opportunity Series) | (58,919 | ) | 69,014 | (10,095 | ) | |||||||
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 127 |
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2012, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:
| Tax | Tax | Net | ||||||||||||||
| Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
| Fund | Cost | Gain | Loss | Gain (Loss) | ||||||||||||
| Series A (Large Cap Core Series) | $ | 176,748,079 | $ | 26,686,736 | $ | (6,828,931 | ) | $ | 19,857,805 | |||||||
| Series B (Large Cap Value Series) | 204,679,246 | 53,487,760 | (12,113,433 | ) | 41,374,327 | |||||||||||
| Series C (Money Market Series) | 72,637,789 | 4,881 | (1,397 | ) | 3,484 | |||||||||||
| Series D (MSCI EAFE Equal Weight Series) | 185,896,517 | 17,645,067 | (18,380,046 | ) | (734,979 | ) | ||||||||||
| Series E (U.S. Intermediate Bond Series) | 107,584,557 | 5,243,043 | (1,604,589 | ) | 3,638,454 | |||||||||||
| Series J (Mid Cap Growth Series) | 134,180,768 | 9,327,957 | (3,669,680 | ) | 5,658,277 | |||||||||||
| Series N (Managed Asset Allocation Series) | 59,220,491 | 1,214,318 | (109,202 | ) | 1,105,116 | |||||||||||
| Series O (All Cap Value Series) | 114,754,236 | 22,327,958 | (8,374,312 | ) | 13,953,646 | |||||||||||
| Series P (High Yield Series) | 133,686,036 | 7,430,273 | (4,262,336 | ) | 3,167,937 | |||||||||||
| Series Q (Small Cap Value Series) | 98,951,345 | 19,752,482 | (8,123,708 | ) | 11,628,774 | |||||||||||
| Series V (Mid Cap Value Series) | 228,838,477 | 48,582,684 | (21,737,129 | ) | 26,845,555 | |||||||||||
| Series X (Small Cap Growth Series) | 28,964,302 | 4,499,935 | (2,551,044 | ) | 1,948,891 | |||||||||||
| Series Y (Large Cap Concentrated Growth Series) | 32,878,911 | 2,364,276 | (565,640 | ) | 1,798,636 | |||||||||||
| Series Z (Alpha Opportunity Series) | 16,757,773 | 2,164,738 | (1,086,650 | ) | 1,078,088 | |||||||||||
8. Other Liabilities
Series A (Large Cap Core Series) and Series V (Mid Cap Value Series) each wrote put option contracts through Lehman Brothers, Inc. (“Lehman”) that were exercised prior to the option contracts expiration and prior to the bankruptcy filing by Lehman, during September 2008. However, these transactions have not settled and the securities have not been delivered to the Funds as of December 31, 2012.
Although the ultimate resolution of these transactions is uncertain, the Funds have recorded a liability on their respective books equal to the difference between the strike price on the put options and the market prices of the underlying security on the exercise date. The amount of liability recorded by the Funds as of December 31, 2012 was $18,615 for Series A (Large Cap Core Series) and $205,716 for Series V (Mid Cap Value Series).
9. Securities Transactions
For the year ended December 31, 2012, purchases and sales of investment securities, excluding government and short-term investments, were as follows:
| Fund | Purchases | Sales | ||||||
| Series A (Large Cap Core Series) | $ | 210,140,598 | $ | 241,336,047 | ||||
| Series B (Large Cap Value Series) | 40,576,269 | 71,734,236 | ||||||
| Series C (Money Market Series) | — | — | ||||||
| Series D (MSCI EAFE Equal Weight Series) | 65,844,955 | 90,240,054 | ||||||
| Series E (U.S. Intermediate Bond Series) | 85,432,576 | 61,970,770 | ||||||
| Series J (Mid Cap Growth Series) | 201,571,916 | 220,574,305 | ||||||
| Series N (Managed Asset Allocation Series) | 66,392,732 | 95,720,279 | ||||||
| Series O (All Cap Value Series) | 18,457,571 | 42,027,775 | ||||||
| Series P (High Yield Series) | 128,092,949 | 111,253,946 | ||||||
| Series Q (Small Cap Value Series) | 49,423,585 | 62,810,441 | ||||||
| Series V (Mid Cap Value Series) | 58,979,948 | 94,396,718 | ||||||
| Series X (Small Cap Growth Series) | 24,228,233 | 32,155,281 | ||||||
| Series Y (Large Cap Concentrated Growth) | 68,550,400 | 74,179,260 | ||||||
| Series Z (Alpha Opportunity Series) | 48,748,132 | 54,076,302 | ||||||
During the year ended December 31, 2012, purchases and sales of government securities, excluding short-term investments, were as follows:
| Purchases | Sales | |||||||
| Series E (U.S. Intermediate Bond Series) | $ | 4,893,047 | $ | 42,774,523 | ||||
| Series N (Managed Asset Allocation Series) | 1,569,991 | 3,802,937 | ||||||
| 128 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued)
10. Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act. Transactions during the year ended December 31, 2012 in which the portfolio company is an “affiliated person” are as follows:
| Value | Value | Shares | Investment | |||||||||||||||||||||||
| Fund | Security | 12/31/11 | Additions | Reductions | 12/31/12 | 12/31/12 | Income | |||||||||||||||||||
| Series V(Mid Cap Value Series) | Common Stock: | |||||||||||||||||||||||||
| HydroGen Corp. | $ | 6,791 | $ | — | $ | — | $ | 8,337 | 672,346 | $ | — | |||||||||||||||
11. Options Written
Transactions in options written during the year ended December 31, 2012 were as follows:
Call Options Written
| Series O (All Cap Value Series) | Series Q (Small Cap Value Series) | Series V (Mid Cap Value Series) | ||||||||||||||||||||||
| Number of | Premium | Number of | Premium | Number of | Premium | |||||||||||||||||||
| contracts | amount | contracts | amount | contracts | amount | |||||||||||||||||||
| Balance at December 31, 2011 | 580 | $ | 135,810 | 454 | $ | 81,721 | 1,300 | $ | 293,309 | |||||||||||||||
| Options written | — | — | 112 | 31,927 | 260 | 74,117 | ||||||||||||||||||
| Options terminated in closing | ||||||||||||||||||||||||
| purchase transactions | — | — | — | — | — | — | ||||||||||||||||||
| Options expired | (239 | ) | (61,488 | ) | (411 | ) | (82,300 | ) | (942 | ) | (232,538 | ) | ||||||||||||
| Options exercised | (341 | ) | (74,322 | ) | (155 | ) | (31,348 | ) | (618 | ) | (134,888 | ) | ||||||||||||
| Balance at December 31, 2012 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Put Options Written
| Series O (All Cap Value Series) | Series Q (Small Cap Value Series) | Series V (Mid Cap Value Series) | ||||||||||||||||||||||
| Number of | Premium | Number of | Premium | Number of | Premium | |||||||||||||||||||
| contracts | amount | contracts | amount | contracts | amount | |||||||||||||||||||
| Balance at December 31, 2011 | 711 | $ | 171,569 | 533 | $ | 81,125 | 1,296 | $ | 311,379 | |||||||||||||||
| Options written | 81 | 5,508 | 1,355 | 159,620 | 2,955 | 295,716 | ||||||||||||||||||
| Options terminated in closing | ||||||||||||||||||||||||
| purchase transactions | (161 | ) | (22,363 | ) | (121 | ) | (16,803 | ) | (292 | ) | (40,550 | ) | ||||||||||||
| Options expired | (521 | ) | (100,759 | ) | (1,549 | ) | (179,689 | ) | (3,760 | ) | (468,937 | ) | ||||||||||||
| Options exercised | (110 | ) | (53,955 | ) | (218 | ) | (44,253 | ) | (199 | ) | (97,608 | ) | ||||||||||||
| Balance at December 31, 2012 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
12. Series Z
The Fund contracted with Lehman Brothers International Europe (“LBIE”) to provide prime brokerage services related to the Fund’s short selling. On September 15, 2008, LBIE was placed into administration and a third party administrator was named (the “Administrator”). The Fund’s exposure to LBIE consists of short sale proceeds held by LBIE, and restricted long positions held at the Fund’s custodian, as collateral for said short sales. Release of the collateral requires the consent of LBIE and Lehman Brothers Inc. (“LBI”), an entity that is subject to a liquidation proceeding. The Fund delivered a Notice of Termination of Loans to LBIE and the Administrator. The Fund has worked to resolve these issues with LBIE and the Administrator. As of December 31, 2012, included in the Statement of Assets and Liabilities are the value of restricted long positions of $9,066,866, cash collateral of $1,417,530, restricted cash representing the value of short sale proceeds of $4,493,492 and liabilities for short sales of $7,786,654, representing the value of securities sold short at the date the short sales were deemed by the Fund to have been terminated. If these short sales had not been terminated, the value of the liability related to these securities sold short would have been $8,762,132 as of December 31, 2012 resulting in a decrease in net assets of $975,478 or (6.3)%. Until such time as the liability for short sales is settled and all restrictions are removed by LBIE and LBI, the Fund cannot sell such restricted long positions and/or utilize the restricted cash balances to achieve the Fund’s investment objectives and/or meet Fund redemption or other Fund obligations. Based on the ultimate terms of such settlement, the value assigned to these positions may ultimately differ from the fair valuations assigned to them by the Fund and there is no guaranty that the Fund will ultimately recover the full value of the assets that are subject to restrictions. Accordingly, a settlement could ultimately result in the Fund realizing values that are materially different from those indicated herein, which would materially
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 129 |
NOTES TO FINANCIAL STATEMENTS (continued)
impact the Fund’s net asset value. As of the close of business on October 3, 2008, and until further notice, the Fund is not accepting subscriptions for shares from either new or existing shareholders.
Effective as of August 1, 2011, Security Investors, LLC has agreed to purchase shares of the Fund from time to time to provide the Fund with liquidity if needed to meet redemptions. The intent of the agreement is to provide liquidity to the Fund in the event that shareholders seek to redeem shares of the Fund at a time that there are not sufficient unrestricted assets.
13. Loan Commitments
Pursuant to the terms of certain Term Loan agreements, the Funds are liable for unfunded loan commitments as of December 31, 2012. The Funds are obligated to fund these loan commitments at the borrower’s discretion.
The unfunded loan commitment as of December 31, 2012 was as follows:
Series P (High Yield Series)
| Borrower | Amount | |||
| Associated Partners, Inc. | $ | 700,000 | ||
14. Line of Credit
On December 14, 2012, Series E (U.S. Intermediate Bond Series) and Series P (High Yield Series) (the “Funds”) entered into an unlimited credit facility agreement with an approved counterparty whereby the counterparty has agreed to provide secured financing to the Funds and the Funds will provide pledged collateral to the counterparty. At December 31, 2012, there was $50,000,000 of credit facility. The maximum amount outstanding during the year ended December 31, 2012 was $0. The Funds did not have any borrowings under this agreement at December 31, 2012.
15. Legal Proceedings
Tribune Company
SBL Fund may be a putative member of the proposed defendant class of shareholders in the case entitled Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (formerly Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership of shares in the Tribune Company (“Tribune”) in 2007 by certain series of the SBL Fund when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In its complaint, the Unsecured Creditors Committee (the “UCC”) has alleged that, in connection with the LBO, insiders and major shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The UCC has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO, and is attempting to obtain from the shareholders the proceeds paid out in connection with the LBO.
In June 2011, a group of Tribune creditors, not including the UCC, filed multiple actions involving state law constructive fraudulent conveyance claims against former Tribune shareholders (the “SLCFC actions”). SBL Fund has been named as a defendant and may be a putative member of one or more proposed defendant classes in one or more of these suits.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2696 (S.D.N.Y.) (the “MDL Proceeding”). On November 6, 2012, the defendants moved to dismiss the SLCFC actions. On December 21, 2012, the plaintiffs filed a memorandum in opposition to the motion to dismiss. On February 4, 2013, the defendants filed a reply in support of the motion to dismiss. The Court has not yet issued a decision on the motion. None of these lawsuits allege any wrongdoing on the part of SBL Fund. The following series of SBL Fund held shares of Tribune and tendered these shares as part of Tribune’s LBO: Series H (Enhanced Index Series), Series N (Managed Asset Allocation Series) and Series O (All Cap Value Series) (the “Funds”). The value of the proceeds received by the foregoing Funds was $158,950, $51,000 and $3,774,000, respectively. At this stage of the proceedings, SBL Fund is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Lyondell Chemical Company
SBL Fund may be a putative member of the proposed defendant class in Weisfelner, as Trustee of the LB Creditor Trust, v. Reichman (In re Lyondell Chemical Co.), Adversary Proceeding No. 12-1570 (Bankr. S.D.N.Y.).
| 130 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded)
Similar to the claims made in the Tribune matter, the Weisfelner complaint seeks to have set aside and recovered as fraudulent transfers from former Lyondell Chemical Company (“Lyondell”) shareholders the consideration paid to them pursuant to the cash out merger of Lyondell shareholders in connection with the combination of Lyondell and Basell AF in 2007. Lyondell filed for bankruptcy in 2008.
This lawsuit initially was filed in New York Supreme Court, Case No. 653522/2011, on December 19, 2011. On April 25, 2012, it was removed to the United States District Court for the Southern District of New York, Case No. 12-3273, and on April 26, 2012, it was referred to the United States Bankruptcy Court for the Southern District of New York.
This lawsuit does not allege any wrongdoing on the part of SBL Fund. The following series of SBL Fund received cash proceeds from the cash out merger in the following amounts: Series N (Managed Asset Allocation Series) - $28,800. At this stage of the proceedings, SBL Fund is not able to make a reliable predication as to the outcome of this lawsuit or the effect, if any, on a Fund’s net asset value.
16. Subsquent Events
Investment Policy Change
At a meeting held on November 15, 2012, the Board of Directors of the Series approved certain changes to the Series’ investment program. In particular, the Board approved the following:
| • | a change of the Series’ name to Series E (Total Return Bond Series); |
| • | changes to the Series’ principal investment strategies, including the Series’ non-fundamental 80% policy adopted pursuant to Rule 35d-1 under the Investment Company Act of 1940, as amended; and |
| • | removal of the non-fundamental policy relating to borrowing. |
The changes to the Series discussed above became effective on January 29, 2013.
Distributor Name Change
Effective January 1, 2013, Rydex Distributors, LLC changed its name to Guggenheim Distributors, LLC. The name change marks another step in the business integration process following the acquisition of Rydex by Guggenheim announced last year. The name change should not result in any material change to the day-to-day management or operations of the funds.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 131 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of SBL Fund:
We have audited the accompanying statements of assets and liabilities of SBL Fund (comprising, Series A–Large Cap Core Series, Series B–Large Cap Value Series, Series C–Money Market Series, Series D–MSCI EAFE Equal Weight Series, Series E–U.S. Intermediate Bond Series, Series J– Mid Cap Growth Series, Series N–Managed Asset Allocation Series, Series O–All Cap Value Series, Series P–High Yield Series, Series Q–Small Cap Value Series, Series V–Mid Cap Value Series, Series X–Small Cap Growth Series, Series Y–Large Cap Concentrated Growth Series and Series Z–Alpha Opportunity Series) (the “Funds”), including the schedules of investments, as of December 31, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2012, by correspondence with the custodian, agent banks, and brokers or by other appropriate auditing procedures where replies from agent banks or brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
As more fully discussed in Note 12 to the financial statements, Series Z–Alpha Opportunity Series has ongoing exposure to Lehman Brothers International Europe, which was placed into administration in September 2008. Significant uncertainly exists regarding the ultimate timing and manner of settlement of this exposure and the difference between amounts currently recorded and that which may ultimately be settled may be material.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting the SBL Fund at December 31, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Chicago, Illinois
February 27, 2013
| 132 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
Of the ordinary income distributions paid during the year, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:
| Fund | % Qualifying | |||
| Series A (Large Cap Core Series) | 100.00 | % | ||
| Series B (Large Cap Value Series) | 100.00 | % | ||
| Series D (MSCI EAFE Equal Weight Series) | 1.84 | % | ||
| Series J (Mid Cap Growth Series) | 100.00 | % | ||
| Series N (Managed Asset Allocation Series) | 100.00 | % | ||
| Series O (All Cap Value Series) | 100.00 | % | ||
| Series P (High Yield Series) | 0.48 | % | ||
| Series Q (Small Cap Value Series) | 100.00 | % | ||
| Series V (Mid Cap Value Series) | 100.00 | % | ||
| Series Y (Large Cap Concentrated Growth Series) | 100.00 | % | ||
With respect to the taxable year ended December 31, 2012, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
| From long-term capital gains, | ||||
| Fund | subject to the 15% rate gains category: | |||
| Series A (Large Cap Core Series) | $ | 2,471,434 | ||
| Series J (Mid Cap Growth Series) | 12,227,488 | |||
| Series N (Managed Asset Allocation Series) | 6,340,386 | |||
| Series P (High Yield Series) | 1,234,994 | |||
| Series Q (Small Cap Value Series) | 13,040,288 | |||
| Series V (Mid Cap Value Series) | 17,275,347 | |||
| Series X (Small Cap Growth Series) | 3,127,824 | |||
| Series Y (Large Cap Concentrated Growth Series) | 1,219,245 | |||
| Series Z (Alpha Opportunity Series) | 120,551 | |||
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1.800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 133 |
OTHER INFORMATION (Unaudited) (concluded)
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 1.800.820.0888.
Office Locations
The offices of Guggenheim Investments can be found in the following locations:
40 East 52nd Street
16th Floor
New York, NY 10022
(Headquarters)
Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850
9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210
| 134 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION on board of Directors and officers (Unaudited)
DIRECTORS
The business address of each director is One Security Benefit Place, Topeka, KS 66636-0001
| Name | ||||||
| (Date of Birth) | Principal Occupations | |||||
| Year Elected*** | During Past Five Years | |||||
| Donald A. Chubb, Jr.** (12-14-46) 1994 |
Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc. Realtors | |||||
| Harry W. Craig, Jr.** (05-11-39) 2004 |
Current: Chairman, CEO, & Director, The Craig Group, Inc.;
Managing Member of Craig Family Investments, LLC. Previous: Prior to November 2009, Chairman, CEO, Secretary and Director, The Martin Tractor Company, Inc. | |||||
| Jerry B. Farley** | Current: President, Washburn University | |||||
| (09-20-46) | ||||||
| 2005 | ||||||
| Penny A. Lumpkin** (08-20-39) 1993 |
Current: Partner, Vivian’s Gift Shop (Corporate Retail); Vice President, Palmer Companies, Inc. (Small Business and Shopping Center Development); PLB (Real Estate Equipment Leasing) | |||||
| Maynard F. Oliverius** | Current: President and Chief Executive Officer, Stormont-Vail HealthCare | |||||
| (12-18-43) | ||||||
| 1998 | ||||||
| Donald C. Cacciapaglia* (07-01-51) 2012 (President) |
Current: Guggenheim Investments: President and Chief Administrative Officer from February 2010 to present Previous: Channel Capital Group, Inc.; Chairman and CEO from April 2002 to February 2010 | |||||
| * | This Director is deemed to be an “interested person” of the Funds under the 1940 Act, as amended, by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager. This Director is also an officer of the funds. |
| ** | These Directors serve on the Fund’s joint audit committee, the purpose of which is to meet with the independent registered public accounting firm, to review the work of the independent registered public accounting firm, and to oversee the handling by Security Investors, LLC of the accounting and financial reporting functions for the Funds. |
| *** | Each Director oversees the Funds and serves until the next annual meeting, or until a successor has been duly elected and qualified. |
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 135 |
INFORMATION on board of Directors and officers (Unaudited) (continued)
OFFICERS*
The business address of each officer is One Security Benefit Place, Topeka, KS 66636-0001
| Name | |||||
| (Date of Birth) | Principal Occupations | ||||
| Title – Year Elected | During Past Five Years | ||||
| Mark P. Bronzo (11-01-60) Vice President - 2008 |
Current: Portfolio Manager, Security Investors, LLC Previous: Managing Director and Chief Compliance Officer, Nationwide Separate Accounts, LLC (2003–2008) | ||||
| Elisabeth Miller (06-06-68) Chief Compliance Officer - 2012 |
Current: Chief Compliance Officer, Rydex Series Funds, Rydex ETF Trust, Rydex Dynamic Funds, and Rydex Variable Trust; Chief Compliance Officer, Security Equity Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, and SBL Fund; Chief Compliance Officer, Security Investors, LLC; and Chief Compliance Officer, Guggenheim Distributors, LLC Previous: Senior Manager, Security Investors, LLC and Guggenheim Distributors, LLC (2004–2009) | ||||
| Nikolaos Bonos (05-30-63) Treasurer - 2010 |
Current: Senior Vice President, Security Investors, LLC; Chief Executive Officer & Manager, Rydex Specialized Products, LLC; Chief Executive Officer & President, Rydex Fund Services, LLC; Vice President, Rydex Holdings, LLC; Vice President & Treasurer, Rydex Series Funds; Rydex ETF Trust; Rydex Dynamic Funds; and Rydex Variable Trust; and Vice President, Security Benefit Asset Management Holdings, LLC Previous: Senior Vice President, Security Global Investors, LLC (2010–2011); and Senior Vice President, Rydex Advisors, LLC and Rydex Advisors II, LLC | ||||
| Joseph M. Arruda (09-05-66) Assistant Treasurer - 2010 |
Current: Vice President, Security Investors, LLC; Chief Financial Officer & Manager, Rydex Specialized Products, LLC; and Assistant Treasurer, Rydex Series Funds; Rydex Dynamic Funds; Rydex ETF Trust; and Rydex Variable Trust Previous: Vice President, Security Global Investors, LLC (2010–2011); and Vice President, Rydex Advisors, LLC and Rydex Advisors II, LLC (2010) | ||||
* Officers serve until the next annual meeting or until a successor has been duly elected and qualified.
| 136 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION on board of Directors and officers (Unaudited) (concluded)
OFFICERS*—(concluded)
The business address of each officer is One Security Benefit Place, Topeka, KS 66636-0001
| Name | |||||
| (Date of Birth) | Principal Occupations | ||||
| Title – Year Elected | During Past Five Years | ||||
| Amy J. Lee (06-05-61) Vice President - 2007 Secretary - 1987 |
Current: Senior Vice President & Secretary, Security Investors,
LLC; Secretary & Chief Compliance Officer, Security Distributors, Inc.; Vice President, Associate General Counsel & Assistant
Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation; Associate General Counsel, First Security
Benefit Life Insurance and Annuity of New York; Vice President & Assistant Secretary, Rydex Series Funds, Rydex ETF Trust,
Rydex Dynamic Funds, and Rydex Variable Trust; Vice President & Secretary, Rydex Holdings, LLC Secretary, Advisor Research
Center, Inc., Rydex Specialized Products, LLC, Guggenheim Distributors, LLC and Rydex Fund Services, LLC; and Assistant Secretary,
Security Benefit Clinic and Hospital Previous: Senior Vice President & Secretary, Security Global Investors, LLC (2007–2011); Senior Vice President & Secretary, Rydex Advisors, LLC and Rydex Advisors II, LLC (2010); and Director, Brecek & Young Advisors, Inc. (2004–2008) | ||||
| Mark A. Mitchell (08-24-64) Vice President - 2003 |
Current: Portfolio Manager, Security Investors, LLC Previous: Vice President and Portfolio Manager, Security Benefit Life Insurance Company (2003–2010) | ||||
| Joseph C. O’Connor (07-15-60) Vice President – 2008 |
Current: Portfolio Manager, Security Investors, LLC Previous: Managing Director, Nationwide Separate Accounts, LLC (2003–2008) | ||||
| Daniel W. Portanova (10-02-60) Vice President – 2008 |
Current: Portfolio Manager, Security Investors, LLC Previous: Managing Director, Nationwide Separate Accounts, LLC (2003–2008) | ||||
| James P. Schier (12-28-57) Vice President – 1998 |
Current: Senior Portfolio Manager, Security Investors, LLC Previous: Vice President and Senior Portfolio Manager, Security Benefit Life Insurance Company (1998–2010) | ||||
| David G. Toussaint (10-10-66) Vice President – 2005 |
Current: Portfolio Manager, Security Investors, LLC Previous: Assistant Vice President and Portfolio Manager, Security Benefit Life Insurance Company (2005–2009) | ||||
* Officers serve until the next annual meeting or until a successor has been duly elected and qualified.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 137 |
GUGGENHEIM INVESTMENTS PRIVACY Policies
Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Distributors, LLC, Security Investors, LLC, Security Distributors, Inc. and Rydex Advisory Services (Collectively “Guggenheim Investments”)
Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.
The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).
How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.
Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
| 138 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY Policies (concluded)
How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We’ll Keep You Informed
As required by federal law, we will notify shareholders of our privacy policy annually. We reserve the right to modify this policy at any time, but rest assured that if we do change it, we will tell you promptly. You will also be able to access our privacy policy from our web site at guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us at 800.820.0888 or 301.296.5100.
| THE GUGGENHEIM FUNDS ANNUAL REPORT | 139 |
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Item 2. Code of Ethics.
The registrant’s Board of Directors has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that Maynard Oliverius, an "independent" Director serving on the registrant's audit committee, is an "audit committee financial expert," as defined in Item 3 of Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Directors in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a) The aggregate Audit Fees billed by the Registrant’s principal accountant, for the audit of the annual financial statements in connection with statutory and regulatory filings for the fiscal years ended December 31, 2012 and December 31, 2011 were $242,520 and $287,600, respectively.
(b) The aggregate Audit Related Fees by the Registrant’s principal accountant billed for the fiscal years ended December 31, 2012 and December 31, 2011 were $10,297 and $5,420, respectively.
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (“Service Affiliates”) which required pre-approval by the Audit Committee which related to the review of the transfer agent function for the fiscal years ended December 31, 2012 and December 31, 2011 were $35,000 and $30,000, respectively.
(c) The aggregate Tax Fees billed by the Registrant’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended December 31, 2012 and December 31, 2011 was $35,689 and $68,060, respectively.
(d) The aggregate All Other Fees billed by the Registrant’s principal accountant for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended December 31, 2012 and December 31, 2011 were $0 and $0, respectively.
(e) The audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment advisor, and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such service is required between regularly scheduled audit committee meetings, the chairman of the audit committee, Penny Lumpkin, is authorized to pre-approve the service with full committee approval at the next scheduled meeting. There shall be no waivers of the pre-approval process. No services described in (b)-(d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $70,689 and $103,479, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. As such, the audit committee has considered these services in maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Mangers of Closed-end Management Investment Companies.
Not applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant does not currently have in place procedures by which shareholders may recommend nominees to the registrant’s board.
There have been no changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
Item 11. Controls and Procedures.
(a) The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
(a)(2) Separate certifications by the President (principal executive officer) and Treasurer (principal financial officer) of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are attached.
(b) A certification by the registrant’s President (principal executive officer) and Treasurer (principal financial officer) as required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)) is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | SBL Fund |
| By (Signature and Title)* | /s/ Donald C. Cacciapaglia |
| Donald C. Cacciapaglia, President |
| Date | March 08, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ Donald C. Cacciapaglia |
| Donald C. Cacciapaglia, President |
| Date | March 08, 2013 |
| By (Signature and Title)* | /s/ Nikolaos Bonos |
| Nikolaos Bonos, Treasurer |
| Date | March 08, 2013 |
* Print the name and title of each signing officer under his or her signature.