N-CSR 1 e101393combined.htm

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- 01136
   
Guggenheim Funds Trust
 
(Exact name of registrant as specified in charter)
 
805 King Farm Boulevard, Suite 600
Rockville, Maryland 20850
 
(Address of principal executive offices) (Zip code)
 
Amy J. Lee
Guggenheim Funds Trust
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:      September 30
   
Date of reporting period:       September 30, 2014

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.


Item 1.   Reports to Stockholders
The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
 
 

9.30.2014

Guggenheim Funds Annual Report

 

Guggenheim Floating Rate Strategies Fund

Guggenheim High Yield Fund

Guggenheim Investment Grade Bond Fund

Guggenheim Limited Duration Fund

Guggenheim Macro Opportunities Fund

Guggenheim Municipal Income Fund

Guggenheim Total Return Bond Fund






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This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.

Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604


TABLE OF CONTENTS    
 
     
DEAR SHAREHOLDER   2
     
ECONOMIC AND MARKET OVERVIEW   5
     
ABOUT SHAREHOLDERS’ FUND EXPENSES   6
     
FLOATING RATE STRATEGIES FUND   10
     
HIGH YIELD FUND   26
     
INVESTMENT GRADE BOND FUND   40
     
LIMITED DURATION FUND   56
     
MACRO OPPORTUNITIES FUND   68
     
MUNICIPAL INCOME FUND   88
     
TOTAL RETURN BOND FUND   98
     
NOTES TO FINANCIAL STATEMENTS   114
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   132
     
OTHER INFORMATION   133
     
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS   145
     
GUGGENHEIM INVESTMENTS PRIVACY POLICIES   147

 
THE GUGGENHEIM FUNDS ANNUAL REPORT    1

September 30, 2014
 

Dear Shareholder:

Security Investors, LLC and Guggenheim Partners Investment Management (the “Investment Advisers”) are pleased to present the annual shareholder report for one or more of our Funds (the “Funds”) for the year ended September 30, 2014. The Investment Advisers are part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.

Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim Partners, LLC and the Investment Advisers.

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
October 31, 2014

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.

Floating Rate Strategies Fund may not be suitable for all investors. • Investments in floating rate senior secured syndicated bank loans and other floating rate securities involve special types of risks, including credit rate risk, interest rate risk, liquidity risk and prepayment risk. • 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. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • Investments in reverse repurchase agreements and synthetic instruments (such as synthetic collateralized debt obligations) expose the Fund to the many of the same risks as investments in derivatives. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • The Fund’s investments in restricted securities may involve financial and liquidity risk. • The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

 
2  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

September 30, 2014
 

High Yield Fund 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

Investment Grade Bond Fund 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. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • Investments in reverse repurchase agreements expose the Fund to the many of the same risks as investments in derivatives. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • The Fund’s investments in municipal securities can be affected by events that affect the municipal bond market. • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

Limited Duration Fund 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. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • Investments in reverse repurchase agreements expose the Fund to the many of the same risks as investments in derivatives. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • The Fund’s investments in municipal securities can be affected by events that affect the municipal bond market. • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

Macro Opportunities Fund 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 intrinsic value of the underlying stocks in which the Fund invests may never be realized or the stock may decline in value. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • The use of short selling involves increased risks and costs. You risk paying more for a security than you received from its sale. Theoretically, stocks sold short have the risk of unlimited losses. • The 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • Investments in reverse repurchase agreements expose the Fund to the many of the same risks as investments in derivatives. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • A highly liquid secondary market may not exist for the commodity-linked structured notes the Fund invests in, and there can be no assurance that a highly liquid secondary market will develop. • The Fund’s exposure to the commodity markets may subject the Fund to greater volatility as commodity-linked investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity such as droughts, floods, weather, embargos, tariffs and international economic, political and regulatory

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  3

September 30, 2014
 

developments. • The Fund’s investments in municipal securities can be affected by events that affect the municipal bond market. • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • 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. •This Fund is considered nondiversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. • Please read the prospectus for more detailed information regarding these and other risks.

Municipal Income Fund may not be suitable for all investors. • The Fund will be significantly affected by events that affect the municipal bond market, which could include unfavorable legislative or political developments and adverse changes in the financial conditions of state and municipal issuers or the federal government in case it provides financial support to the municipality. Income from municipal bonds held by the Fund could be declared taxable because of changes in tax laws. The Fund may invest in securities that generate taxable income. A portion of the Fund’s otherwise tax-exempt dividends may be taxable to those shareholders subject to the alternative minimum tax. • Certain sectors of the municipal bond market have special risks that can affect them more significantly than the market as a whole. Because many municipal instruments are issued to finance similar projects, conditions in these industries can significantly affect the Fund and the overall municipal market. • Municipalities currently experience budget shortfalls, which could cause them to default on their debt and thus subject the Fund to unforeseen losses. • Like other funds that hold bonds and other fixed-income investments, 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. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • 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. •Instruments and strategies (such as reverse repurchase agreements, unfunded commitments, tender option bonds and borrowings) may expose the Fund to many of the same risks as investments in derivatives and may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

Total Return Bond Fund 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. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • 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. • Instruments and strategies (such as borrowing transactions and reverse repurchase agreements) may provide leveraged exposure to a particular investment, which will magnify any gains or losses on those investments. • Investments in reverse repurchase agreements expose the Fund to the many of the same risks as investments in derivatives. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • Investments in syndicated bank loans generally offer a floating interest rate and involve special types of risks. • The Fund’s investments in municipal securities can be affected by events that affect the municipal bond market. • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • 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. • Please read the prospectus for more detailed information regarding these and other risks.

 
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ECONOMIC AND MARKET OVERVIEW (Unaudited)   September 30, 2014
 

Despite market volatility rising in October, for the year ended September 30, data on everything from hiring to housing conveys that the U.S. economy is firing on all cylinders. Overcoming a first-quarter weather-related soft patch, second-quarter GDP was revised upward to 4.6%, led by business investment. Durable goods orders surged over the summer and consumer confidence was at multi-year highs, despite a lower reading for the last part of the period. With tailwinds for economic growth gathering, we could see a strong third quarter GDP reading.

September’s addition of 248,000 non-farm payroll jobs was, on the surface, at least a strong figure and certainly not something to be discounted. However, investor optimism about the report, which also showed the unemployment rate falling to 5.9%—its lowest level since 2008—masked the fact that average hourly earnings were unchanged. Economic data late in the period included disappointing factory orders, poor construction spending, and weaker-than-expected ISM manufacturing data. The most recent decline in the U.S. Conference Board Consumer Confidence Index was worrisome.

The U.S. economy is certainly doing well enough to suggest higher interest rates ahead. With quantitative easing ending in the U.S. in October 2014 and the Fed preparing investors for a higher federal funds rate, the stage is set for U.S. interest rates to move higher. However, our view is that, despite a strengthening U.S. economy, the greater risk is that interest rates head lower in the near term.

Following the “taper tantrum” last year, before rates were able to reach historical norms, the average rate on a 30-year mortgage spiked almost a full percentage point in two months—the sharpest rise since the late 1990s—resulting in an abrupt housing slowdown, which slowed the U.S. economy materially.

In addition, U.S. Treasury yields are still materially higher than those in any other developed market. The spread between 10-year U.S. Treasuries and comparable German bunds reached 157 basis points in September, its widest level since 1999, and the spread between 10-year Treasuries and 10-year Japanese government bonds was recently 189 basis points. With developments in the Middle East increasingly troubling and turbulence continuing elsewhere from Ukraine to Hong Kong, the relative price value of U.S. government bonds versus other safe haven investments should continue to be a factor keeping U.S. interest rates low.

International economic data remain weak. Euro zone economic confidence is falling as the entire region continues to battle below-target inflation. At the start of September, the European Central Bank cut interest rates and signaled their intent to launch a program to purchase asset-backed securities and covered bonds to stimulate the dismal economy. In Japan, retail sales fell month-over-month in August, while industrial production falters.

Economic data around the world confirms our view that central banks are likely to renew efforts to force liquidity into the global financial system, which in turn further supports our positive outlook for risk assets. However, positive returns are unlikely without volatility. While markets continue to rally, gains are becoming more grudging. The upward momentum in U.S. stocks has deteriorated meaningfully while credit spreads, specifically high-yield spreads, have widened significantly over the past number of weeks. While the bull market trend remains intact, as the appreciation in risk assets continues it becomes more likely that this ageing advance will, at some point, experience a correction.

For the year ended September 30, 2014, the return of the Standard & Poor’s 500® Index* (“S&P 500”) was 19.73%. The Barclays U.S. Aggregate Bond Index* returned 3.96% for the year, while the Barclays U.S. Corporate High Yield Index* returned 7.20%. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* returned 0.05%. The MSCI World Index* returned 12.22%, while the MSCI Emerging Markets Index* returned 4.30%.

The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.

*Index Definitions:

The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.

BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.

BofA/ML ABS Master AA-BBB Index is a subset of the BofA Merrill Lynch U.S. Fixed Rate Asset Backed Securities Index including all securities rated AA1 through BBB3, inclusive.

Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Barclays U.S. Corporate High Yield Index covers the universe of dollar denominated, fixed rate, non-investment grade debt, taxable corporate debt.

Barclays U.S. Corporate Investment Grade Index is an unmanaged index consisting of publicly issued US Corporate and specified foreign debentures and secured notes that are rated investment grade (Baa3/BBB- or higher) by at least two ratings agencies, have at least one year to final maturity and have at least $250 million par amount outstanding. To qualify, bonds must be SEC-registered.

Barclays Capital U.S. 1-3 Year Corporate Bond Index is designed to measure the performance of the short term U.S. corporate bond market. The Index includes publicly issued U.S. dollar denominated corporate issues that have a remaining maturity of greater than or equal to 1 year and less than 3 years, are rated investment grade (must be Baa3/BBB- or higher using the middle rating of Moody’s Investor Service, Inc., Standard & Poor’s, and Fitch Rating), and have $250 million or more of outstanding face value.

Barclays Municipal Bond Index is a broad market performance benchmark for the tax-exempt bond market. The bonds included in this index must have a minimum credit rating of at least Baa.

Barclays Municipal Long Bond Index is a sub-index of the Barclays Municipal Bond Index that is representative of the performance of municipal bonds with 22+ years to maturity.

Barclays U.S. Aggregate Bond 1-3 Year Total Return Index measures the performance of publicly issued investment grade corporate, U.S. Treasury and government agency securities with remaining maturities of one to three years.

Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the dollar denominated leveraged loan market.

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 World Index (Net) is calculated with net dividends reinvested. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

S&P 500® Index is a market-weighted stock market index comprised of the stocks of 500 U.S. corporations; the index is owned and maintained by Standard & Poor’s.

 
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 March 31, 2014 and ending September 30, 2014.

The following tables illustrate a Fund’s costs in two ways:

Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”

Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.

 
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ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (continued)    
 

                    Beginning     Ending     Expenses  
    Expense     Fund   Account Value     Account Value     Paid During  
    Ratio1   Return   March 31, 2014     September 30, 2014     Period2  
 
Table 1. Based on actual Fund return3  
Floating Rate Strategies Fund                                        

A-Class

     1.03 %     1.09 %     $1,000.00       $1,010.90       $5.19  

C-Class

     1.79 %     0.70 %     1,000.00       1,007.00       9.01  

Institutional Class

     0.79 %     1.25 %     1,000.00       1,012.50       3.99  
High Yield Fund                                        

A-Class

     1.27 %     1.00 %     1,000.00       1,010.00       6.40  

B-Class

     1.04 %     1.10 %     1,000.00       1,011.00       5.24  

C-Class

     2.03 %     0.65 %     1,000.00       1,006.50       10.21  

Institutional Class

     1.03 %     1.13 %     1,000.00       1,011.30       5.19  
Investment Grade Bond Fund                                        

A-Class

     1.03 %     3.55 %     1,000.00       1,035.50       5.26  

B-Class

     1.78 %     3.12 %     1,000.00       1,031.20       9.06  

C-Class

     1.78 %     3.17 %     1,000.00       1,031.70       9.07  

Institutional Class

     0.78 %     3.64 %     1,000.00       1,036.40       3.98  
Limited Duration Fund                                        

A-Class

     0.83 %     1.22 %     1,000.00       1,012.20       4.19  

C-Class

     1.56 %     0.80 %     1,000.00       1,008.00       7.85  

Institutional Class

     0.57 %     1.35 %     1,000.00       1,013.50       2.88  
Macro Opportunities Fund                                        

A-Class

     1.33 %     1.09 %     1,000.00       1,010.90       6.70  

C-Class

     2.07 %     0.72 %     1,000.00       1,007.20       10.42  

Institutional Class

     0.99 %     1.23 %     1,000.00       1,012.30       4.99  
Municipal Income Fund                                        

A-Class

     0.83 %     6.28 %     1,000.00       1,062.80       4.29  

C-Class

     1.58 %     5.89 %     1,000.00       1,058.90       8.15  

Institutional Class

     0.58 %     6.41 %     1,000.00       1,064.10       3.00  
Total Return Bond Fund                                        

A-Class

     0.81 %     3.21 %     1,000.00       1,032.10       4.13  

C-Class

     1.67 %     2.84 %     1,000.00       1,028.40       8.49  

Institutional Class

     0.57 %     3.43 %     1,000.00       1,034.30       2.91  
 

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  7

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)    
 

                    Beginning     Ending     Expenses  
    Expense   Fund   Account Value     Account Value     Paid During  
    Ratio1   Return   March 31, 2014     September 30, 2014     Period2  
 
Table 2. Based on hypothetical 5% return (before expenses)
Floating Rate Strategies Fund                                        

A-Class

     1.03 %     5.00 %     $1,000.00       $1,019.90       $5.22  

C-Class

     1.79 %     5.00 %     1,000.00       1,016.09       9.05  

Institutional Class

     0.79 %     5.00 %     1,000.00       1,021.11       4.00  
High Yield Fund                                        

A-Class

     1.27 %     5.00 %     1,000.00       1,018.70       6.43  

B-Class

     1.04 %     5.00 %     1,000.00       1,019.85       5.27  

C-Class

     2.03 %     5.00 %     1,000.00       1,014.89       10.25  

Institutional Class

     1.03 %     5.00 %     1,000.00       1,019.90       5.22  
Investment Grade Bond Fund                                        

A-Class

     1.03 %     5.00 %     1,000.00       1,019.90       5.22  

B-Class

     1.78 %     5.00 %     1,000.00       1,016.14       9.00  

C-Class

     1.78 %     5.00 %     1,000.00       1,016.14       9.00  

Institutional Class

     0.78 %     5.00 %     1,000.00       1,021.16       3.95  
Limited Duration Fund                                        

A-Class

     0.83 %     5.00 %     1,000.00       1,020.91       4.20  

C-Class

     1.56 %     5.00 %     1,000.00       1,017.25       7.89  

Institutional Class

     0.57 %     5.00 %     1,000.00       1,022.21       2.89  
Macro Opportunities Fund                                        

A-Class

     1.33 %     5.00 %     1,000.00       1,018.40       6.73  

C-Class

     2.07 %     5.00 %     1,000.00       1,014.69       10.45  

Institutional Class

     0.99 %     5.00 %     1,000.00       1,020.10       5.01  
Municipal Income Fund                                        

A-Class

     0.83 %     5.00 %     1,000.00       1,020.91       4.20  

C-Class

     1.58 %     5.00 %     1,000.00       1,017.15       7.99  

Institutional Class

     0.58 %     5.00 %     1,000.00       1,022.16       2.94  
Total Return Bond Fund                                        

A-Class

     0.81 %     5.00 %     1,000.00       1,021.01       4.10  

C-Class

     1.67 %     5.00 %     1,000.00       1,016.70       8.44  

Institutional Class

     0.57 %     5.00 %     1,000.00       1,022.21       2.89  


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 183/365 (to reflect the one-half year period).
3   Actual cumulative return at net asset value for the period March 31, 2014 to September 30, 2014.

 
8  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

 

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THE GUGGENHEIM FUNDS ANNUAL REPORT  |  9

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders

Guggenheim Floating Rate Strategies Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Michael P. Damaso, Senior Managing Director and Portfolio Manager; Anne B. Walsh, Senior Managing Director; Kevin H. Gundersen, Senior Managing Director and Portfolio Manager; and James W. Michal, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the “Period”), the Guggenheim Floating Rate Strategies Fund returned 4.42%1, compared with the 4.31% return of its benchmark, the Credit Suisse Leveraged Loan Index.

The Fund seeks to provide a high level of current income while maximizing total return. The Fund pursues its objective by normally investing at least 80% of its assets in floating rate securities, including senior secured syndicated bank loans and asset-backed securities (ABS).

The leveraged credit market performed well for the 12 months ended September 30, 2014, even as it contended with Treasury rate volatility and frothy valuations, as investors searched for yield amid generally declining interest rates. The last three months in the Period were particularly bumpy, as markets tried to ascertain what the Fed might do about short-term interest rates. Quantitative easing was expected to end in October, and the Fed began signaling a higher federal funds rate as soon as late 2015.

It was the general decline in Treasury yields over the Period, and not fundamentals, that appeared to drive outflows from bank loan mutual funds in the last half of the Period. However, the bank loan market was not as affected as the high yield space by mutual fund outflows, due to strong demand from the collateralized loan obligation (CLO) market. On track to set a new annual record, CLO creation raised $93 billion through the first three quarters of 2014.

For most of the Period, bank loan discount margins tightened. The events that drove spread widening in the third quarter demonstrate that investors are becoming increasingly reactive to factors outside of the fundamentals that underscore our positive outlook on credit. Even though U.S. economic data was mixed in September, it has been strong year to date, and the improving health of the U.S. economy and low interest rates continue to underscore our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening should be viewed as buying opportunities.

Positive performance in the quarter was primarily a result of credit selection, as Guggenheim’s bottom-up, downside protection led approach limited downside risk versus the benchmark. The Fund was consistently positioned through the Period, with approximately 80% of assets invested in leveraged loans and the remainder invested in high yield bonds, asset-backed securities and non-agency mortgage-backed securities. The Fund has been constructed flexibly, so that it can add selected fixed rate high yield exposure where it is attractive, while maintaining the majority of its focus on bank debt. The Fund benefited from reducing exposure to assets that had less upside with respect to spread compression, while selectively adding to holdings that can be expected to benefit from sustained period of economic expansion.

Most bank loans traded wide of ex-recession averages for the Period, indicating that there may be room for further spread compression. The Fund favored BB-rated and B-rated bank loans, which we believe offered better relative value than loans in the lower-quality CCC space. The Fund has maintained an average portfolio quality of B+ and has the ability to invest across the ratings spectrum.

We continue to identify relative value in bank loans, which we expect will outperform fixed-rated investments in a rising rate environment. Some of the best opportunities exist in the upper middle market segments, which offer a yield pickup over larger tranches that are often overlooked and underfollowed.

Outperformance was also a result of a lower risk profile of the Fund compared with the market. The Fund’s exposure to floating rate assets (primarily bank loans), and shorter-maturity bonds acted as a buffer to market volatility. The Fund has used market sell-offs to capture opportunities to buy issues we view as being cheap compared to inherent value.

 
10  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded)   September 30, 2014
 

Our research suggests that macroeconomic indicators in the U.S. are pointing higher, which by itself would suggest a relaxation in accommodative monetary policy ahead—and therefore transmission of high real interest rates. Despite a strengthening U.S. economy, there is the potential that interest rates head lower in the near future.

Historically, credit spreads begin to widen approximately 80 months following the end of a recession, and September 2014 marks the 63rd month following the end of the last recession, indicating the potential for further spread tightening over the next 17 months. Credit cycles typically only end after corporate defaults start to spike, which typically starts to happen 12-24 months after the Federal Reserve begins raising short-term interest rates.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  11

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

FLOATING RATE STRATEGIES FUND

OBJECTIVE: Seeks to provide a high level of current income while maximizing total return.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
    % of  
Rating   Total Investments  
 
Fixed Income Instruments        

AAA

     0.5 %

AA

     1.1 %

A

     1.8 %

BBB

     10.2 %

BB

     20.6 %

B

     53.9 %

CCC

     5.5 %

Other

     4.0 %
Other Instruments        

Short Term Investments

     2.1 %

Common Stocks

     0.3 %
 
Total Investments     100.0 %
 

The chart above reflects percentages of the value of total investments.

Inception Dates:    
 
A-Class   November 30, 2011
C-Class   November 30, 2011
Institutional Class   November 30, 2011

Ten Largest Holdings (% of Total Net Assets)
 
Cartrawler- Mustang Bidco Ltd.   1.8 %
Alliance Boots Ltd.   1.4 %
Infor (US), Inc.   1.2 %
Scout24 AG   1.2 %
Flakt Woods   1.2 %
HUB International Ltd.   1.0 %
National Financial Partners Corp.   1.0 %
Crosby Worldwide   1.0 %
Active Network, Inc., The   1.0 %
Go Daddy Operating Company, LLC   0.9 %
 
Top Ten Total   11.7 %
 

“Ten Largest Holdings" exclude any temporary cash or derivative investments.

* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
12  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*
Periods Ended September 30, 2014

        Since Inception  
    1 Year   (11/30/11)  
 
A-Class Shares   4.42%   7.19%  
 
A-Class Shares with sales charge†   -0.55%   5.36%  
 
C-Class Shares   3.64%   6.39%  
 
C-Class Shares with CDSC‡   2.64%   6.39%  
 
Institutional Class Shares   4.67%   7.45%  
 
Credit Suisse Leveraged Loan Index   4.31%   6.52%  
 

* The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Credit Suisse Leveraged Loan Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  13

SCHEDULE OF INVESTMENTS   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS†- 0.3%              
               
CONSUMER DISCRETIONARY - 0.3%              

Travelport LLC*

     189,931   $ 3,126,264  
             
               
BASIC MATERIALS - 0.0%              

Mirabela Nickel Ltd.*

     4,755,634     274,784  
             
Total Common Stocks              

(Cost $5,290,286)

           3,401,048  
             
               
SHORT TERM INVESTMENTS†- 2.2%              

Federated U.S. Treasury Cash Reserve Fund

     27,996,441     27,996,441  
             
Total Short Term Investments              

(Cost $27,996,441)

           27,996,441  
             
               
      FACE        
      AMOUNT        
             
               
SENIOR FLOATING RATE INTERESTS††,2,6 - 76.3%              
               
INDUSTRIAL -16.9%              

Amber Bidco Foster + Partners

              

6.28% due 07/18/21†††

   $ 10,480,000     10,270,400  

5.01% due 07/18/21†††

   GBP 3,500,000     5,560,509  

Flakt Woods

              

2.63% due 03/20/175

   EUR 12,115,820     14,690,479  

Crosby Worldwide

              

3.75% due 11/23/20

     12,902,500     12,321,887  

Sabre, Inc.

              

4.00% due 02/19/19

     11,256,561     11,097,883  

Brickman Group Holdings, Inc.

              

4.00% due 12/18/20

     11,221,305     10,964,112  

Mitchell International, Inc.

              

4.50% due 10/13/20

     6,352,000     6,281,874  

8.50% due 10/11/21

     3,050,000     3,038,563  

Minimax Viking

              

4.25% due 08/14/20

     8,610,676     8,589,149  

Rexnord LLC/ RBS Global, Inc.

              

4.00% due 08/21/20

     8,316,000     8,171,967  

US Infrastructure Corp.

              

4.00% due 07/10/20

     6,813,750     6,660,441  

Thermasys Corp.

              

5.25% due 05/03/19

     6,611,719     6,573,172  

SIRVA Worldwide, Inc.

              

7.50% due 03/27/19

     5,910,000     5,998,650  

Ceridian Corp.

              

4.50% due 05/09/17

     2,846,109     2,810,533  

4.15% due 05/09/17

     2,728,535     2,716,611  

Berlin Packaging LLC

              

5.75% due 04/02/19

     3,564,000     3,557,335  

9.75% due 04/02/20

     1,900,000     1,885,750  

Doncasters Group Ltd.

              

9.50% due 10/09/20

     3,834,483     3,824,897  

4.50% due 04/09/20

     1,469,852     1,457,917  

Connolly Corp.

              

5.00% due 05/14/21

     4,987,500     4,956,328  

Transdigm, Inc.

              

3.75% due 06/04/21

     4,788,000     4,698,225  

Gogo LLC

              

11.25% due 03/21/185

     4,286,367     4,500,685  

Power Borrower, LLC

              

4.25% due 05/06/20

     2,940,002     2,873,851  

8.25% due 11/06/20

     1,670,000     1,619,900  

SRA International, Inc.

              

6.50% due 07/20/18

     4,402,702     4,391,696  

syncreon

              

5.25% due 10/28/20

     3,771,500     3,733,785  

Sutherland Global Services, Inc.

              

7.25% due 03/06/19

     3,700,000     3,690,750  

Ceva Logistics US Holdings

              

6.50% due 03/19/21

     3,764,335     3,637,289  

Knowledge Learning Corp.

              

5.25% due 03/18/21

     3,532,250     3,532,250  

NaNa Development Corp.

              

8.00% due 03/15/185

     3,570,000     3,498,600  

Univision Communications, Inc.

              

4.00% due 03/01/20

     3,152,007     3,088,967  

Camp Systems International

              

4.75% due 05/31/19

     1,885,639     1,880,925  

8.25% due 11/29/19

     1,150,000     1,157,188  

GYP Holdings III Corp.

              

4.75% due 04/01/21

     2,793,000     2,751,105  

Ceva Logistics Holdings BV (Dutch)

              

6.50% due 03/19/21

     2,729,143     2,637,034  

Mast Global

              

8.75% due 09/12/19†††,5

     2,646,875     2,624,751  

Learning Care Group (US), Inc.

              

5.50% due 05/05/21

     2,543,625     2,539,377  

Ceva Group plc (United Kingdom)

              

6.50% due 03/19/21

     2,600,985     2,509,951  

Ranpak

              

4.50% due 04/23/19

     1,995,022     1,990,653  

8.50% due 04/23/20

     500,000     504,165  

Realogy Corp.

              

3.75% due 03/05/20

     2,462,641     2,416,466  

Kronos, Inc.

              

4.50% due 10/30/195

     2,422,566     2,403,645  

MRC Global, Inc.

              

5.52% due 11/08/19

     2,346,275     2,342,850  

SI Organization

              

5.75% due 11/23/19

     2,290,521     2,298,400  

Nord Anglia Education Finance LLC

              

4.50% due 03/31/21

     1,645,875     1,633,531  

Braas Monier Buildings Group

              

4.70% due 10/15/20

   EUR 1,216,837     1,544,580  

Gogo LLC

              

7.50% due 03/21/18

     1,375,779     1,389,537  

Dematic S.A.

              

4.25% due 12/28/19

     1,354,856     1,333,693  

CareCore National LLC

              

5.50% due 03/05/21

     1,343,250     1,333,176  

IntraWest Holdings S.à r.l.

              

5.50% due 12/09/20

     1,182,050     1,182,050  

V.Group Ltd.

              

5.00% due 06/25/21

     1,047,375     1,039,520  

 
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

CPM Acquisition Corp.

              

6.25% due 08/29/17

   $ 377,192   $ 376,249  

10.25% due 03/01/18

     325,000     328,250  

Panolam Industries International, Inc.

              

7.76% due 08/23/17

     549,352     546,606  

Wireco Worldgroup, Inc.

              

6.00% due 02/15/17

     485,361     487,385  

Ceva Logistics Canada, ULC

              

6.50% due 03/19/21

     470,542     454,661  

Omnitracs, Inc.

              

8.75% due 05/25/21

     350,000     348,250  

Advanced Disposal Services, Inc.

              

3.75% due 10/09/19

     349,590     339,802  

Hunter Fan Co.

              

6.50% due 12/20/17

     221,823     221,269  

Total Safety U.S., Inc.

              

9.25% due 09/13/20

     99,750     96,758  
             
Total Industrial           211,406,282  
             
               
CONSUMER, CYCLICAL - 13.3%              

Alliance Boots Ltd.

              

3.98% due 07/09/17

   GBP 10,521,726     17,042,006  

BJ’s Wholesale Club, Inc.

              

4.50% due 09/26/19

     11,482,260     11,293,835  

Smart & Final Stores LLC

              

4.75% due 11/15/19

     10,410,926     10,378,443  

Burger King Corp.

              

4.50% due 09/24/21

     10,200,000     10,120,644  

Alexander Mann Solutions Ltd.

              

5.75% due 12/20/19

     7,940,000     7,860,600  

Neiman Marcus Group, Inc.

              

4.25% due 10/25/20

     7,967,152     7,819,998  

Lions Gate Entertainment Corp.

              

5.00% due 07/19/20

     7,400,000     7,418,500  

Sears Holdings Corp.

              

5.50% due 06/30/18

     7,102,653     6,898,452  

Hilton Worldwide Holdings, Inc.

              

3.50% due 10/26/20

     6,378,596     6,272,265  

Party City Holdings, Inc.

              

4.00% due 07/27/19

     5,968,790     5,859,024  

Compucom Systems, Inc.

              

4.25% due 05/07/20

     4,340,806     4,156,321  

Nassa Midco AS

              

4.25% due 05/14/21

   EUR 3,300,000     4,121,093  

Ollies Bargain Outlet

              

4.75% due 09/28/19

     4,139,994     4,106,377  

Advantage Sales & Marketing, Inc.

              

4.25% due 07/21/21

     4,112,903     4,038,007  

CPA Global

              

4.50% due 12/03/20

     3,930,250     3,920,424  

TI Automotive Ltd.

              

4.25% due 07/02/21

     3,920,175     3,863,842  

Digital Cinema

              

3.25% due 05/17/21

     3,756,176     3,704,529  

Acosta, Inc.

              

5.00% due 09/26/21

     3,700,000     3,690,750  

Aecom Techology Corp.

              

3.75% due 09/17/21

     3,600,000     3,590,352  

Warner Music Group

              

3.75% due 07/01/20

     3,712,500     3,578,516  

Fitness International LLC

              

5.50% due 07/01/20

     3,491,250     3,456,338  

Pinnacle Entertainment, Inc.

              

3.75% due 08/13/20

     3,242,652     3,196,704  

Men’s Wearhouse

              

4.50% due 06/18/21

     3,100,000     3,079,323  

ServiceMaster Co.

              

4.25% due 07/01/21

     3,050,000     3,000,926  

Tank & Rast

              

3.58% due 12/10/19

   EUR 2,340,000     2,955,478  

Capital Automotive LP

              

6.00% due 04/30/20

     2,830,000     2,858,300  

California Pizza Kitchen, Inc.

              

5.25% due 03/29/18

     2,949,450     2,819,498  

SNL Financial

              

4.50% due 10/23/18

     2,029,659     2,019,511  

GCA Services Group, Inc.

              

4.29% due 11/01/19

     1,760,536     1,743,670  

9.25% due 11/01/20

     200,000     199,500  

Southern Graphics, Inc.

              

4.25% due 10/17/19

     1,836,278     1,819,072  

CHG Healthcare Services, Inc.

              

4.25% due 11/19/19

     1,830,587     1,818,011  

Fleetpride Corp.

              

5.25% due 11/19/19

     1,598,401     1,580,419  

AlixPartners, LLP

              

4.00% due 07/10/20

     1,422,755     1,399,037  

1-800 Contacts, Inc.

              

4.25% due 01/29/21

     1,293,500     1,274,098  

Container Store, Inc.

              

4.25% due 04/06/19

     890,430     872,621  

Equinox Fitness

              

4.25% due 01/31/20

     592,247     583,364  

Jacobs Entertainment, Inc.

              

5.25% due 10/29/18

     490,000     455,700  

Navistar, Inc.

              

5.75% due 08/17/17

     312,500     312,891  

CKX Entertainment, Inc.

              

9.00% due 06/21/175

     145,875     123,994  
             
Total Consumer, Cyclical           165,302,433  
             
               
TECHNOLOGY - 12.1%              

Infor (US), Inc.

              

3.75% due 06/03/20

     15,743,196     15,372,925  

Active Network, Inc., The

              

5.50% due 11/13/20

     12,202,053     12,095,285  

Go Daddy Operating Company, LLC

              

4.75% due 05/13/21

     12,070,679     11,882,135  

Greenway Medical Technologies

              

6.00% due 11/04/205

     9,925,000     9,875,375  

GlobalLogic Holdings, Inc.

              

6.25% due 05/31/19

     9,676,875     9,362,377  

Wall Street Systems

              

4.50% due 04/30/21

     8,778,000     8,690,220  

CallCredit Info Group Ltd.

              

5.21% due 02/12/215

   GBP 5,300,000     8,534,731  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 15

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    
      FACE        
      AMOUNT     VALUE  
 
               

LANDesk Group, Inc.

              

5.00% due 02/25/20

   $ 8,415,213   $ 8,376,671  

Aspect Software, Inc.

              

7.25% due 05/07/16

     7,890,917     7,868,744  

Activision Blizzard

              

3.25% due 10/12/20

     6,356,250     6,335,274  

Evergreen Skill

              

5.75% due 04/28/21

     5,750,000     5,637,415  

Deltek, Inc.

              

4.50% due 10/10/18

     5,608,482     5,563,614  

EIG Investors Corp.

              

5.00% due 11/09/19

     5,382,137     5,361,954  

Applied Systems, Inc.

              

4.25% due 01/25/21

     5,304,900     5,238,589  

Avago Technologies Ltd.

              

3.75% due 05/06/21

     4,987,500     4,938,273  

CDW LLC

              

3.25% due 04/29/20

     4,925,019     4,800,515  

Sophos

              

5.00% due 01/29/21

     4,447,650     4,430,971  

Telx Group

              

4.50% due 04/09/20

     2,942,625     2,890,217  

7.50% due 04/09/21

     600,000     595,002  

Renaissance Learning Corp.

              

4.50% due 04/09/21

     3,482,500     3,406,338  

Paradigm Ltd

              

4.75% due 07/30/195

     3,265,057     3,227,312  

Lantiq Deutschland GmbH

              

11.00% due 11/16/155

     1,881,406     1,862,592  

Sparta Holding Corp.

              

6.25% due 07/28/20†††

     1,450,000     1,435,890  

Eze Castle Software, Inc.

              

7.25% due 04/05/21

     1,441,176     1,427,961  

Attachmate Group, Inc., The

              

7.25% due 11/22/17

     1,119,620     1,119,967  

American Builders & Contractors

              

Supply Co., Inc.

              

3.50% due 04/16/20

     693,000     678,925  

P2 Energy Solutions

              

9.00% due 04/30/21

     390,000     390,975  

Sophia, LP

              

4.00% due 07/19/18

     366,703     361,202  
             
Total Technology           151,761,449  
             
               
FINANCIAL -11.1%              

HUB International Ltd.

              

4.25% due 10/02/20

     12,699,173     12,408,107  

Expert Global Solutions

              

8.50% due 04/03/18

     11,855,722     11,826,083  

7.46% due 04/02/175

     583,333     554,167  

National Financial Partners Corp.

              

4.50% due 07/01/20

     12,499,154     12,374,162  

First Data Corp.

              

3.65% due 03/23/18

     9,300,000     9,111,117  

4.15% due 03/24/21

     1,199,869     1,181,871  

3.65% due 09/24/18

     400,000     391,252  

Magic Newco, LLC

              

5.00% due 12/12/18

     9,036,776     9,014,184  

12.00% due 06/12/19

     500,000     564,165  

York Risk Services

              

4.75% due 10/01/21†††

     6,452,439     6,416,176  

HSBC Holdings

              

due 03/30/201

     6,250,000     6,062,500  

Banca Civica (UK) - Chambertin

              

5.07% due 08/12/20†††

   GBP 3,800,000     6,006,322  

Intertrust Group

              

8.00% due 04/11/22

     3,300,000     3,261,489  

7.50% due 04/16/21

     2,616,000     2,598,342  

American Stock Transfer & Trust

              

5.75% due 06/26/20

     5,798,967     5,757,910  

WTG Holdings

              

4.75% due 01/15/21

     5,706,875     5,635,539  

AmWINS Group, LLC

              

5.00% due 09/06/19

     4,731,910     4,720,080  

International Lease Finance

              

3.50% due 03/06/21

     4,700,000     4,633,401  

Wastequip, Inc.

              

5.50% due 08/09/19

     4,406,719     4,397,553  

Nuveen Investments, Inc.

              

4.16% due 05/13/17

     4,000,000     3,987,840  

6.50% due 02/28/19

     400,000     400,300  

RCS Capital

              

6.50% due 04/29/19

     4,295,625     4,311,734  

STG-Fairway Acquisitions, Inc.

              

6.25% due 02/28/19

     2,955,021     2,949,495  

10.50% due 08/28/19†††,5

     1,300,000     1,290,142  

Lineage Logistics LLC

              

4.50% due 04/07/21

     4,069,550     4,018,681  

Genex Services, Inc.

              

5.25% due 05/28/21

     2,793,000     2,775,544  

Fly Leasing Ltd.

              

4.50% due 08/09/19

     2,592,734     2,586,901  

Transunion Holding Co.

              

4.00% due 04/09/21

     2,487,500     2,445,536  

USI Holdings Corp.

              

4.25% due 12/27/19

     2,353,190     2,309,068  

Cunningham Lindsey U.S., Inc.

              

5.00% due 12/10/19

     1,623,341     1,594,933  

9.25% due 06/10/20

     194,886     194,643  

AssuredPartners

              

4.50% due 04/02/21

     1,600,000     1,577,008  

Alliant Holdings I, LLC

              

4.25% due 12/20/19

     865,759     852,773  

Hamilton Lane Advisors LLC

              

4.00% due 02/28/18

     177,542     175,766  
             
Total Financial           138,384,784  
             
               
COMMUNICATIONS - 8.9%              

Cartrawler- Mustang Bidco Ltd.

              

4.26% due 04/29/21

   EUR 17,700,000     22,327,598  

Scout24 AG

              

4.26% due 02/12/21

   EUR 12,000,000     15,137,354  

Zayo Group LLC

              

4.00% due 07/02/19

     8,772,742     8,634,571  

Asurion Corp.

              

4.25% due 07/08/20

     4,108,000     4,037,835  

5.00% due 05/24/19

     3,871,132     3,848,408  

Avaya, Inc.

              

6.50% due 03/31/18

     4,904,716     4,858,759  

7.75% due 10/26/17

     2,325,100     2,213,565  

 
16 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Ziggo BV

              

3.50% due 01/15/22

   EUR 5,670,300   $ 7,052,299  

Light Tower Fiber LLC

              

4.00% due 04/13/20

     6,426,193     6,307,052  

Cengage Learning Acquisitions, Inc.

              

7.00% due 03/31/20

     5,621,750     5,609,719  

Trader Media Corporation Ltd.

              

5.01% due 12/08/17

   GBP 3,376,319     5,470,912  

CBS Outdoor Americas Capital LLC

              

3.00% due 01/31/21

     4,600,000     4,526,216  

Interactive Data Corp.

              

4.75% due 05/02/21

     4,438,875     4,412,508  

Charter Communications Operating LLC

              

4.25% due 09/10/21

     4,100,000     4,085,076  

Univision Communications, Inc.

              

4.00% due 03/01/20

     2,991,879     2,933,926  

Live Nation Worldwide, Inc.

              

3.50% due 08/14/20

     2,970,000     2,930,083  

Cumulus Media, Inc.

              

4.25% due 12/23/20

     2,314,885     2,273,402  

Virgin Media Investment Holdings Ltd.

              

3.50% due 06/07/20

     2,000,000     1,945,460  

Anaren, Inc.

              

5.50% due 02/18/21

     1,588,000     1,576,090  

9.25% due 08/18/21

     275,000     273,625  

Level 3 Communications, Inc.

              

4.00% due 08/01/19

     750,000     735,938  

Clientlogic Corp.

              

7.48% due 01/30/17

     250,000     250,418  
             
Total Communications           111,440,814  
             
               
CONSUMER, NON-CYCLICAL - 8.2%              

Albertson’s (Safeway) Holdings LLC

              

5.50% due 08/25/21

     11,700,000     11,636,587  

CTI Foods Holding Co. LLC

              

8.25% due 06/28/21

     8,650,000     8,682,438  

4.50% due 06/28/20

     1,336,500     1,328,147  

Performance Food Group

              

6.25% due 11/14/19

     9,871,471     9,834,453  

ABG Intermediate Holdings 2 LLC

              

5.50% due 05/27/21

     8,457,500     8,415,213  

Dole Food Company, Inc.

              

4.50% due 11/01/18

     7,833,333     7,745,208  

Reddy Ice Holdings, Inc.

              

6.75% due 04/01/195

     4,841,225     4,574,958  

10.75% due 10/01/195

     2,000,000     1,780,000  

Grocery Outlet, Inc.

              

6.50% due 12/17/18

     5,462,051     5,445,009  

Arctic Glacier Holdings, Inc.

              

5.00% due 05/10/19

     5,447,906     5,366,187  

Alliance Boots Ltd.

              

3.48% due 07/09/15

   GBP 2,986,900     4,832,352  

Hearthside Foods

              

4.50% due 06/02/21

     3,042,375     3,022,082  

Hostess Brands

              

6.75% due 04/09/20

     2,786,000     2,841,720  

Akorn, Inc.

              

4.50% due 04/16/21

     2,800,000     2,779,868  

Serta Simmons Holdings LLC

              

4.25% due 10/01/19

     2,736,956     2,707,889  

Continental Foods

              

4.33% due 08/20/21

   EUR 2,000,000     2,500,436  

DS Waters of America, Inc.

              

5.25% due 08/30/20

     2,475,000     2,499,750  

Ceramtec GMBH

              

4.25% due 08/30/20

     2,262,989     2,238,957  

Mitel Networks Corp.

              

5.25% due 01/31/20

     2,047,405     2,050,824  

NES Global Talent

              

6.50% due 10/03/19

     1,962,500     1,942,875  

AdvancePierre Foods, Inc.

              

5.75% due 07/10/17

     1,458,936     1,458,323  

9.50% due 10/10/17

     491,000     483,635  

DJO Finance LLC

              

4.25% due 09/15/17

     1,905,419     1,889,146  

Fender Musical Instruments Corp.

              

5.75% due 04/03/19

     1,333,743     1,328,741  

Birds Eye Iglo Group Ltd.

              

4.26% due 06/30/20

   EUR 1,000,000     1,240,568  

Aramark Corp.

              

3.25% due 02/24/21

     1,213,900     1,188,869  

Catalent Pharma Solutions, Inc.

              

4.50% due 05/20/21

     1,175,516     1,167,922  

Healthport, Inc.

              

5.25% due 10/04/19

     744,375     738,792  

Rite Aid Corp.

              

5.75% due 08/21/20

     500,000     505,625  

Reynolds Group Holdings

              

4.00% due 12/01/18

     491,287     485,638  

Targus Group International, Inc.

              

12.00% due 05/24/165

     229,401     186,389  
             
Total Consumer, Non-cyclical           102,898,601  
             
               
BASIC MATERIALS - 3.0%              

Chromaflo Technologies

              

4.50% due 12/02/19

     11,661,875     11,516,102  

WR Grace & Co.

              

3.00% due 02/03/21

     6,760,488     6,697,953  

Royal Adhesives and Sealants

              

5.50% due 07/31/18

     4,947,867     4,966,421  

Minerals Technologies, Inc.

              

4.00% due 05/07/21

     4,206,558     4,167,142  

CPG International, Inc.

              

4.75% due 09/30/20

     3,691,700     3,670,177  

Ennis-Flint

              

4.25% due 03/31/21

     2,089,500     2,026,815  

7.75% due 09/30/21

     550,000     529,375  

Berry Plastics Corp.

              

3.50% due 02/08/20

     1,088,945     1,059,609  

3.75% due 01/06/21

     895,500     874,348  

Fortescue Metals Group Ltd.

              

3.75% due 06/30/19

     990,000     968,190  

Hoffmaster Group, Inc.

              

6.28% due 05/09/195

     500,000     445,930  

Atkore International, Inc.

              

7.75% due 10/09/21

     400,000     396,000  
             
Total Basic Materials           37,318,062  
             

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 17

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               
ENERGY - 1.8%              

Floatel International Ltd.

              

6.00% due 06/27/20

   $ 6,716,250   $ 6,581,925  

PSS Companies

              

5.50% due 01/28/20

     5,726,942     5,698,307  

Pacific Drilling

              

4.50% due 05/18/18

     5,676,888     5,480,581  

Panda Temple II Power

              

7.25% due 04/03/19

     4,500,000     4,590,000  

EP Energy LLC

              

4.50% due 04/30/19

     281,250     279,579  
             
Total Energy           22,630,392  
             
               
UTILITIES - 1.0%              

Astoria Generating Company Acquisitions LLC

              

9.25% due 10/26/17

     6,319,091     6,429,675  

Expro Holdings UK 3 Ltd.

              

5.75% due 08/12/21

     5,950,000     5,917,751  
             
Total Utilities           12,347,426  
             
Total Senior Floating Rate Interests              

(Cost $966,574,785)

           953,490,243  
             
               
ASSET BACKED SECURITIES†† - 10.3%              

Gramercy Real Estate CDO 2007-1 Ltd.

              

0.51% due 08/15/562,3

     11,257,820     9,921,517  

Castlelake Aircraft Securitization Trust 2014-1

              

5.25% due 02/15/29

     4,237,998     4,254,102  

7.50% due 02/15/29

     3,122,735     3,126,483  

Cedar Woods CRE CDO Ltd. 2006-1A

              

0.42% due 07/25/51

     8,099,793     6,935,043  

GreenPoint Mortgage Funding Trust 2005-HE4

              

0.86% due 07/25/302

     7,300,000     6,833,975  

RAIT CRE CDO I Ltd. 2006-1X

              

0.48% due 11/20/46

     6,250,723     5,616,900  

N-Star REL CDO VIII Ltd. 2006-8A

              

0.51% due 02/01/412,3

     3,250,000     2,923,375  

0.44% due 02/01/412,3

     1,664,835     1,596,743  

N-Star Real Estate CDO IX Ltd.

              

0.47% due 02/01/415

     4,495,054     4,312,106  

KKR Financial CLO 2007-1 Ltd.

              

2.48% due 05/15/212,3

     4,100,000     4,020,460  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2006-OPT1

              

0.41% due 04/25/362

     4,300,000     3,870,899  

CIT Mortgage Loan Trust 2007-1

              

1.60% due 10/25/372,3

     3,400,000     3,158,760  

Newstar Commercial Loan Funding 2013-1 LLC

              

4.78% due 09/20/232,3

     2,750,000     2,700,225  

5.53% due 09/20/232,3

     250,000     249,375  

Jasper CLO Ltd. 2005-1A

              

1.14% due 08/01/172,3

     3,000,000     2,868,300  

Halcyon Loan Advisors Funding 2012-1 Ltd.

              

3.23% due 08/15/232,3

     2,600,000     2,554,760  

ALM XIV Ltd. 2014-14A

              

3.68% due 07/28/262,3

     2,650,000     2,501,070  

Lehman XS Trust 2007-9

              

0.27% due 06/25/372

     2,743,806     2,475,997  

Fortress Credit Opportunities V CLO Ltd. 2014-5A

              

4.73% due 10/15/262,3

     2,500,000     2,444,750  

Wachovia Asset Securitization Issuance II

              

LLC 2007-HE1 Trust

              

0.29% due 07/25/372,3

     2,726,563     2,391,632  

Tricadia CDO 2006-6 Ltd.

              

0.79% due 11/05/412,3

     1,750,000     1,654,800  

0.99% due 11/05/412,3

     550,000     505,340  

TCW Global Project Fund III Ltd. 2005-1A

              

0.88% due 09/01/17†††,2,3

     1,750,000     1,684,550  

1.08% due 09/01/17†††,2,3

     500,000     428,900  

GSAMP Trust 2005-HE6

              

0.59% due 11/25/352

     2,250,000     2,071,694  

Duane Street CLO IV Ltd. 2007-4A

              

2.48% due 11/14/212,3

     2,000,000     1,934,400  

Highland Park CDO I Ltd. 2006-1A

              

0.56% due 11/25/512,3

     1,932,775     1,843,094  

Copper River CLO Ltd. 2007-1A

              

1.73% due 01/20/212,3

     1,500,000     1,370,700  

1.03% due 01/20/212,3

     500,000     468,350  

Acis CLO 2013-2 Ltd.

              

4.08% due 10/14/222,3

     1,800,000     1,738,620  

Rockwall CDO II Ltd. 2007-1A

              

0.49% due 08/01/242,3

     1,740,241     1,665,584  

DIVCORE CLO Ltd. 2013-1A B

              

4.05% due 11/15/32

     1,600,000     1,600,960  

MCF CLO I LLC 2013-1A

              

3.78% due 04/20/232,3

     1,500,000     1,483,950  

Drug Royalty II Limited Partnership 2 2014-1

              

3.48% due 07/15/233

     1,471,304     1,471,120  

Global Leveraged Capital Credit

              

Opportunity Fund 2006-1A

              

1.23% due 12/20/182,3

     1,288,000     1,244,852  

GSAA Home Equity Trust 2007-7

              

0.42% due 07/25/372

     1,377,290     1,168,438  

Grayson CLO Ltd. 2006-1A

              

0.65% due 11/01/212,3

     1,200,000     1,112,040  

Halcyon Structured Asset Management Long

              

Secured/Short Unsecured 2007-1 Ltd.

              

2.54% due 08/07/212,3

     1,100,000     1,085,370  

Cerberus Onshore II CLO LLC 2014-1A

              

4.23% due 10/15/232,3

     600,000     565,860  

3.73% due 10/15/232,3

     500,000     486,250  

Telos CLO 2007-2 Ltd.

              

2.43% due 04/15/222,3

     1,100,000     1,049,290  

Telos CLO Ltd. 2013-3A

              

4.48% due 01/17/242,3

     1,050,000     1,025,010  

New Century Home Equity Loan Trust 2004-4

              

0.95% due 02/25/352

     1,095,332     1,004,005  

Putnam Structured Product CDO 2002-1 Ltd.

              

0.83% due 01/10/382,3

     1,090,390     1,002,286  

Hewett’s Island CDO Ltd. 2007-6A

              

2.48% due 06/09/192,3

     1,000,000     996,200  

Gramercy Park CLO Ltd. 2014-1AR

              

4.28% due 07/17/232,3

     1,000,000     993,300  

Liberty CLO Ltd. 2005-1A

              

0.74% due 11/01/172,3

     1,000,000     990,200  

Salus CLO 2012-1 Ltd. 2013-1AN

              

6.98% due 03/05/212,3

     1,000,000     988,800  

Acis CLO 2013-1 Ltd.

              

4.73% due 04/18/242,3

     1,000,000     986,200  

 
18 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

COA Summit CLO Limited 2014-1

              

4.09% due 04/20/232,3

   $ 1,000,000   $ 984,900  

ARES XXVI CLO Ltd. 2013-1A

              

due 04/15/253,8

     1,250,000     943,375  

NewStar Commercial Loan Trust 2007-1

              

1.53% due 09/30/222,3

     500,000     472,850  

2.53% due 09/30/222,3

     500,000     470,450  

Churchill Financial Cayman Ltd. 2007-1A

              

2.83% due 07/10/192,3

     1,000,000     937,700  

West Coast Funding Ltd. 2006-1A

              

0.38% due 11/02/412,3

     865,660     849,645  

Aerco Ltd. 2000-2A

              

0.61% due 07/15/252

     1,546,568     835,147  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2007-BC1

              

0.28% due 02/25/372

     900,000     777,946  

Garrison Funding 2013-2 Ltd.

              

4.88% due 09/25/232,3

     750,000     742,575  

Shackleton II CLO Ltd. 2012-2A

              

4.28% due 10/20/232,3

     750,000     740,175  

Airplanes Pass Through Trust 2001-1A

              

0.70% due 03/15/192

     1,705,538     735,513  

Westchester CLO Ltd. 2007-1A

              

0.58% due 08/01/222,3

     750,000     714,450  

Northwoods Capital VII Ltd. 2006-7A

              

1.78% due 10/22/212,3

     700,000     689,360  

KKR Financial CLO Ltd.

              

5.23% due 05/15/21

     650,000     648,895  

NewStar Arlington Senior Loan

              

Program LLC 2014-1A

              

3.53% due 07/25/252,3

     600,000     584,640  

ACA CLO 2007-1 Ltd.

              

1.18% due 06/15/222,3

     575,000     542,973  

CIFC Funding 2012-II Ltd.

              

4.48% due 12/05/242,3

     500,000     500,050  

Cerberus Offshore Levered I, LP 2012-1A

              

6.23% due 11/30/182,3

     250,000     250,050  

4.98% due 11/30/182,3

     250,000     249,925  

Gleneagles CLO Ltd. 2005-1A

              

1.14% due 11/01/172,3

     500,000     479,700  

Kingsland III Ltd. 2006-3A

              

1.83% due 08/24/212,3

     500,000     475,800  

Pangaea CLO Ltd. 2007-1A

              

0.73% due 10/21/212,3

     500,000     475,550  

Westwood CDO I Ltd. 2007-1A

              

0.90% due 03/25/212,3

     500,000     464,050  

Kingsland IV Ltd. 2007-4A

              

1.68% due 04/16/212,3

     500,000     453,450  

MCF CLO III LLC 2014-3A

              

3.46% due 01/20/242,3

     500,000     452,050  

Drug Royalty Limited Partnership 1 2012-1

              

5.48% due 07/15/242,3

     435,385     449,564  

Babcock & Brown Air Funding I Ltd. 2007-1A

              

0.45% due 11/14/332,3

     466,193     396,264  

Northwind Holdings LLC 2007-1A

              

1.01% due 12/01/372,3

     435,207     396,038  

ACS 2007-1 Pass Through Trust

              

0.47% due 06/14/372,3

     385,935     377,251  

OFSI Fund Ltd. 2006-1A

              

1.08% due 09/20/192,3

     370,000     357,198  

Eastland CLO Ltd. 2007-1A

              

0.64% due 05/01/222,3

     350,000     326,095  

Asset Backed Securities Corporation

              

Home Equity Loan Trust Series 2004-HE8

              

1.20% due 12/25/342

     331,772     310,169  

Raspro Trust 2005-1A

              

0.63% due 03/23/242,3

     266,550     261,885  

Ivy Hill Middle Market Credit Fund Ltd. 2011-3A

              

6.73% due 01/15/222,3

     250,000     250,000  

Newstar Commercial Loan Funding 2014-1 LLC

              

5.07% due 04/20/252,3

     250,000     246,500  

Credit Card Pass-Through Trust 2012-BIZ

              

0.00% due 12/15/493,7

     278,095     240,274  

Black Diamond CLO 2005-2 Delaware Corp.

              

2.03% due 01/07/182,3

     250,000     240,175  

Great Lakes CLO 2014-1 Ltd.

              

4.43% due 04/15/252,3

     250,000     238,975  

Diversified Asset Securitization

              

Holdings II, LP 2000-1A

              

0.72% due 09/15/352,3

     207,760     203,418  

Structured Asset Receivables Trust Series 2005-1

              

0.73% due 01/21/152,3

     110,517     106,517  

Atlas Air 1999-1 Class A-1 Pass Through Trust 991A

              

7.20% due 01/02/195

     77,989     81,693  

Vega Containervessel plc 2006-1A

              

5.56% due 02/10/213

     38,614     37,989  
             
Total Asset Backed Securities              

(Cost $124,687,551)

           129,367,859  
             
               
CORPORATE BONDS††,6 - 7.2%              
               
ENERGY - 2.1%              

Crestwood Midstream Partners Limited

              

Partnership / Crestwood Midstream

              

Finance Corp.

              

6.00% due 12/15/20

     6,300,000     6,331,500  

Unit Corp.

              

6.63% due 05/15/21

     4,000,000     4,009,999  

Legacy Reserves Limited Partnership /

              

Legacy Reserves Finance Corp.

              

8.00% due 12/01/20

     2,750,000     2,860,000  

Regency Energy Partners, LP /

              

Regency Energy Finance Corp.

              

8.38% due 06/01/19

     2,600,000     2,756,000  

Rosetta Resources, Inc.

              

5.88% due 06/01/22

     2,700,000     2,689,875  

BreitBurn Energy Partners LP /

              

BreitBurn Finance Corp.

              

7.88% due 04/15/22

     2,000,000     2,025,000  

Ultra Petroleum Corp.

              

5.75% due 12/15/183

     1,750,000     1,758,750  

Atlas Energy Holdings Operating Company

              

LLC / Atlas Resource Finance Corp.

              

9.25% due 08/15/21

     1,500,000     1,530,000  

Penn Virginia Resource Partners Limited

              

Partnership / Penn Virginia Resource

              

Finance Corp.

              

8.38% due 06/01/20

     1,340,000     1,460,600  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 19

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Gibson Energy, Inc.

              

6.75% due 07/15/213

   $ 1,055,000   $ 1,118,300  

Bill Barrett Corp.

              

7.63% due 10/01/19

     800,000     826,000  
             
Total Energy           27,366,024  
             
               
FINANCIAL - 1.8%              

Icahn Enterprises Limited Partnership /

              

Icahn Enterprises Finance Corp.

              

5.88% due 02/01/22

     5,000,000     5,000,000  

4.88% due 03/15/19

     1,750,000     1,723,750  

3.50% due 03/15/17

     1,000,000     990,000  

Citigroup, Inc.

              

5.35%2,4

     4,000,000     3,740,000  

Credit Acceptance Corp.

              

6.13% due 02/15/213

     3,100,000     3,154,250  

Cabot Financial Luxembourg S.A.

              

6.50% due 04/01/213

   GBP 1,300,000     2,020,148  

Icahn Enterprises, LP / Icahn

              

Enterprises Finance Corp.

              

6.00% due 08/01/20

     1,700,000     1,746,750  

Ally Financial, Inc.

              

3.50% due 01/27/19

     1,750,000     1,701,875  

Nationstar Mortgage LLC /

              

Nationstar Capital Corp.

              

6.50% due 07/01/21

     1,050,000     1,000,125  

Oxford Finance LLC / Oxford Finance

              

Company-Issuer, Inc.

              

7.25% due 01/15/183

     650,000     676,000  

Fidelity & Guaranty Life Holdings, Inc.

              

6.38% due 04/01/213

     450,000     471,375  

LCP Dakota Fund

              

10.00% due 08/17/155

     28,800     28,800  
             
Total Financial           22,253,073  
             
               
COMMUNICATIONS - 0.7%              

Alcatel-Lucent USA, Inc.

              

6.75% due 11/15/203

     3,000,000     3,045,000  

Virgin Media Secured Finance plc

              

5.38% due 04/15/213

     1,800,000     1,813,500  

MDC Partners, Inc.

              

6.75% due 04/01/203

     1,000,000     1,030,000  

SITEL LLC / Sitel Finance Corp.

              

11.00% due 08/01/173

     670,000     693,450  

CyrusOne Limited Partnership /

              

CyrusOne Finance Corp.

              

6.38% due 11/15/22

     600,000     627,000  

Avaya, Inc.

              

7.00% due 04/01/193

     610,000     591,700  

UPCB Finance VI Ltd.

              

6.88% due 01/15/223

     530,000     565,775  
             
Total Communications           8,366,425  
             
               
CONSUMER, NON-CYCLICAL - 0.6%              

Premier Foods Finance plc

              

5.56% due 03/16/202,3

   GBP 2,750,000     4,102,821  

Central Garden and Pet Co.

              

8.25% due 03/01/18

     2,000,000     2,035,000  

Vector Group Ltd.

              

7.75% due 02/15/21

     1,000,000     1,052,500  
             
Total Consumer, Non-cyclical           7,190,321  
             
               
INDUSTRIAL - 0.5%              

BMBG Bond Finance SCA

              

5.20% due 10/15/202,3

   EUR 4,000,000     5,098,832  

Unifrax I LLC / Unifrax Holding Co.

              

7.50% due 02/15/193

     1,525,000     1,540,250  
             
Total Industrial           6,639,082  
             
               
CONSUMER, CYCLICAL - 0.5%              

GRD Holdings III Corp.

              

10.75% due 06/01/193

     3,680,000     4,057,200  

Checkers Drive-In Restaurants, Inc.

              

11.00% due 12/01/173

     1,000,000     1,095,000  

Men’s Wearhouse, Inc.

              

7.00% due 07/01/22

     525,000     530,250  
             
Total Consumer, Cyclical           5,682,450  
             
               
DIVERSIFIED - 0.3%              

Harbinger Group, Inc.

              

7.75% due 01/15/22

     1,975,000     1,960,187  

7.88% due 07/15/19

     490,000     521,850  

Opal Acquisition, Inc.

              

8.88% due 12/15/213

     1,775,000     1,832,688  
             
Total Diversified           4,314,725  
             
               
TECHNOLOGY - 0.3%              

NCR Corp.

              

6.38% due 12/15/23

     1,800,000     1,885,500  

Eagle Midco, Inc.

              

9.00% due 06/15/183

     1,400,000     1,429,750  
             
Total Technology           3,315,250  
             
               
BASIC MATERIALS - 0.2%              

TPC Group, Inc.

              

8.75% due 12/15/203

     1,555,000     1,652,188  

Mirabela Nickel Ltd.

              

9.50% due 05/20/19†††,5

     1,063,000     1,063,000  

1.00% due 09/10/44†††,5

     25,316     —  
             
Total Basic Materials           2,715,188  
             
               
OTHER - 0.1%              

Ultra Resources, Inc.

              

4.66% due 10/12/22†††,5

     1,800,000     1,666,080  
             
UTILITIES - 0.1%              

LBC Tank Terminals Holding Netherlands BV

              

6.88% due 05/15/233

     630,000     670,950  
             
Total Corporate Bonds              

(Cost $91,149,664)

           90,179,568  
             
               
COLLATERALIZED MORTGAGE OBLIGATIONS†† - 2.8%              

LSTAR Securities Investment Trust 2014-1

              

3.25% due 09/01/212,9

     6,500,000     6,500,000  

HarborView Mortgage Loan Trust 2006-12

              

0.34% due 01/19/382

     4,455,696     3,803,307  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2006-AR9 Trust

              

0.96% due 11/25/462

     4,896,104     3,472,625  

Nomura Resecuritization Trust 2012-1R

              

0.59% due 08/27/472,3

     3,588,284     3,319,163  

IndyMac INDX Mortgage Loan Trust 2006-AR4

              

0.37% due 05/25/462

     3,763,939     3,230,721  

 
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 
FLOATING RATE STRATEGIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Structured Asset Mortgage Investments II

              

Trust 2006-AR1

              

0.38% due 02/25/362

   $ 3,732,066   $ 3,194,171  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2007-OA4 Trust

              

0.88% due 04/25/472

     3,901,788     2,959,584  

Lehman XS Trust Series 2006-16N

              

0.34% due 11/25/462

     3,350,229     2,787,973  

GreenPoint Mortgage Funding Trust 2006-AR1

              

0.44% due 02/25/362

     3,133,624     2,629,627  

Morgan Stanley Re-REMIC Trust 2010-R5

              

0.54% due 06/26/362,3

     1,510,103     1,123,758  

Bear Stearns Mortgage Funding Trust 2007-AR5

              

0.32% due 06/25/472

     964,763     790,805  

Alliance Bancorp Trust 2007-OA1

              

0.39% due 07/25/372

     944,509     652,540  
             
Total Collateralized Mortgage Obligations              

(Cost $33,856,770)

           34,464,274  
             
               
MORTGAGE BACKED SECURITIES†† - 0.2%              

SRERS Funding Ltd. 2011-RS

              

0.40% due 05/09/462,3

     1,578,636     1,503,651  

HSI Asset Securitization Corporation

              

Trust 2007-WF1

              

0.32% due 05/25/372

     1,531,171     1,428,139  
             
Total Mortgage Backed Securities              

(Cost $2,801,354)

           2,931,790  
             
               
COMMERCIAL PAPER†† - 4.0%              

Bemis Co., Inc.

              

0.23% due 10/01/14

     10,000,000     10,000,000  

Diageo Capital PLC

              

0.24% due 10/02/14

     10,000,000     9,999,933  

Northeast Utilities

              

0.22% due 10/03/14

     10,000,000     9,999,878  

American Water Capital Corp.

              

0.23% due 10/07/14

     10,000,000     9,999,617  

Pentair Finance SA

              

0.27% due 10/21/14

     10,000,000     9,998,500  
             
Total Commercial Paper              

(Cost $49,997,928)

           49,997,928  
             
               
Total Investments - 103.3%              

(Cost $1,302,354,779)

         $ 1,291,829,151  
             
               
Other Assets & Liabilities, net - (3.3)%           (40,776,391 )
             
               
Total Net Assets - 100.0%         $ 1,251,052,760  
 

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS††

            Settlement   Settlement   Value at   Net Unrealized  
Counterparty   Contracts to Sell   Currency   Date   Value   September 30, 2014   Appreciation  
   
BNY Mellon   62,300,000   EUR   10/07/14   $81,929,566   $78,696,895   $ 3,232,671  
BNY Mellon   33,500,000   GBP   10/07/14   55,146,695   54,309,206     837,489  
BNY Mellon   480,000   AUD   10/07/14   447,576   420,022     27,554  
                           
                        $ 4,097,714  
                           

*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Security with no rate was unsettled at September 30, 2014.
2   Variable rate security. Rate indicated is rate effective at September 30, 2014.
3   Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $130,358,641 (cost $127,963,763), or 10.4% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4   Perpetual maturity.
5   Illiquid security.
6   The face amount is denominated in U.S. Dollars unless otherwise indicated.
7   Zero coupon rate security.
8   Residual interest.
9   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $6,500,000 (cost $6,500,000), or 0.5% of total net assets — See Note 16.
    plc — Public Limited Company
    REIT — Real Estate Investment Trust

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 21

FLOATING RATE STRATEGIES FUND    

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $1,302,354,779)

   $ 1,291,829,151  
Foreign currency, at value        
(cost $239,064)     237,455  
Cash     4,944,685  
Unrealized appreciation on forward foreign        

currency exchange contracts

     4,097,714  
Prepaid expenses     98,241  
Receivables:        

Securities sold

     17,316,929  

Interest

     4,812,793  

Fund shares sold

     2,556,736  

Foreign taxes reclaim

     32,436  
       
Total assets     1,325,926,140  
       
         
LIABILITIES:        
Unfunded loan commitments, at value        

(commitment fees received $2,405,979)

     2,068,066  
Payable for:        

Securities purchased

     66,065,679  

Fund shares redeemed

     4,335,409  

Distributions to shareholders

     1,547,576  

Management fees

     521,276  

Distribution and service fees

     187,984  

Fund accounting/administration fees

     101,163  

Transfer agent/maintenance fees

     19,273  

Trustees’ fees*

     7,694  

Miscellaneous

     19,260  
       
Total liabilities     74,873,380  
       
NET ASSETS   $ 1,251,052,760  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 1,254,561,312  
Distributions in excess of net investment income     (510,475 )
Accumulated net realized gain on investments     3,252,762  
Net unrealized depreciation on investments     (6,250,839 )
       
Net assets   $ 1,251,052,760  
       
A-CLASS:        
Net assets   $ 365,207,068  
Capital shares outstanding     13,768,582  
Net asset value per share     $26.52  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $27.84  
       
C-CLASS:        
Net assets   $ 132,370,158  
Capital shares outstanding     4,992,678  
Net asset value per share     $26.51  
       
INSTITUTIONAL CLASS:        
Net assets   $ 753,475,534  
Capital shares outstanding     28,386,449  
Net asset value per share     $26.54  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Interest (net of foreign withholding tax of $110,161)   $ 63,500,953  
Dividends     71,411  
       

Total investment income

     63,572,364  
       
         
EXPENSES:        
Management fees     8,054,181  
Transfer agent/maintenance fees:        

A-Class

     444,613  

C-Class

     89,736  

Institutional Class

     239,955  
Distribution and service fees:        

A-Class

     1,104,711  

C-Class

     1,420,881  
Fund accounting/administration fees     1,177,133  
Trustees’ fees*     122,885  
Line of credit expense     99,205  
Interest expense     34,981  
Custodian fees     28,750  
Tax expense     26  
Miscellaneous     767,530  
       

Total expenses

     13,584,587  
Less:        
Expenses waived by Adviser     (402,751 )
Expenses waived by Transfer Agent        

A-Class

     (434,334 )

C-Class

     (81,140 )

Institutional Class

     (235,153 )
Expenses waived by Distributor        

A-Class

     (39,780 )

C-Class

     (12,886 )
       
Total expenses waived     (1,206,044 )
       
Net expenses     12,378,543  
       
Net investment income     51,193,821  
       
       
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     4,456,341  

Foreign currency

     143,413  

Forward foreign currency exchange contracts

     3,875,634  
       
Net realized gain     8,475,388  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (12,465,930 )

Forward foreign currency exchange contracts

     4,097,714  

Foreign currency

     (56,544 )
       
Net change in unrealized appreciation (depreciation)     (8,424,760 )
       
Net realized and unrealized loss     50,628  
       
Net increase in net assets resulting        

from operations

   $ 51,244,449  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
22  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

 FLOATING RATE STRATEGIES FUND                
                 
STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 51,193,821     $ 22,811,058  
Net realized gain on investments     8,475,388       1,357,739  
Net change in unrealized appreciation (depreciation) on investments     (8,424,760 )     47,569  
 
Net increase in net assets resulting from operations     51,244,449       24,216,366  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (19,618,301 )     (8,633,219 )

C-Class

     (5,268,652 )     (2,743,608 )

Institutional Class

     (31,207,426 )     (11,457,765 )
Net realized gains                

A-Class

     (760,820 )     (132,969 )

C-Class

     (250,718 )     (75,574 )

Institutional Class

     (1,010,452 )     (201,041 )
 
Total distributions to shareholders     (58,116,369 )     (23,244,176 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     346,835,950       402,666,976  

C-Class

     58,742,934       104,350,559  

Institutional Class

     664,581,990       475,637,894  
Distributions reinvested                

A-Class

     15,511,424       6,868,671  

C-Class

     4,571,714       2,445,945  

Institutional Class

     25,876,740       10,574,134  
Cost of shares redeemed                

A-Class

     (374,228,993 )     (75,616,322 )

C-Class

     (51,062,726 )     (10,919,310 )

Institutional Class

     (389,646,851 )     (100,967,437 )
 
Net increase from capital share transactions     301,182,182       815,041,110  
 
Net increase in net assets     294,310,262       816,013,300  
                 
NET ASSETS:                

Beginning of year

     956,742,498       140,729,198  
 

End of year

   $ 1,251,052,760     $ 956,742,498  
 
Distributions in excess of net investment income at end of year   $ (510,475 )   $ (1,455 )
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     12,939,395       15,101,427  

C-Class

     2,194,462       3,917,569  

Institutional Class

     24,773,852       17,831,851  
Shares issued from reinvestment of distributions                

A-Class

     579,106       257,605  

C-Class

     170,795       91,877  

Institutional Class

     965,789       396,547  
Shares redeemed                

A-Class

     (13,963,500 )     (2,837,771 )

C-Class

     (1,905,834 )     (409,799 )

Institutional Class

     (14,540,760 )     (3,804,751 )
 
Net increase in shares     11,213,305       30,544,555  
 

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  23


  FLOATING RATE STRATEGIES FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Period Ended  
    September 30,     September 30,     September 30,  
A-Class   2014     2013     2012a  
 
Per Share Data                  
Net asset value, beginning of period   $26.62     $26.10     $25.00  
 
                   
Income (loss) from investment operations:                  
Net investment income (loss)b   1.10     1.30     1.09  
Net gain (loss) on investments (realized and unrealized)   .05     .65     .97  
     
Total from investment operations   1.15     1.95     2.06  
 
Less distributions from:                  
Net investment income   (1.20 )   (1.37 )   (.96 )
Net realized gains   (.05 )   (.06 )   –  
     
Total distributions   (1.25 )   (1.43 )   (.96 )
 
Net asset value, end of period   $26.52     $26.62     $26.10  
     
                   
 
Total Returnd   4.42%     7.61%     8.37%  
 
Ratios/Supplemental Data                  
Net assets, end of period (in thousands)   $365,207     $378,324     $44,175  
 
Ratios to average net assets:                  
Net investment income (loss)   4.10%     4.90%     5.13%  
Total expenses   1.18%     1.19%     1.39%  
Net expensesc,e   1.04%     1.05%     1.06%  
 
Portfolio turnover rate   58%     50%     61%  
                   
    Year Ended     Year Ended     Period Ended  
    September 30,     September 30,     September 30,  
C-Class   2014     2013     2012a  
 
Per Share Data                  
Net asset value, beginning of period   $26.60     $26.09     $25.00  
 
Income (loss) from investment operations:                  
Net investment income (loss)b   .90     1.11     .93  
Net gain (loss) on investments (realized and unrealized)   .06     .63     .98  
     
Total from investment operations   .96     1.74     1.91  
 
Less distributions from:                  
Net investment income   (1.00 )   (1.17 )   (.82 )
Net realized gains   (.05 )   (.06 )   –  
     
Total distributions   (1.05 )   (1.23 )   (.82 )
 
Net asset value, end of period   $26.51     $26.60     $26.09  
     
                   
 
Total Returnd   3.64%     6.77%     7.72%  
 
Ratios/Supplemental Data                  
Net assets, end of period (in thousands)   $132,370     $120,606     $24,358  
 
Ratios to average net assets:                  
Net investment income (loss)   3.35%     4.19%     4.36%  
Total expenses   1.89%     1.93%     2.06%  
Net expensesc,e   1.79%     1.81%     1.80%  
 
Portfolio turnover rate   58%     50%     61%  

 
24  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

 FLOATING RATE STRATEGIES FUND

FINANCIAL HIGHLIGHTS  (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Period Ended  
    September 30,     September 30,     September 30,  
Institutional Class   2014     2013     2012a  
 
Per Share Data                  
Net asset value, beginning of period   $26.64     $26.12     $25.00  
 
Income (loss) from investment operations:                  
Net investment income (loss)b   1.16     1.36     1.10  
Net gain (loss) on investments (realized and unrealized)   .06     .65     1.02  
     
Total from investment operations   1.22     2.01     2.12  
 
Less distributions from:                  
Net investment income   (1.27 )   (1.43 )   (1.00 )
Net realized gains   (.05 )   (.06 )   –  
     
Total distributions   (1.32 )   (1.49 )   (1.00 )
 
Net asset value, end of period   $26.54     $26.64     $26.12  
     
                   
 
Total Returnd   4.67%     7.86 %   8.59%  
 
Ratios/Supplemental Data                  
Net assets, end of period (in thousands)   $753,476     $457,813     $72,197  
 
Ratios to average net assets:                  
Net investment income (loss)   4.32%     5.12 %   5.16%  
Total expenses   0.87%     0.86 %   0.99%  
Net expensesc,e   0.80%     0.81 %   0.80%  
 
Portfolio turnover rate   58%     50 %   61%  

a   Since commencement of operations: November 30, 2011. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c   Net expense information reflects the expense ratios after expense waivers.
d   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
e   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratios for the periods would be:

      09/30/14   09/30/13   09/30/12
   
  A-Class   1.02%   1.03%   1.01%
  C-Class   1.77%   1.78%   1.76%
  Institutional Class   0.78%   0.79%   0.77%

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  25


MANAGERS’ COMMENTARY  (Unaudited) September 30, 2014
 

To Our Shareholders

Guggenheim High Yield Fund (the "Fund") is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Jeffrey B. Abrams, Senior Managing Director and Portfolio Manager; and Kevin H. Gundersen, Senior Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the "Period"), the Guggenheim High Yield Fund returned 9.18%1, compared with the 7.20% return of its benchmark, the Barclays U.S. Corporate High Yield Index.

The investment objective of the Fund 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, higher risk debt securities rated below the top four long-term rating categories by a nationally recognized statistical rating organization.

The Fund is composed primarily of high yield bonds and bank loans. The allocation mix varies according to the relative attractiveness of the two asset classes. High yield bonds for example averaged roughly 70%, but represented a higher proportion in the middle of the Period. The bank loan allocation averaged roughly 25% of the Fund over the Period.

The leveraged credit market performed well for the 12 months ended September 30, 2014, even as it contended with Treasury rate volatility and frothy valuations, as investors searched for yield amid generally declining interest rates.

Mid-way through the Period, the high yield sector began to appear overvalued relative to other asset classes. Bond spreads tightened to below their historical ex-recession average and approached all time lows. Fund inflows, which were strong early in the Period, began to slow and reverse in response to Treasury market volatility early in 2014. The last three months in the Period were particularly bumpy, with general spread widening, as markets tried to ascertain what the Fed might do about short-term interest rates, and risk appetite in the market waned.

September returns that slumped late in the month should be viewed in the context of one of the biggest new issuance months in history, with roughly $40 billion coming to market. Amidst the backdrop of increasing volatility and some risk aversion hangover from sell-offs earlier in the summer months, appetite in the market for the asset class began showing signs of fatigue.

The bank loan market has remained reasonably resilient due to strong demand from the collateralized loan obligation (CLO) market. On track to set a new annual record, CLO creation raised $93 billion through the first three quarters of 2014.

Even though U.S. economic data was mixed late in the Period, it had been strong since the beginning of 2014, and the improving health of the U.S. economy and low interest rates continue to underscore our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening should be viewed as buying opportunities. Skittish investor sentiment tends to affect high beta asset classes like high yield and equities to a larger degree than other asset classes. Our research, however, suggests there is no reason for credit concern in the near term.

The floating rate nature of bank loans and their position higher in the capital structure makes them a defensive asset class during periods of market/interest rate volatility. They function as an attractive asset as the credit cycle changes particularly as interest rates rise. When the interest rate environment in the U.S. is relatively stable, the Fund may incrementally add higher-yielding, longer-maturity assets to the portfolio as attractive new issues come to market. The Fund benefited from participation in new issues, many of which came at a concession to pricing of bonds trading in secondary market.

For the Period, the Fund outpaced the index through good credit selection, overweight or underweight stances relative to the index, some incremental exposure to investment grade assets that performed well, and due to timely moves between high yield and bank loan allocations. The Fund, for example, had lower exposure in the higher quality BB-rated segment and longer duration assets during late 2013 and the third quarter of 2014, when rates were rising or volatile, and a higher exposure when rates were falling during the early part of 2014.

The main detractor to Fund performance for the year was the impact of a large restricted equity position, which the Fund was unable to exit until the second quarter of 2014. The position was additive in the final months of 2013, but detracted in the first and early second quarters of 2014.

 
26  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY  (Unaudited) (concluded) September 30, 2014
 

The Fund’s outperformance was a result of a lower risk profile of the Fund compared with the market. The Fund’s exposure to floating rate assets (primarily bank loans), and shorter-maturity bonds acts as a buffer to market volatility. The Fund used market sell-offs to capture opportunities to buy issues we view as being cheap compared to inherent value.

We continue to see opportunity for strong returns in the high yield market, though we are conscious of a larger number of issues coming to market that exhibit lower credit quality and weaker security structures. The average credit quality of the portfolio remains B rated (S&P). Average security pricing declined slightly over the course of the year, helping keep the Fund’s yield stable. With the slight decline in the portfolio’s average price, taking par value as a base, the worst declines in price are likely behind us in the short run. We continue to target strong yields with a focus on containing risk exposure.

Our research suggests that macroeconomic indicators in the U.S. are pointing higher, which by itself would suggest a relaxation in accommodative monetary policy ahead–and therefore transmission of high real interest rates. Despite a strengthening U.S. economy, there is the potential that interest rates head lower in the near future.

Historically, credit spreads begin to widen approximately 80 months following the end of a recession, and September 2014 marks the 63rd month following the end of the last recession, indicating the potential for further spread tightening over the next 17 months. Credit cycles typically only end after corporate defaults start to spike, which typically starts to happen 12-24 months after the Federal Reserve begins raising short-term interest rates.


Performance displayed represents past performance which is no guarantee of future results.

1Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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)   September 30, 2014
 

HIGH YIELD FUND

OBJECTIVE:     Seeks high current income. Capital appreciation is a secondary objective.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
    % of
Rating   Total Investments
 
Fixed Income Instruments    

BBB

   5.7%

BB

   24.7%

B

   50.6%

CCC

   10.7%

NR

   1.3%
Other Instruments    

Preferred Stocks

   5.0%

Common Stocks

   2.0%
 
Total Investments   100.0%
 

The chart above reflects percentages of the value of total investments.

Inception Date:
 
A-Class   August 5, 1996
B-Class   August 5, 1996
C-Class   May 1, 2000
Institutional Class   July 11, 2008
     
Ten Largest Holdings (% of Total Net Assets)    
 
Opal Acquisition, Inc.   1.9%
Central Garden and Pet Co.   1.8%
GRD Holdings III Corp.   1.8%
Vector Group Ltd.   1.8%
BreitBurn Energy Partners LP/    

BreitBurn Finance Corp.

   1.7%
Endeavor Energy Resources. LP/    

EER Finance, Inc.

   1.6%
MDC Partners, Inc.   1.5%
Seaspan Corp.   1.5%
Flakt Woods   1.4%
Credit Acceptance Corp.   1.4%
 
Top Ten Total   16.4%
 

"Ten Largest Holdings" exclude any temporary cash or derivative investments.

* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
28   |   THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE  (Unaudited) (concluded)   September 30, 2014
 


Average Annual Returns*                  
Periods Ended September 30, 2014                  
    1 Year     5 Year     10 Year   
 
A-Class Shares   9.18%     9.38%     7.87%  
 
A-Class Shares with sales charge†   3.97%     8.32%     7.35%  
 
B-Class Shares   9.46%     9.68%     7.87%  
 
B-Class Shares with CDSC‡   4.46%     9.40%     7.87%  
 
C-Class Shares   8.46%     8.58%     7.09%  
 
C-Class Shares with CDSC§   7.46%     8.58%     7.09%  
 
Barclays U.S. Corporate High Yield Index   7.20%     10.57%     8.33%  
 
                   
                Since Inception  
    1 Year     5 Year     (07/11/08)  
 
Institutional Class Shares   9.50%     9.71%     10.26%  
 
Barclays U.S. Corporate High Yield Index   7.20%     10.57%     10.61%  
 

* 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. Corporate High Yield Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase
§ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  29

SCHEDULE OF INVESTMENTS   September 30, 2014
HIGH YIELD FUND    

      SHARES     VALUE
 
             
             
COMMON STOCKS†- 2.2%            
             
CONSUMER DISCRETIONARY - 1.8%            

Travelport LLC*

     107,757   $ 1,773,681

Metro-Goldwyn-Mayer, Inc.*††

     7,040     547,782
             
Total Consumer Discretionary           2,321,463
             
             
ENERGY - 0.2%            

Stallion Oilfield Holdings Ltd.*††

     8,257     275,206
             
FINANCIAL - 0.2%            

CIT Group, Inc.

     4,569     209,991
             
COMMUNICATIONS - 0.0%            

Cengage Learning Acquisitions, Inc.*††

     2,107     67,635
             
BASIC MATERIALS - 0.0%            

Mirabela Nickel Ltd.*

     1,044,540     60,354
             
DIVERSIFIED - 0.0%            

Leucadia National Corp.

     81     1,931
             
CONSUMER, NON-CYCLICAL - 0.0%            

Crimson Wine Group Ltd.*,6

     8     73
             
Total Common Stocks            

(Cost $2,916,907)

           2,936,653
             
             
PREFERRED STOCKS††- 5.2%            

Seaspan Corp.

            

6.38% due 04/30/19†

     80,000     2,047,200

Goldman Sachs Group, Inc.

            

5.50% †,1,2

     62,240     1,478,200

Morgan Stanley

            

6.38%* ,†,1,2

     46,000     1,153,220

Aspen Insurance Holdings Ltd.

            

5.95% †,1,2

     40,000     998,800

Kemper Corp.

            

7.38% due 02/27/54†

     39,000     996,450

Medianews Group, Inc.*

     11,074     362,674

U.S. Shipping Corp.*,6

     14,718     17,367
             
Total Preferred Stocks            

(Cost $7,170,957)

           7,053,911
             
             
      FACE      
      AMOUNT      
             
             
CORPORATE BONDS††,7 - 69.6%            
             
ENERGY - 19.3%            

Atlas Energy Holdings Operating Company LLC/

            

Atlas Resource Finance Corp.

            

9.25% due 08/15/21

   $ 1,300,000     1,326,000

7.75% due 01/15/213

     1,250,000     1,231,250

Legacy Reserves Limited Partnership/

            

Legacy Reserves Finance Corp.

            

6.63% due 12/01/21

     1,340,000     1,313,200

8.00% due 12/01/20

     965,000     1,003,600

BreitBurn Energy Partners LP/

            

BreitBurn Finance Corp.

            

7.88% due 04/15/223

     2,250,000     2,278,124

SandRidge Energy, Inc.

            

7.50% due 03/15/21

     1,000,000     975,000

8.13% due 10/15/22

     900,000     898,875

8.75% due 01/15/20

     295,000     303,850

Endeavor Energy Resources.

            

LP/EER Finance, Inc.

            

7.00% due 08/15/214

     2,100,000     2,163,000

Sabine Pass Liquefaction LLC

            

6.25% due 03/15/223

     1,250,000     1,315,625

5.75% due 05/15/24

     500,000     508,750

Bill Barrett Corp.

            

7.00% due 10/15/223

     1,100,000     1,091,750

7.63% due 10/01/193

     700,000     722,750

Atlas Pipeline Partners Limited Partnership/

            

Atlas Pipeline Finance Corp.

            

6.63% due 10/01/20

     1,000,000     1,022,500

5.88% due 08/01/23

     450,000     439,875

ContourGlobal Power Holdings S.A.

            

7.13% due 06/01/194

     1,300,000     1,287,000

Unit Corp.

            

6.63% due 05/15/213

     1,200,000     1,203,000

Crestwood Midstream Partners Limited

            

Partnership/Crestwood Midstream

            

Finance Corp.

            

6.13% due 03/01/22

     700,000     701,750

6.00% due 12/15/20

     400,000     402,000

Keane Group Holdings LLC

            

8.50% due 08/08/19†††,1,6

     750,000     735,225

8.50% due 08/08/19†††,1,6

     250,000     250,000

FTS International, Inc.

            

6.25% due 05/01/22

     900,000     884,250

Jones Energy Holdings LLC/

            

Jones Energy Finance Corp.

            

6.75% due 04/01/224

     850,000     850,000

Denbury Resources, Inc.

            

5.50% due 05/01/22

     800,000     792,000

California Resources Corp.

            

6.00% due 11/15/24

     600,000     616,500

CONSOL Energy, Inc.

            

5.88% due 04/15/22

     600,000     591,000

RSP Permian, Inc.

            

6.63% due 10/01/22

     550,000     553,438

Pacific Drilling S.A.

            

5.38% due 06/01/204

     500,000     457,500

Rosetta Resources, Inc.

            

5.88% due 06/01/22

     300,000     298,875

IronGate Energy Services LLC

            

11.00% due 07/01/184

     120,000     120,450

SemGroup, LP

            

8.75% due 11/15/15†††,6,9

     1,300,000     —
             
Total Energy           26,337,137
             
             
CONSUMER, NON-CYCLICAL - 10.3%            

Central Garden and Pet Co.

            

8.25% due 03/01/18

     2,450,000     2,492,874

Vector Group Ltd.

            

7.75% due 02/15/21

     2,330,000     2,452,325

R&R Ice Cream plc

            

8.25% due 05/15/204

   AUD 1,300,000     1,145,505

 
30 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 HIGH YIELD FUND    

      FACE      
      AMOUNT     VALUE
 
             

Bumble Bee Holdco SCA

            

9.63% due 03/15/184

   $ 1,100,000   $ 1,141,250

FTI Consulting, Inc.

            

6.00% due 11/15/223

     800,000     810,000

KeHE Distributors LLC/KeHE Finance Corp.

            

7.63% due 08/15/214

     750,000     795,000

ADT Corp.

            

6.25% due 10/15/21

     750,000     776,250

Reynolds Group Issuer Incorporated/Reynolds

            

Group Issuer LLC/Reynolds Group Issuer Lu

            

6.88% due 02/15/21

     700,000     738,500

Premier Foods Finance plc

            

6.50% due 03/15/214

   GBP 500,000     716,138

Symbion, Inc.

            

8.00% due 06/15/16

     475,000     492,813

American Seafoods Group

            

LLC/American Seafoods Finance, Inc.

            

10.75% due 05/15/164

     500,000     486,250

JBS USA LLC / JBS USA Finance, Inc.

            

5.88% due 07/15/244

     450,000     432,000

US Foods, Inc.

            

8.50% due 06/30/19

     395,000     418,799

Bumble Bee Holdings, Inc.

            

9.00% due 12/15/174

     350,000     366,625

Midas Intermediate Holdco II LLC/Midas

            

Intermediate Holdco II Finance, Inc.

            

7.88% due 10/01/224

     300,000     299,250

Spectrum Brands, Inc.

            

6.63% due 11/15/22

     225,000     236,250

Ceridian LLC/Comdata, Inc.

            

8.13% due 11/15/174

     200,000     200,250
           
Total Consumer, Non-cyclical           14,000,079
           
             
FINANCIAL - 8.4%            

Credit Acceptance Corp.

            

6.13% due 02/15/214

     1,900,000     1,933,250

Bank of America Corp.

            

4.20% due 08/26/24

     750,000     743,515

6.25%1,2

     650,000     645,734

Pacific Premier Bancorp, Inc.

            

5.75% due 09/03/248

     1,250,000     1,256,250

American Equity Investment Life

            

Holding Co.

            

6.63% due 07/15/21

     1,000,000     1,050,000

Citigroup, Inc.

            

6.30%1,2

     700,000     691,320

Wilton Re Finance LLC

            

5.88% due 03/30/331,4

     650,000     676,000

Ally Financial, Inc.

            

5.13% due 09/30/24

     650,000     637,000

Jefferies Finance LLC/JFIN Company-Issuer Corp.

            

7.38% due 04/01/204

     600,000     613,500

Kennedy-Wilson, Inc.

            

5.88% due 04/01/24

     550,000     552,750

Lock AS

            

7.00% due 08/15/21

   EUR 400,000     519,103

Lancashire Holdings Ltd.

            

5.70% due 10/01/224

     450,000     485,676

General Motors Financial Company, Inc.

            

4.38% due 09/25/21

     400,000     409,000

Majid AL Futtaim Holding

            

7.12% due 12/31/49

     300,000     326,415

Cabot Financial Luxembourg S.A.

            

6.50% due 04/01/214

   GBP 200,000     310,792

Icahn Enterprises Limited Partnership/Icahn

            

Enterprises Finance Corp.

            

5.88% due 02/01/22

     300,000     300,000

Fidelity & Guaranty Life Holdings, Inc.

            

6.38% due 04/01/214

     250,000     261,875
             
Total Financial           11,412,180
             
             
CONSUMER, CYCLICAL - 8.3%            

GRD Holdings III Corp.

            

10.75% due 06/01/194

     2,250,000     2,480,625

WMG Acquisition Corp.

            

6.75% due 04/15/224

     1,450,000     1,388,375

6.00% due 01/15/214

     600,000     607,500

5.63% due 04/15/224

     150,000     150,000

AmeriGas Finance LLC / AmeriGas Finance Corp.

            

7.00% due 05/20/223

     1,320,000     1,382,700

6.75% due 05/20/20

     650,000     676,000

Checkers Drive-In Restaurants, Inc.

            

11.00% due 12/01/174

     1,400,000     1,533,000

Guitar Center, Inc.

            

6.50% due 04/15/194

     1,040,000     936,000

DreamWorks Animation SKG, Inc.

            

6.88% due 08/15/204

     800,000     836,000

Suburban Propane Partners Limited

            

Partnership/Suburban Energy Finance Corp.

            

5.50% due 06/01/24

     650,000     620,750

7.38% due 08/01/21

     149,000     157,940

Seminole Hard Rock Entertainment Incorporated/

            

Seminole Hard Rock International LLC

            

5.88% due 05/15/214

     250,000     241,250

Men’s Wearhouse, Inc.

            

7.00% due 07/01/22

     150,000     151,500

Global Partners Limited Partnership/

            

GLP Finance Corp.

            

6.25% due 07/15/22

     90,000     89,550
             
Total Consumer, Cyclical           11,251,190
             
             
COMMUNICATIONS - 5.9%            

MDC Partners, Inc.

            

6.75% due 04/01/204

     2,000,000     2,060,000

SITEL LLC / Sitel Finance Corp.

            

11.00% due 08/01/174

     1,357,000     1,404,495

Virgin Media Finance plc

            

6.38% due 10/15/244

   GBP 550,000     887,285

CyrusOne Limited Partnership/CyrusOne

            

Finance Corp.

            

6.38% due 11/15/22

     650,000     679,250

CSC Holdings LLC

            

5.25% due 06/01/24

     700,000     672,000

Avaya, Inc.

            

7.00% due 04/01/194

     600,000     582,000

McGraw-Hill Global Education Holdings

            

LLC/McGraw-Hill Global Education Finance

            

9.75% due 04/01/21

     450,000     497,250

Level 3 Financing, Inc.

            

3.82% due 01/15/181,4

     500,000     492,650

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 31

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 HIGH YIELD FUND    

          FACE        
          AMOUNT     VALUE  
 
                   
  Alcatel-Lucent USA, Inc.                
 

6.75% due 11/15/204

     $ 350,000   $ 355,250  
  Sirius XM Canada Holdings, Inc.                
 

5.63% due 04/23/214

     CAD 200,000     179,027  
  Expo Event Transco, Inc.                
 

9.00% due 06/15/214

       150,000     154,500  
                 
Total Communications             7,963,707  
                 
                   
INDUSTRIAL - 5.0%                
  Amsted Industries, Inc.                
 

5.38% due 09/15/244

       1,150,000     1,115,500  
  Deutsche Raststatten                
 

6.75% due 12/30/20

     EUR 800,000     1,058,334  
  Marquette Transportation Company                
 

LLC/Marquette Transportation Finance Corp.

                
 

10.88% due 01/15/17

       755,000     790,863  
  Odebrecht Offshore Drilling Finance Ltd.                
 

6.63% due 10/01/224

       683,270     703,768  
  BMBG Bond Finance SCA                
 

5.20% due 10/15/201,4

     EUR 550,000     701,089  
  Anixter, Inc.                
 

5.13% due 10/01/21

       600,000     592,500  
  Ultra Resources, Inc.                
 

4.51% due 10/12/20†††,6

       600,000     570,900  
  CEVA Group plc                
 

7.00% due 03/01/214

       550,000     550,000  
  Unifrax I LLC / Unifrax Holding Co.                
 

7.50% due 02/15/194

       350,000     353,500  
  LMI Aerospace, Inc.                
 

7.38% due 07/15/194

       350,000     350,000  
                 
Total Industrial             6,786,454  
                 
                   
TECHNOLOGY - 3.7%                
  Eagle Midco, Inc.                
 

9.00% due 06/15/184

       1,300,000     1,327,625  
  Aspect Software, Inc.                
 

10.63% due 05/15/17

       1,235,000     1,225,738  
  First Data Corp.                
 

8.75% due 01/15/223,4

       1,050,000     1,113,000  
  NCR Corp.                
 

6.38% due 12/15/23

       550,000     576,125  
 

5.88% due 12/15/21

       400,000     409,000  
  iGATE Corp.                
 

4.75% due 04/15/19

       350,000     339,500  
                 
Total Technology             4,990,988  
                 
                   
DIVERSIFIED - 3.6%                
  Opal Acquisition, Inc.                
 

8.88% due 12/15/214

       2,450,000     2,529,625  
  Harbinger Group, Inc.                
 

7.75% due 01/15/22

       1,936,000     1,921,480  
 

7.88% due 07/15/19

       385,000     410,025  
                 
Total Diversified             4,861,130  
                 
                   
BASIC MATERIALS - 2.9%                
  TPC Group, Inc.                
 

8.75% due 12/15/204

       1,505,000     1,599,062  
  KGHM International Ltd.                
 

7.75% due 06/15/194

       1,150,000     1,213,250  
  Eldorado Gold Corp.              
 

6.13% due 12/15/204

     525,000     521,063  
  Cascades, Inc.              
 

5.50% due 07/15/224

     350,000     339,500  
  Mirabela Nickel Ltd.              
 

9.50% due 05/20/19†††,6

     231,000     231,000  
 

1.00% due 09/10/44†††,6

     5,506     —  
               
Total Basic Materials           3,903,875  
               
                 
UTILITIES - 2.2%              
  LBC Tank Terminals Holding Netherlands BV              
 

6.88% due 05/15/234

     1,250,000     1,331,250  
  AES Corp.              
 

5.50% due 03/15/24

     650,000     632,125  
 

4.88% due 05/15/23

     250,000     237,500  
  NGL Energy Partners, LP/NGL Energy              
 

Finance Corp.

              
 

6.88% due 10/15/214

     700,000     728,000  
               
Total Utilities           2,928,875  
               
Total Corporate Bonds              
  (Cost $94,958,781)           94,435,615  
               
                 
SENIOR FLOATING RATE INTERESTS††,1,7 - 25.1%              
                 
INDUSTRIAL - 6.1%              
  Flakt Woods              
 

2.63% due 03/20/176

   EUR 1,600,000     1,940,006  
  Mitchell International, Inc.              
 

8.50% due 10/11/21

     1,250,000     1,245,313  
  SI Organization              
 

5.75% due 11/23/19

     704,776     707,200  
  IntraWest Holdings S.à r.l.              
 

5.50% due 12/09/20

     665,500     665,500  
  Service King              
 

4.75% due 09/17/21†††

     449,367     447,965  
  CareCore National LLC              
 

5.50% due 03/05/21

     497,500     493,769  
  Hunter Defense Technologies              
 

6.50% due 08/05/19

     500,000     493,750  
  Gogo LLC              
 

7.50% due 03/21/18

     438,900     443,289  
  SIRVA Worldwide, Inc.              
 

7.50% due 03/27/19

     394,000     399,910  
  Berlin Packaging LLC              
 

4.50% due 09/24/21

     400,000     399,000  
  Knowledge Learning Corp.              
 

5.25% due 03/18/21

     298,500     298,500  
  Mast Global              
 

8.75% due 09/12/19†††,6

     240,625     238,614  
  Panolam Industries International, Inc.              
 

7.76% due 08/23/17

     196,197     195,216  
  Ceva Logistics US Holdings              
 

6.50% due 03/19/21

     98,030     94,721  
  NaNa Development Corp.              
 

8.00% due 03/15/186

     77,778     76,222  
  Ceva Logistics Holdings BV (Dutch)              
 

6.50% due 03/19/21

     71,071     68,673  
  Ceva Group plc (United Kingdom)              
 

6.50% due 03/19/21

     67,734     65,363  

 
32 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued) September 30, 2014
HIGH YIELD FUND  

      FACE        
      AMOUNT     VALUE  
 
               

Ceva Logistics Canada, ULC

              

6.50% due 03/19/21

   $ 12,254   $ 11,840  
             
Total Industrial           8,284,851  
             
               
CONSUMER, CYCLICAL - 4.2%              

DLK Acquisitions BV

              

8.50% due 08/28/19

   EUR 700,000     865,886  

GCA Services Group, Inc.

              

9.25% due 11/01/20

     800,000     798,000  

Fitness International LLC

              

5.50% due 07/01/20

     748,125     740,644  

Lions Gate Entertainment Corp.

              

5.00% due 07/19/20

     600,000     601,500  

Talbots, Inc.

              

4.75% due 03/19/20

     530,000     512,775  

Burger King Corp.

              

4.50% due 09/24/21

     500,000     496,110  

Alexander Mann Solutions Ltd.

              

5.75% due 12/20/19

     496,250     491,288  

National Vision, Inc.

              

6.75% due 03/11/22

     450,000     438,750  

Ipreo Holdings

              

4.25% due 08/06/21

     450,000     438,377  

BJ’s Wholesale Club, Inc.

              

4.50% due 09/26/19

     300,000     295,077  
             
Total Consumer, Cyclical           5,678,407  
             
               
FINANCIAL - 4.4%              

Expert Global Solutions

              

8.50% due 04/03/18

     1,367,660     1,364,240  

York Risk Services

              

4.75% due 10/01/21†††

     676,829     673,025  

Cunningham Lindsey U.S., Inc.

              

9.25% due 06/10/20

     623,636     622,857  

HSBC Holdings

              

due 03/30/205

     600,000     582,000  

Magic Newco, LLC

              

12.00% due 06/12/19

     500,000     564,165  

Intertrust Group

              

8.00% due 04/11/22

     500,000     494,165  

Safe-Guard

              

6.25% due 08/19/21

     450,000     447,750  

Lineage Logistics LLC

              

4.50% due 04/07/21

     447,750     442,153  

Trademonster

              

7.25% due 08/29/19†††

     350,000     348,280  

STG-Fairway Acquisitions, Inc.

              

6.25% due 02/28/19

     246,252     245,791  

National Financial Partners Corp.

              

4.50% due 07/01/20

     247,501     245,026  
             
Total Financial           6,029,452  
             
               
CONSUMER, NON-CYCLICAL - 3.3%              

Birds Eye Iglo Group Ltd.

              

4.26% due 06/30/20

   EUR 550,000     682,312  

NES Global Talent

              

6.50% due 10/03/19

     588,750     582,863  

Reddy Ice Holdings, Inc.

              

6.75% due 04/01/196

     592,500     559,913  

ABG Intermediate Holdings 2 LLC

              

5.50% due 05/27/21

     547,250     544,514  

AdvancePierre Foods, Inc.

              

9.50% due 10/10/17

     491,000     483,635  

CTI Foods Holding Co. LLC

              

8.25% due 06/28/21

     340,000     341,275  

Pelican Products, Inc.

              

9.25% due 04/09/21

     300,000     299,250  

Nextech Systems LLC

              

6.00% due 10/28/18†††,6

     288,750     283,983  

Performance Food Group

              

6.25% due 11/14/19

     246,875     245,949  

Targus Group International, Inc.

              

12.00% due 05/24/166

     230,321     187,136  

Arctic Glacier Holdings, Inc.

              

5.00% due 05/10/19

     180,429     177,723  

Catalent Pharma Solutions, Inc.

              

6.50% due 12/31/17

     36,818     36,726  
             
Total Consumer, Non-cyclical           4,425,279  
             
               
TECHNOLOGY - 3.1%              

Sparta Holding Corp.

              

6.25% due 07/28/20†††

     900,000     891,242  

Greenway Medical Technologies

              

9.25% due 11/04/216

     550,000     544,500  

6.00% due 11/04/206

     347,375     345,638  

Evergreen Skill

              

5.75% due 04/28/21

     830,000     813,749  

EIG Investors Corp.

              

5.00% due 11/09/19

     396,000     394,515  

Quorum Business Solutions

              

5.75% due 08/07/21

     300,000     299,250  

Telx Group

              

7.50% due 04/09/21

     300,000     297,501  

Flexera Software LLC

              

8.00% due 04/02/21

     250,000     242,500  

GlobalLogic Holdings, Inc.

              

6.25% due 05/31/19

     198,500     192,049  

Active Network, Inc., The

              

5.50% due 11/13/20

     149,248     147,942  
             
Total Technology           4,168,886  
             
               
COMMUNICATIONS - 1.6%              

Cartrawler- Mustang Bidco Ltd.

              

4.26% due 04/29/21

   EUR 650,000     819,940  

Anaren, Inc.

              

9.25% due 08/18/21

     500,000     497,500  

Cengage Learning Acquisitions, Inc.

              

7.00% due 03/31/20

     298,500     297,861  

Avaya, Inc.

              

6.50% due 03/31/18

     293,943     291,189  

MergerMarket Ltd.

              

4.50% due 02/04/21

     298,500     289,545  
             
Total Communications           2,196,035  
             
               
ENERGY - 0.9%              

PSS Companies

              

5.50% due 01/28/20

     545,328     542,601  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 33

SCHEDULE OF INVESTMENTS (concluded) September 30, 2014
HIGH YIELD FUND  

      FACE        
      AMOUNT     VALUE  
 
               

Cactus Wellhead

              

7.00% due 07/31/20

   $ 450,000   $ 441,000  

FTS International

              

5.75% due 04/16/21

     261,818     261,771  
             
Total Energy           1,245,372  
             
               
UTILITIES - 0.9%              

Astoria Generating Company Acquisitions LLC

              

9.25% due 10/26/17

     1,173,545     1,194,083  
             
BASIC MATERIALS - 0.6%              

Atkore International, Inc.

              

7.75% due 10/09/21

     450,000     445,500  

Hoffmaster Group, Inc.

              

5.25% due 05/09/20

     399,000     397,005  
             
Total Basic Materials           842,505  
             
               
Total Senior Floating Rate Interests              

(Cost $34,322,638)

           34,064,870  
             
               
ASSET BACKED SECURITIES††,7 - 1.6%              

Iron Mountain, Inc.

              

6.12% due 09/15/22

   GBP 850,000     1,386,099  

ALM XIV Ltd. 2014-14A

              

3.68% due 07/28/261,4

     800,000     755,040  
             
Total Asset Backed Securities              

(Cost $2,138,972)

           2,141,139  
             
MORTGAGE BACKED SECURITIES†† - 0.4%              

SRERS Funding Ltd. 2011-RS

              

0.40% due 05/09/461,4

     526,212     501,217  
             
Total Mortgage Backed Securities              

(Cost $487,038)

           501,217  
             
Total Investments - 104.1%              

(Cost $141,995,293)

         $ 141,133,405  
             
Other Assets & Liabilities, net - (4.1)%           (5,548,938)  
             
Total Net Assets - 100.0%         $ 135,584,467  
 

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS††

                Settlement   Settlement   Value at   Net Unrealized
Counterparty   Contracts to Sell   Currency   Date   Value   September 30, 2014   Appreciation
 
BNY Mellon     7,100,000     EUR     10/07/14   $ 9,321,506   $ 8,968,667   $ 352,839
BNY Mellon     1,500,000     AUD     10/07/14     1,398,675     1,312,569     86,106
BNY Mellon     1,550,000     GBP     10/07/14     2,540,981     2,512,814     28,167
BNY Mellon     210,000     CAD     10/07/14     192,691     187,496     5,195
                                   
                                  $ 472,307
                                   

*   Non-income producing security.
†   Value determined based on Level 1 inputs, unless otherwise noted — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Perpetual maturity.
3   Security or a portion thereof is held as collateral for reverse repurchase agreements — See Note 13.
4   Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $50,977,220 (cost $51,122,127), or 37.6% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
5   Security with no rate was unsettled at September 30, 2014.
6   Illiquid security.
7   The face amount is denominated in U.S. Dollars unless otherwise indicated.
8   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $1,256,250 (cost $1,250,000), or 0.9% of total net assets — See Note 16.
9   Security is in default of interest and/or principal obligations.
    plc–Public Limited Company
    REIT–Real Estate Investment Trust

 
34 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


HIGH YIELD FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:        
Investments, at value        

(cost $141,995,293)

   $ 141,133,405  
Foreign currency, at value        

(cost $2,420,600)

     2,374,000  
Cash     648,379  
Unrealized appreciation on forward foreign currency        

exchange contracts

     472,307  
Prepaid expenses     40,891  
Receivables:        

Securities sold

     3,627,813  

Interest

     2,048,664  

Fund shares sold

     82,749  

Dividends

     14,876  

Foreign taxes reclaim

     7,124  
       
Total assets     150,450,208  
       
         
LIABILITIES:        
Reverse Repurchase Agreements     7,642,161  
Unfunded loan commitments, at value        

(commitment fees received $233,435)

     224,795  
Payable for:        

Securities purchased

     6,339,544  

Fund shares redeemed

     348,657  

Distributions to shareholders

     135,987  

Management fees

     45,413  

Distribution and service fees

     28,692  

Fund accounting/administration fees

     10,431  

Transfer agent/maintenance fees

     10,339  

Trustees’ fees*

     2,660  

Miscellaneous

     77,062  
       
Total liabilities     14,865,741  
       
NET ASSETS   $ 135,584,467  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 133,423,619  
Distributions in excess of net investment income     (263,479 )
Accumulated net realized gain on investments     2,845,368  
Net unrealized depreciation on investments     (421,041 )
       
Net assets   $ 135,584,467  
       
A-CLASS:        
         
Net assets   $ 82,854,393  
Capital shares outstanding     6,891,509  
Net asset value per share     $12.02  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $12.62  
       
B-CLASS:        
         
Net assets   $ 1,175,674  
Capital shares outstanding     98,449  
Net asset value per share     $11.94  
       
C-CLASS:        
         
Net assets   $ 14,674,011  
Capital shares outstanding     1,210,784  
Net asset value per share     $12.12  
       
         
INSTITUTIONAL CLASS:        
Net assets   $ 36,880,389  
Capital shares outstanding     3,737,814  
Net asset value per share     $9.87  
       

STATEMENT OF OPERATIONS
 
Year Ended September 30, 2014

INVESTMENT INCOME:        
Interest (net of foreign withholding tax of $120)   $ 8,989,609  
Dividends     147,736  
       

Total investment income

     9,137,345  
       
         
EXPENSES:        
Management fees     765,969  
Transfer agent/maintenance fees:        

A-Class

     109,623  

B-Class

     13,072  

C-Class

     17,704  

Institutional Class

     15,610  
Distribution and service fees:        

A-Class

     216,967  

C-Class

     123,385  
Fund accounting/administration fees     121,276  
Interest expense     100,104  
Trustees’ fees*     14,867  
Line of credit expense     9,965  
Custodian fees     1,825  
Tax expense     2  
Miscellaneous     195,533  
       

Total expenses

     1,705,902  
Less:        
Expenses waived by Adviser     (81,112 )
       
Net expenses     1,624,790  
       
Net investment income     7,512,555  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     4,542,424  

Foreign currency

     (14,354 )

Forward foreign currency exchange contracts

     308,186  
       
Net realized gain     4,836,256  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (3,417,707 )

Forward foreign currency exchange contracts

     472,307  

Foreign currency

     (40,100 )
       
Net change in unrealized appreciation (depreciation)     (2,985,500 )
       
Net realized and unrealized gain     1,850,756  
       
Net increase in net assets resulting        

from operations

   $ 9,363,311  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
SEE NOTES TO FINANCIAL STATEMENTS THE GUGGENHEIM FUNDS ANNUAL REPORT  |  35


HIGH YIELD FUND

STATEMENTS OF CHANGES IN NET ASSETS  
 

      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 7,512,555     $ 6,288,703  
Net realized gain (loss) on investments     4,836,256       (84,912 )
Net change in unrealized appreciation (depreciation) on investments     (2,985,500 )     2,346,050  
 
Net increase in net assets resulting from operations     9,363,311       8,549,841  
 
 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (5,820,148 )     (4,965,936 )

B-Class

     (99,790 )     (159,633 )

C-Class

     (738,796 )     (643,147 )

Institutional Class

     (1,911,261 )     (1,199,068 )
Net realized gains                

A-Class

     —       (1,585,188 )

B-Class

     —       (52,625 )

C-Class

     —       (230,586 )

Institutional Class

     —       (428,291 )
 
Total distributions to shareholders     (8,569,995 )     (9,264,474 )
 
 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     62,904,723       38,631,261  

B-Class

     142,328       372,026  

C-Class

     7,344,432       3,038,894  

Institutional Class

     28,060,805       12,079,625  
Redemption fees collected                

A-Class

     66,165       39,291  

B-Class

     1,013       1,267  

C-Class

     9,220       5,860  

Institutional Class

     19,942       9,020  
Distributions reinvested                

A-Class

     5,125,824       5,926,872  

B-Class

     93,097       202,480  

C-Class

     552,770       709,020  

Institutional Class

     1,189,371       934,337  
Cost of shares redeemed                

A-Class

     (56,529,637 )     (37,955,365 )

B-Class

     (782,961 )     (1,020,724 )

C-Class

     (2,735,624 )     (3,278,088 )

Institutional Class

     (11,032,316 )     (3,983,265 )
 
Net increase from capital share transactions     34,429,152       15,712,511  
 
Net increase in net assets     35,222,468       14,997,878  
 
NET ASSETS:                

Beginning of year

     100,361,999       85,364,121  
 

End of year

   $ 135,584,467     $ 100,361,999  
 
(Distributions in excess of net investment income)/Undistributed net investment income at end of year   $ (263,479 )   $ 283,975  
 
 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     5,157,454       3,257,493  

B-Class

     11,694       31,410  

C-Class

     596,582       252,867  

Institutional Class

     2,794,173       1,230,655  
Shares issued from reinvestment of distributions                

A-Class

     420,028       500,071  

B-Class

     7,688       17,194  

C-Class

     44,965       59,371  

Institutional Class

     118,766       95,923  
Shares redeemed                

A-Class

     (4,630,360 )     (3,182,863)  

B-Class

     (64,801 )     (86,562 )

C-Class

     (222,849 )     (272,695 )

Institutional Class

     (1,101,374 )     (407,628 )
 
Net increase in shares     3,131,966       1,495,236  
 

 
36  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.


 HIGH YIELD FUND

FINANCIAL HIGHLIGHTS
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended     Year Ended     Period Ended     Year Ended     Year Ended     Year Ended  
      September 30,     September 30,     September 30,     December 31,     December 31,     December 31,  
A-Class     2014     2013     2012b     2011     2010     2009  
 
Per Share Data                                      
Net asset value, beginning of period     $11.85     $11.95     $11.12     $12.89     $12.07     $7.70  
 
Income (loss) from investment operations:                                      
Net investment income (loss)c     .72     .81     .58     .87     .96     .90  
Net gain (loss) on investments (realized and unrealized)     .27     .27     .84     (1.30 )   .78     4.30  
     
Total from investment operations     .99     1.08     1.42     (.43 )   1.74     5.20  
 
Less distributions from:                                      
Net investment income     (.83 )   (.90 )   (.59 )   (1.07 )   (.92 )   (.83 )
Net realized gains     —     (.29 )   —     (.27 )   —     —  
Return of capital     —     —     —     —     —     (—) d
     
Total distributions     (.83 )   (1.19 )   (.59 )   (1.34 )   (.92 )   (.83 )
 
Redemption fees collected     .01     .01     —e     —     —     —  
 
Net asset value, end of period     $12.02     $11.85     $11.95     $11.12     $12.89     $12.07  
     
                                       
 
Total Returng     9.18%     9.54%     12.93%     (3.50% )   14.92%     70.53%  
 
Ratios/Supplemental Data                                      
Net assets, end of period (in thousands)     $82,854     $70,451     $64,174     $86,041     $172,443     $155,899  
 
Ratios to average net assets:                                      
Net investment income (loss)     5.91%     6.84%     7.19%     6.92%     7.69%     8.49%  
Total expenses     1.32%     1.41%     1.44%     1.34%     1.28%     1.41%  
Net expensesf,h     1.26%     1.18%     1.17% %   1.18%     1.14%     1.10%  
 
Portfolio turnover rate     97%     101%     55%     102%     77%     53%  
                                       
      Year Ended     Year Ended     Period Ended     Year Ended     Year Ended     Year Ended  
      September 30,     September 30,     September 30,     December 31,     December 31,     December 31,  
B-Class     2014a     2013a     2012a,b     2011a     2010a     2009a  
 
Per Share Data                                      
Net asset value, beginning of period     $11.77     $11.89     $11.07     $12.84     $12.05     $7.67  
 
Income (loss) from investment operations:                                      
Net investment income (loss)c     .75     .84     .62     .92     1.00     .92  
Net gain (loss) on investments (realized and unrealized)     .26     .26     .81     (1.32 )   .78     4.30  
     
Total from investment operations     1.01     1.10     1.43     (.40 )   1.78     5.22  
 
Less distributions from:                                      
Net investment income     (.85 )   (.94 )   (.61 )   (1.10 )   (.99 )   (.84 )
Net realized gains     —     (.29 )   —     (.27 )   —     —  
Return of capital     —     —     —     —     —     (—) d
     
Total distributions     (.85 )   (1.23 )   (.61 )   (1.37 )   (.99 )   (.84 )
 
Redemption fees collected     .01     .01     —e     —     —     —  
 
Net asset value, end of period     $11.94     $11.77     $11.89     $11.07     $12.84     $12.05  
     
                                       
 
Total Returng     9.46%     9.79%     13.20%     (3.32% )   15.28%     71.07%  
 
Ratios/Supplemental Data                                      
Net assets, end of period (in thousands)     $1,176     $1,693     $2,162     $2,777     $4,872     $6,996  
 
Ratios to average net assets:                                      
Net investment income (loss)     6.17%     7.10%     7.43%     7.38%     8.01%     9.08%  
Total expenses     1.87%     1.89%     1.62%     1.10%     1.04%     1.19%  
Net expensesf,h     1.00%     0.93%     0.92%     0.94%     0.89%     0.85%  
 
Portfolio turnover rate     97%     101%     55%     102%     77%     53%  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  37


 HIGH YIELD FUND

FINANCIAL HIGHLIGHTS (continued)
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended     Year Ended     Period Ended     Year Ended     Year Ended     Year Ended  
      September 30,     September 30,     September 30,     December 31,     December 31,     December 31,  
C-Class     2014     2013     2012b     2011     2010     2009  
 
Per Share Data                                      
Net asset value, beginning of period     $11.95     $12.03     $11.20     $12.97     $12.14     $7.73  
 
Income (loss) from investment operations:                                      
Net investment income (loss)c     .63     .73     .56     .79     .87     .83  
Net gain (loss) on investments (realized and unrealized)     .27     .27     .80     (1.32 )   .79     4.33  
     
Total from investment operations     .90     1.00     1.36     (.53 )   1.66     5.16  
 
Less distributions from:                                      
Net investment income     (.74 )   (.80 )   (.53 )   (.97 )   (.83 )   (.75 )
Net realized gains     —     (.29 )   —     (.27 )   —     —  
Return of capital     —     —     —     —     —     (—) d
     
Total distributions     (.74 )   (1.09 )   (.53 )   (1.24 )   (.83 )   (.75 )
 
Redemption fees collected     .01     .01     —e     —     —     —  
 
Net asset value, end of period     $12.12     $11.95     $12.03     $11.20     $12.97     $12.14  
     
                                       
 
Total Returng     8.46%     8.69%     12.33%     (4.30% )   14.07%     69.42%  
 
Ratios/Supplemental Data                                      
Net assets, end of period (in thousands)     $14,674     $9,463     $9,054     $7,991     $10,264     $8,048  
 
Ratios to average net assets:                                      
Net investment income (loss)     5.14%     6.10%     6.37%     6.32%     6.92%     8.11%  
Total expenses     2.09%     2.17%     2.19%     2.08%     2.04%     2.19%  
Net expensesf,h     2.01%     1.93%     1.92%     1.94%     1.89%     1.85%  
 
Portfolio turnover rate     97%     101%     55%     102%     77%     53%  

 
38  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


HIGH YIELD FUND

FINANCIAL HIGHLIGHTS (concluded)    
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

  Year Ended   Year Ended   Period Ended   Year Ended   Year Ended   Year Ended  
  September 30,   September 30,   September 30,   December 31,   December 31,   December 31,  
Institutional Class   2014     2013     2012b     2011     2010     2009  
 
Per Share Data                                    
Net asset value, beginning of period   $9.74     $9.90     $9.26     $10.96     $10.47     $6.74  
 
Income (loss) from investment operations:                                    
Net investment income (loss)c   .61     .70     .55     .79     .86     .81  
Net gain (loss) on investments (realized and unrealized)   .23     .22     .64     (1.12 )   .68     3.76  
     
Total from investment operations   .84     .92     1.19     (.33 )   1.54     4.57  
 
Less distributions from:                                    
Net investment income   (.72 )   (.80 )   (.55 )   (1.10 )   (1.05 )   (.84 )
Net realized gains   —     (.29 )   —     (.27 )   —     —  
Return of capital   —     —     —     —     —     (— )d
     
Total distributions   (.72 )   (1.09 )   (.55 )   (1.37 )   (1.05 )   (.84 )
 
Redemption fees collected   .01     .01     — e   —     —     —  
 
Net asset value, end of period   $9.87     $9.74     $9.90     $9.26     $10.96     $10.47  
     
 
Total Returng   9.50%     9.97%     13.17%     (3.30% )   15.33%     71.18%  
 
Ratios/Supplemental Data                                    
Net assets, end of period (in thousands)   $36,880     $18,755     $9,974     $7,900     $2,785     $2,649  
 
Ratios to average net assets:                                    
Net investment income (loss)   6.12%     7.12%     7.42%     7.61%     7.99%     8.79%  
Total expenses   1.01%     1.01%     1.11%     1.08%     1.02%     1.16%  
Net expensesf,h   1.01%     0.93%     0.92%     0.95%     0.89%     0.85%  
 
Portfolio turnover rate   97%     101%     55%     102%     77%     53%  


a   Effective December 31, 2006, B-Class shares ceased charging 12b-1 fees in accordance with FINRA (formerly NASD) sales cap regulations. Per share information reflects this change. This fee will be reinstated when sales reach above the sales cap limit.
b   The Fund changed its fiscal year end from December 31 to September 30.
c   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
d   Distributions from return of capital are less than $0.01 per share.
e   Redemption fees collected are less than $0.01 per share.
f   Net expense information reflects the expense ratios after expense waivers.
g   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
h   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratio for the year would be:

    09/30/14
 
  A-Class   1.16 %
  B-Class   0.91 %
  C-Class   1.91 %
  Institutional Class   0.91 %

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 39

MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders

Guggenheim Investment Grade Bond Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director; Jeffrey B. Abrams, Senior Managing Director and Portfolio Manager; and James W. Michal, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the “Period”), the Guggenheim Investment Grade Bond Fund returned 8.47%1, compared with the 3.96% return of its benchmark, the Barclays U.S. Aggregate Bond Index.

The investment objective of the Fund is to seek to provide 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. The Fund has the ability to adjust portfolio duration synthetically using interest rate hedges.

As the Period began, monetary accommodation by the Fed was propelling asset prices higher, while positive economic momentum was pushing interest rates higher. By the end of December 2013, the 10-year U.S. Treasury yield reached its highest point over the prior 2½ years at 3%, a level that was not revisited for the remainder of the Period.

Credit-spread and risk assets continued to find investor favor through 2014, even though severe winter weather produced volatility and mixed economic data. Additional liquidity from central banks outside the U.S. supported foreign capital flows into U.S. assets, which, along with the search for yield among U.S. investors, was positive for fixed income. But just as the market appeared to be growing complacent in the third quarter of 2014, leveraged credit had its first correction in a year, as mutual fund investors withdrew from the sector amid concerns about frothy valuations and talk of credit bubble. Volatility spread across risk assets, including equities.

The events that drove spread widening in the third quarter showed that investors are becoming increasingly reactive to factors outside of the fundamentals that underscore a generally positive outlook on credit. Even though U.S. economic data was mixed in September, it was strong year to date, and the improving health of the U.S. economy and low interest rates underscored our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening could present buying opportunities.

The Fund mainly invests in asset-backed securities (ABS), investment grade corporate bonds and non-agency residential mortgage-backed securities (RMBS). It has positions in high yield corporate bonds, municipal bonds, bank loans, preferred securities, among other holdings.

Investment grade corporate bonds weathered interest rate volatility in the fourth quarter of 2013, but low dealer inventory and heavy demand for most of the 12-month Period supported continued spread compression. The Barclays U.S. Corporate Investment Grade Index rose by 6.77% for the Period. The credit spread on investment grade corporate bonds tightened by 29 basis points, and yields declined to 3.10% at the end of September 2014. Volatility in the third quarter also impacted issuance, but it still reached $647 billion through the three quarters of 2014.

High yield corporate bonds and bank loans posted their fifth consecutive year of positive returns in 2013 and strong performance continued through the first half of 2014. As upside potential declined in the leveraged credit space, the Fund rotated into higher quality credits. With the onset of a leveraged credit sell-off in the third quarter, the Fund was able to add exposure back to many of the names it had sold several months before.

The ABS and non-agency RMBS sectors contributed positively for the Period. The BofA/ML ABS Master BBB-AA Index gained 3.36% for the 12-month Period as its spread tightened 48 basis points to 133 basis points. Credit performance across the commercial ABS and collateralized loan obligation (CLO) sectors remained strong given benign credit conditions and improving collateral valuations across the U.S. economy. 2014 issuance is well ahead of 2013’s pace and

 
40  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


MANAGERS’ COMMENTARY (Unaudited) (concluded) September 30, 2014
 

likely to break 2012’s post-crisis peak. New ABS issuance was diversified across all classes, with auto and credit card new issues remaining strong. Consumer ABS performance has been solid despite concern surrounding student loans and subprime auto lending. JPMorgan Research indicates the gradual improvement in the household balance sheet will continue to support credit performance of Consumer ABS. Year-to-date ABS issuance has now surpassed $94 billion, the all time annual record set in 2007. Housing activity has been uneven, as price appreciation has been slowing and sales remain below the post-crisis peak in 2013. With the economic outlook mostly positive and central banks maintaining accommodation, the backdrop for ABS and RMBS remains constructive. Amidst these positive fundamentals, the CLO market raised $93 billion through three quarters of 2014, already exceeding 2013’s full-year volume.

Much of the Fund’s outperformance stemmed from credit spread compression and the gradual decline in the benchmark 10-year U.S. Treasury yield. Positive returns have largely been driven by the Fund’s investments in asset backed securities as spreads continued to normalize across various subsectors including collateralized loan obligations, commercial real estate CDOs, and aircraft lease securitizations. Detractors from Fund performance included a few higher-duration assets such as fixed-rate corporate bonds and preferred debt in late 2013 when rates were rising.

The Fund maintains low interest rate duration, particularly at the front end of the yield curve, and thus has largely avoided losses due to a flattening curve. Concentration of the Fund’s credit investments in relatively short-maturity high yield bonds and loans has muted the impact of recent turmoil of risk assets, and the Fund continues to use periods of weakness in those sectors to add attractive assets.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  41


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

INVESTMENT GRADE BOND FUND

OBJECTIVE:    Seeks to provide current income.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
  % of
Rating Total Investments
 
Fixed Income Instruments  

AAA

 2.6%

AA

 15.4%

A

 21.9%

BBB

 36.4%

BB

 5.2%

B

 6.2%

CCC

 5.7%

Other

 2.9%
Other Instruments  

Preferred Stocks

 3.6%

Common Stocks

 0.1%
 
Total Investments 100.0%
 

The chart above reflects percentages of the value of total investments.

Inception Dates:  
 
A-Class August 15, 1985
B-Class October 19, 1993
C-Class May 1, 2000
Institutional Class January 29, 2013

Ten Largest Holdings (% of Total Net Assets)  
 
Willis Engine Securitization Trust II — Class A 2.0%
GATX Corp. 1.6%
Northwoods Capital VIII Ltd. — Class D 1.5%
Fifth Third Bancorp 1.3%
T2 Income Fund CLO Ltd. — Class C 1.2%
Cigna Corp. 1.2%
Cox Enterprises, Inc. 1.2%
Diageo Capital PLC 1.2%
LSTAR Securities Investment Trust 2014-1 1.1%
Cypress School District General  

Obligation Unlimited

 1.1%
 
Top Ten Total 13.4%
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

*   Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
42  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*
Periods Ended September 30, 2014

    1 Year   5 Year   10 Year
 
A-Class Shares   8.47 %   6.02 %   3.55 %
 
A-Class Shares with sales charge†   3.31 %   5.00 %   3.05 %
 
B-Class Shares   7.68 %   5.27 %   2.93 %
 
B-Class Shares with CDSC‡   2.68 %   4.94 %   2.93 %
 
C-Class Shares   7.69 %   5.25 %   2.80 %
 
C-Class Shares with CDSC§   6.69 %   5.25 %   2.80 %
 
Barclays U.S. Aggregate Bond Index   3.96 %   4.12 %   4.62 %
 
          Since Inception    
    1 Year   (01/29/13)    
 
Institutional Class Shares   8.64 %   5.94 %      
 
Barclays U.S. Aggregate Bond Index   3.96 %   1.63 %      
 

* 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. Aggregate Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase.
§ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  43

SCHEDULE OF INVESTMENTS   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 0.1%              
               
FINANCIAL - 0.1%              

Rescap Liquidating Trust

     5,199   $ 83,184  
             
CONSUMER, CYCLICAL - 0.0%              

Harry & David Holdings, Inc.*

     7     994  
             
MATERIALS - 0.0%              

Constar International Holdings LLC*,†††,8

     68     —  
             
Total Common Stocks              

(Cost $263,071)

           84,178  
             
PREFERRED STOCKS††- 3.8%              

Aspen Insurance Holdings Ltd.

              

5.95%†,1,2

     48,000     1,198,560  

Seaspan Corp.

              

6.38% due 04/30/19†

     22,000     562,980  

Woodbourne Capital Trust IV

              

0.02%†††,1,2,3,9

     950,000     535,515  

Woodbourne Capital Trust III

              

0.02%†††,1,2,3,9

     950,000     535,515  

Woodbourne Capital Trust II

              

0.02%†††,1,2,3,9

     950,000     535,515  

Woodbourne Capital Trust I

              

0.02%†††,1,2,3,9

     950,000     535,515  

Wells Fargo & Co.

              

5.85%†,1,2

     15,000     384,450  

Morgan Stanley

              

7.13%†,1,2

     10,000     269,100  

AgriBank FCB

              

6.88%†,1,2

     1,500     160,219  

City National Corp.

              

6.75%†,1,2

     4,000     111,400  

Constar International Holdings LLC*,†††,8

     7     —  
             
Total Preferred Stocks              

(Cost $6,445,328)

           4,828,769  
             
               
      FACE        
      AMOUNT        
             
ASSET BACKED SECURITIES†† - 41.1%              

Willis Engine Securitization Trust II 2012-A

              

5.50% due 09/15/373

   $ 2,516,284     2,522,575  

Northwoods Capital VIII Ltd. 2007-8A

              

2.24% due 07/28/221,3

     1,950,000     1,887,015  

Castlelake Aircraft Securitization Trust 2014-1

              

5.25% due 02/15/29

     1,115,263     1,119,501  

7.50% due 02/15/29

     446,105     446,640  

T2 Income Fund CLO Ltd. 2007-1A

              

1.73% due 07/15/191,3

     1,600,000     1,561,600  

Emerald Aviation Finance Ltd. 2013-1

              

4.65% due 10/15/383

     1,178,385     1,193,115  

6.35% due 10/15/383,4

     235,677     239,330  

Grayson CLO Ltd. 2006-1A

              

0.65% due 11/01/211,3

     1,400,000     1,297,380  

Copper River CLO Ltd. 2007-1A

              

due 01/20/211,3,10

     700,000     767,900  

0.63% due 01/20/211,3

     500,000     480,150  

Telos CLO Ltd. 2013-3A

              

3.23% due 01/17/241,3

     1,250,000     1,230,000  

Gramercy Real Estate CDO 2007-1 Ltd.

              

0.51% due 08/15/561,3

     1,382,539     1,218,432  

Flagship CLO VI 2007-1A

              

2.63% due 06/10/211,3

     1,250,000     1,211,125  

Garanti Diversified Payment Rights

              

Finance Co. 2007-A

              

0.42% due 07/09/17

     1,248,000     1,209,062  

CKE Restaurant Holdings, Inc. 2013-1A

              

4.47% due 03/20/433

     1,124,125     1,134,546  

Telos CLO 2007-2 Ltd.

              

2.43% due 04/15/221,3

     1,100,000     1,049,290  

Great Lakes CLO 2012-1 Ltd.

              

4.33% due 01/15/231,3

     1,000,000     1,008,600  

Fortress Credit Opportunities V CLO Ltd. 2014-5A

              

2.88% due 10/15/261,3

     1,000,000     989,500  

Figueroa CLO 2013-1 Ltd.

              

2.98% due 03/21/241,3

     1,000,000     981,300  

Rockwall CDO II Ltd. 2007-1A

              

0.79% due 08/01/241,3

     1,100,000     980,650  

KKR Financial CLO 2007-1 Ltd.

              

2.48% due 05/15/211,3

     1,000,000     980,600  

ALM VII R Ltd. 2013-7RA

              

2.83% due 04/24/241,3

     1,000,000     979,200  

Venture XIV CLO Ltd. 2013-14A

              

2.99% due 08/28/251,3

     1,000,000     967,100  

RAIT CRE CDO I Ltd. 2006-1X

              

0.48% due 11/20/46

     1,015,743     912,746  

MCF CLO I LLC 2013-1A

              

3.78% due 04/20/231,3

     900,000     890,370  

CIT Mortgage Loan Trust 2007-1

              

1.60% due 10/25/371,3

     950,000     882,595  

N-Star Real Estate CDO IX Ltd.,

              

0.47% due 02/01/418

     915,659     878,392  

Turbine Engines Securitization Ltd. 2013-1A

              

5.13% due 12/13/483

     868,095     876,776  

ICE EM CLO 2007-1A

              

0.93% due 08/15/221,3

     850,000     809,115  

COA Summit CLO Limited 2014-1

              

3.04% due 04/20/231,3

     800,000     793,680  

Newstar Trust 2012-2A

              

3.48% due 01/20/231,3

     750,000     751,650  

OZLM Funding Ltd. 2012-2A

              

3.49% due 10/30/231,3

     750,000     750,000  

ARES XII CLO Ltd. 2007-12A

              

3.48% due 11/25/201,3

     750,000     744,675  

Carlyle Global Market Strategies CLO 2014-2 Ltd.

              

2.35% due 05/15/251,3

     750,000     738,975  

Tricadia CDO 2006-6 Ltd.

              

0.79% due 11/05/411,3

     750,000     709,200  

Icon Brand Holdings LLC 2013-1A

              

4.35% due 01/25/433

     645,079     642,241  

Ivy Hill Middle Market Credit Fund VII Ltd. 2013-7A

              

3.68% due 10/20/251,3

     600,000     595,020  

Fortress Credit Opportunities III CLO, LP 2014-3A

              

3.48% due 04/28/261,3

     300,000     297,960  

2.73% due 04/28/261,3

     300,000     294,570  

Babson CLO Limited 2014-I

              

due 07/20/253,10

     650,000     591,630  

 
44 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Black Diamond CLO 2012-1 Ltd.

              

3.49% due 02/01/231,3

   $ 550,000   $ 545,985  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2006-OPT1

              

0.41% due 04/25/361

     600,000     540,125  

Apidos CDO IX 2012-9A

              

3.98% due 07/15/231,3

     500,000     500,000  

Cent CLO 16, LP 2014-16AR

              

2.74% due 08/01/241,3

     500,000     498,800  

Miramax LLC 2014-1A

              

3.34% due 07/20/263

     500,000     498,424  

KKR CLO Trust 2012-1A

              

3.53% due 12/15/241,3

     500,000     496,450  

Acis CLO 2013-1 Ltd.

              

3.18% due 04/18/241,3

     500,000     490,150  

Apidos CDO III Ltd. 2006-3A

              

1.98% due 06/12/201,3

     500,000     484,850  

Golub Capital Partners Fundings Ltd. 2007-1A

              

0.98% due 03/15/221,3

     500,000     478,600  

MCF CLO III LLC 2014-3A

              

3.21% due 01/20/241,3

     500,000     477,100  

Cerberus Offshore Levered I, LP 2012-1A

              

4.98% due 11/30/181,3

     450,000     449,865  

N-Star REL CDO VIII Ltd. 2006-8A

              

0.51% due 02/01/411,3

     500,000     449,750  

West Coast Funding Ltd. 2006-1A

              

0.38% due 11/02/411,3

     434,381     426,345  

Eastland CLO Ltd. 2007-1A

              

0.64% due 05/01/221,3

     450,000     419,265  

Lehman XS Trust 2007-9

              

0.27% due 06/25/371

     415,345     374,805  

Westwood CDO I Ltd. 2007-1A

              

0.90% due 03/25/211,3

     400,000     371,240  

UCFC Manufactured Housing Contract 1997-2

              

7.38% due 10/15/28

     333,409     363,316  

Halcyon Loan Advisors Funding 2012-2 Ltd.

              

4.73% due 12/20/241,3

     350,000     351,330  

Saxon Asset Securities Trust 2005-4

              

0.59% due 11/25/371

     400,000     345,542  

Northwoods Capital VII Ltd. 2006-7A

              

1.78% due 10/22/211,3

     350,000     344,680  

Newstar Commercial Loan Funding 2013-1 LLC

              

4.78% due 09/20/231,3

     350,000     343,665  

Anchorage Capital CLO 4 Ltd. 2014-4A

              

2.44% due 07/28/261,3

     350,000     342,125  

DIVCORE CLO Ltd. 2013-1A B

              

4.05% due 11/15/32

     300,000     300,180  

CIFC Funding 2012-II Ltd.

              

4.48% due 12/05/241,3

     300,000     300,030  

Salus CLO 2012-1 Ltd.

              

3.98% due 03/05/211,3

     300,000     299,340  

ALM VII R-2 Ltd. 2013-7R2A

              

2.83% due 04/24/241,3

     300,000     294,540  

GreenPoint Mortgage Funding Trust 2005-HE4

              

0.86% due 07/25/301

     300,000     280,848  

TICC CLO 2012-1 LLC

              

4.98% due 08/25/231,3

     250,000     251,125  

Ivy Hill Middle Market Credit Fund Ltd. 2011-3A

              

6.23% due 01/15/221,3

     250,000     251,050  

Acis CLO 2013-2 Ltd.

              

3.44% due 10/14/221,3

     250,000     250,125  

Golub Capital Partners CLO 17 Ltd. 2013-17A

              

4.06% due 10/25/251,3

     250,000     249,125  

Gallatin CLO VII 2014-1 Ltd.

              

3.06% due 07/15/231,3

     250,000     248,700  

Dryden XXIII Senior Loan Fund 2014-23RA

              

3.18% due 07/17/231,3

     250,000     248,700  

Great Lakes CLO 2014-1 Ltd.

              

3.93% due 04/15/251,3

     250,000     248,625  

Garrison Funding 2013-2 Ltd.

              

3.63% due 09/25/231,3

     250,000     247,600  

Drug Royalty II Limited Partnership 2014-1

              

3.08% due 07/15/231,2,3

     245,217     246,794  

ALM XIV Ltd. 2014-14A

              

3.18% due 07/28/261,3

     250,000     246,075  

Cerberus Onshore II CLO LLC 2014-1A

              

2.93% due 10/15/231,3

     250,000     246,025  

NewStar Arlington Senior Loan

              

Program LLC 2014-1A

              

3.53% due 07/25/251,3

     250,000     243,600  

Race Point IV CLO Ltd. 2007-4A

              

2.24% due 08/01/211,3

     250,000     242,925  

Carlyle Global Market Strategies CLO 2012-3 Ltd.

              

due 10/04/243,10

     250,000     233,225  

Keuka Park CLO Limited 2013-1

              

due 10/21/243,10

     250,000     213,750  

GSAA Home Equity Trust 2007-7

              

0.42% due 07/25/371

     206,594     175,266  

New Century Home Equity Loan Trust 2005-1

              

0.87% due 03/25/351

     149,784     133,225  

Credit-Based Asset Servicing and

              

Securitization LLC 2005-CB5

              

0.42% due 08/25/351

     69,679     69,191  

First Franklin Mortgage Loan Trust 2006-FF1

              

0.49% due 01/25/361

     50,000     43,961  
             
Total Asset Backed Securities              

(Cost $51,716,613)

           52,770,643  
             
               
CORPORATE BONDS†† - 27.4%              
               
FINANCIAL - 16.9%              

Fifth Third Bancorp

              

5.10%1,2

     1,820,000     1,715,350  

JPMorgan Chase & Co.

              

5.00%1,2

     1,050,000     1,023,539  

5.15%1,2

     700,000     666,750  

EPR Properties

              

5.25% due 07/15/235

     1,000,000     1,051,352  

5.75% due 08/15/225

     500,000     547,420  

Teachers Insurance & Annuity

              

Association of America

              

4.90% due 09/15/443

     1,000,000     1,019,123  

4.38% due 09/15/541,3

     500,000     504,265  

Kaupthing Bank HF

              

3.49% due 01/15/103,6

     5,000,000     1,287,500  

Susquehanna Bancshares, Inc.

              

5.38% due 08/15/22

     1,200,000     1,246,463  

PNC Financial Services Group, Inc.

              

4.85%1,2

     1,100,000     1,042,250  

AmTrust Financial Services, Inc.

              

6.13% due 08/15/23

     1,000,000     1,040,630  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 45

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

General Motors Financial Company, Inc.

              

2.63% due 07/10/17

   $ 980,000   $ 984,446  

Lancashire Holdings Ltd.

              

5.70% due 10/01/223

     900,000     971,352  

HSBC Holdings plc

              

5.63%1,2

     650,000     645,450  

6.38%1,2

     200,000     199,750  

Icahn Enterprises, LP / Icahn Enterprises

              

Finance Corp.

              

6.00% due 08/01/205

     800,000     822,000  

Bank of America Corp.

              

5.13%1,2

     750,000     725,625  

Assured Guaranty US Holdings, Inc.

              

5.00% due 07/01/245

     700,000     707,320  

Nordea Bank AB

              

6.13%1,2,3

     400,000     392,000  

5.50%1,2,3

     300,000     294,750  

ACC Group Housing LLC

              

6.35% due 07/15/543,†††

     300,000     309,810  

3.50% due 07/15/183,†††

     300,000     304,380  

Corporation Financiera de Desarrollo S.A.

              

5.25% due 07/15/291,3

     600,000     608,250  

Customers Bank

              

6.13% due 06/26/291,3

     500,000     504,375  

Wilton Re Finance LLC

              

5.88% due 03/30/331,3

     475,000     494,000  

Icahn Enterprises Limited Partnership / Icahn

              

Enterprises Finance Corp.

              

4.88% due 03/15/19

     450,000     443,250  

Pacific Northwest Communities LLC

              

5.91% due 06/15/503

     400,000     415,036  

Atlantic Marine Corporations Communities LLC

              

5.43% due 12/01/503

     389,456     375,564  

Royal Bank of Scotland Group plc

              

5.13% due 05/28/24

     350,000     343,896  

CIC Receivables Master Trust

              

4.89% due 10/07/21†††

     300,000     300,300  

Cadence Bank North America

              

6.25% due 06/28/291,11

     200,000     203,500  

Skyway Concession Company LLC

              

0.61% due 06/30/261,3

     250,000     200,000  

Cadence Financial Corp.

              

4.88% due 06/28/1911

     150,000     150,750  

Prosight Global Inc.

              

7.50% due 11/26/20†††,8

     100,000     102,520  

TIG Holdings, Inc.

              

8.60% due 01/15/273

     34,000     29,750  
             
Total Financial           21,672,716  
             
BASIC MATERIALS - 3.1%              

Newcrest Finance Pty Ltd.

              

4.20% due 10/01/223

     1,200,000     1,101,798  

4.45% due 11/15/213

     500,000     480,556  

AngloGold Ashanti Holdings plc

              

5.13% due 08/01/225

     1,250,000     1,205,951  

Yamana Gold, Inc.

              

4.95% due 07/15/24

     1,150,000     1,144,787  

Mosaic Global Holdings, Inc.

              

7.38% due 08/01/18

     18,000     20,370  
             
Total Basic Materials           3,953,462  
             
CONSUMER, CYCLICAL - 2.4%              

United Airlines 2014-2 Class B

              

Pass Through Trust

              

4.63% due 09/03/22

     745,000     731,963  

Sabre GLBL, Inc.

              

8.50% due 05/15/193,5

     680,000     727,600  

Northern Group Housing LLC

              

6.80% due 08/15/533

     600,000     672,090  

Continental Airlines 2012-2 Class B

              

Pass Through Trust

              

5.50% due 10/29/20

     380,441     401,365  

GRD Holdings III Corp.

              

10.75% due 06/01/193

     250,000     275,625  

QVC, Inc.

              

7.38% due 10/15/203

     200,000     213,061  

Continental Airlines 2012-1 Class B

              

Pass Through Trust

              

6.25% due 04/11/20

     112,331     119,632  
             
Total Consumer, Cyclical           3,141,336  
             
MORTGAGE SECURITIES - 1.6%              

CSMC Series 2014-ICE

              

2.30% due 04/15/271,3

     1,150,000     1,151,825  

BBCMS Trust 2013-TYSN

              

3.71% due 09/05/323

     900,000     858,542  
             
Total Mortgage Securities           2,010,367  
             
ENERGY - 1.1%              

BreitBurn Energy Partners LP /

              

BreitBurn Finance Corp.

              

7.88% due 04/15/225

     600,000     607,500  

Regency Energy Partners, LP / Regency

              

Energy Finance Corp.

              

8.38% due 06/01/19

     455,000     482,300  

Crestwood Midstream Partners, LP / Crestwood

              

Midstream Finance Corp.

              

7.75% due 04/01/19

     350,000     366,625  

Williams Companies, Inc.

              

8.75% due 03/15/32

     12,000     15,228  
             
Total Energy           1,471,653  
             
INDUSTRIALS - 1.0%              

Chicago Bridge & Iron Co.

              

5.15% due 12/27/22†††,8

     750,000     771,900  

SBM Baleia Azul Sarl

              

5.50% due 09/15/27†††,8

     459,700     466,550  
             
Total Industrials           1,238,450  
             
COMMUNICATIONS - 0.5%              

Avaya, Inc.

              

7.00% due 04/01/193

     650,000     630,500  

Nortel Networks Ltd.

              

6.88% due 09/01/236

     31,000     12,710  
             
Total Communications           643,210  
             
DIVERSIFIED - 0.5%              

Leucadia National Corp.

              

5.50% due 10/18/23

     600,000     627,019  
             
GOVERNMENT - 0.2%              

U.S. Treasury Bonds

              

0.00% due 05/15/449

     750,000     279,061  
             

 
46 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               
CONSUMER, NON-CYCLICAL - 0.1%              

ADT Corp.

              

6.25% due 10/15/21

   $ 150,000   $ 155,250  
             
MATERIALS - 0.0%              

Constar International, Inc

              

11.00% due 12/31/17†††,8

     5,747     —  
             
Total Corporate Bonds              

(Cost $38,772,511)

           35,192,524  
             
COLLATERALIZED MORTGAGE OBLIGATIONS†† - 7.5%              

LSTAR Securities Investment Trust 2014-1

              

3.25% due 09/01/211,11

     1,400,000     1,400,000  

American Home Mortgage Investment Trust 2006-1

              

0.35% due 03/25/461

     1,443,823     1,225,496  

Luminent Mortgage Trust 2006-2

              

0.35% due 02/25/461

     1,636,774     1,213,470  

Alternative Loan Trust 2003-18CB

              

5.25% due 09/25/33

     1,014,650     1,054,456  

MASTR Adjustable Rate Mortgages Trust 2003-5

              

2.13% due 11/25/331

     927,033     846,845  

American Home Mortgage Assets Trust 2007-1

              

0.82% due 02/25/471

     1,251,991     789,644  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2006-AR9 Trust

              

0.96% due 11/25/461

     759,086     538,391  

Chase Mortgage Finance Trust Series 2006-S3

              

6.00% due 11/25/36

     545,719     468,093  

Sequoia Mortgage Trust 2013-5

              

2.50% due 05/25/431,3

     427,908     399,308  

HarborView Mortgage Loan Trust 2006-12

              

0.34% due 01/19/381

     449,566     383,742  

Residential Asset Securitization Trust 2006-A12

              

6.25% due 11/25/36

     486,340     367,036  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2006-8 Trust

              

4.90% due 10/25/36

     462,046     352,592  

Nomura Resecuritization Trust 2012-1R

              

0.59% due 08/27/471,3

     331,818     306,932  

GreenPoint Mortgage Funding Trust Series 2007-AR1

              

0.23% due 02/25/471

     291,083     269,541  

JP Morgan Mortgage Trust 2006-A3

              

2.63% due 04/25/361

     35,037     30,444  
             
Total Collateralized Mortgage Obligations              

(Cost $9,727,659)

           9,645,990  
             
               
SENIOR FLOATING RATE INTERESTS††,1 - 7.0%              
               
CONSUMER, CYCLICAL - 1.8%              

Landry’s, Inc.

              

4.00% due 04/24/18

     723,475     716,631  

Compucom Systems, Inc.

              

4.25% due 05/07/20

     726,882     695,990  

Ollies Bargain Outlet

              

4.75% due 09/28/19

     387,932     384,782  

Arby’s

              

4.75% due 11/15/20

     347,375     346,507  

1-800 Contacts, Inc.

              

4.25% due 01/29/21

     199,000     196,015  
             
Total Consumer, Cyclical           2,339,925  
             
               
TECHNOLOGY - 1.3%              

Avago Technologies Ltd.

              

3.75% due 05/06/21

     997,500     987,655  

Greenway Medical Technologies

              

6.00% due 11/04/208

     347,375     345,638  

P2 Energy Solutions

              

5.00% due 10/30/20

     347,375     345,204  
             
Total Technology           1,678,497  
             
INDUSTRIAL - 1.1%              

Rise Ltd.

              

4.74% due 02/12/39

     722,656     732,628  

AABS Ltd.

              

4.87% due 01/15/38

     447,917     455,173  

VAT Holding AG

              

4.75% due 02/11/21

     248,750     246,263  
             
Total Industrial           1,434,064  
             
CONSUMER, NON-CYCLICAL - 1.0%              

Hanesbrands, Inc.

              

3.50% due 07/29/21

   EUR 400,000     507,422  

Albertson’s (Safeway) Holdings LLC

              

5.50% due 08/25/21

     400,000     397,832  

NES Global Talent

              

6.50% due 10/03/19

     147,188     145,716  

Akorn, Inc.

              

4.50% due 04/16/21

     100,000     99,281  

Performance Food Group

              

6.25% due 11/14/19

     99,246     98,874  
             
Total Consumer, Non-cyclical           1,249,125  
             
COMMUNICATIONS - 0.8%              

MergerMarket Ltd.

              

4.50% due 02/04/21

     597,000     579,090  

Asurion Corp.

              

5.00% due 05/24/19

     458,821     456,128  
             
Total Communications           1,035,218  
             
FINANCIAL - 0.5%              

Corporate Capital Trust

              

4.00% due 05/20/19

     348,250     348,250  

Magic Newco, LLC

              

5.00% due 12/12/18

     246,854     246,237  

American Stock Transfer & Trust

              

5.75% due 06/26/20

     96,649     95,965  
             
Total Financial           690,452  
             
BASIC MATERIALS - 0.5%              

Fortescue Metals Group Ltd.

              

3.75% due 06/30/19

     596,985     583,833  
             
Total Senior Floating Rate Interests              

(Cost $9,103,531)

           9,011,114  
             
MORTGAGE BACKED SECURITIES†† - 5.2%              

COMM 2014-KYO Mortgage Trust

              

2.50% due 06/11/271,3

     1,150,000     1,150,380  

2.15% due 06/11/271,3

     600,000     600,198  

Hilton USA Trust 2013-HLT

              

4.41% due 11/05/303

     1,100,000     1,121,468  

5.61% due 11/05/181,3

     350,000     355,426  

Boca Hotel Portfolio Trust 2013-BOCA

              

3.20% due 08/15/261,3

     1,000,000     1,000,792  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 47

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Motel 6 Trust 2012-MTL6

              

3.78% due 10/05/253

   $ 500,000   $ 500,415  

LSTAR Commercial Mortgage Trust 2014-2

              

5.30% due 01/20/411,3

     500,000     499,588  

GMAC Commercial Mortgage

              

Asset Corp. 2003-PRES

              

6.24% due 10/10/41†††,3

     483,369     473,556  

Capmark Military Housing Trust 2007-AETC

              

5.75% due 02/10/523

     341,931     345,111  

SRERS Funding Ltd. 2011-RS

              

0.40% due 05/09/461,3

     350,808     334,145  

T2 Income Fund CLO Ltd. 2007-1X

              

1.73% due 07/15/19

     250,000     244,000  

Ginnie Mae

              

#518436, 7.25% due 09/15/29

     9,450     9,995  

#1849, 8.50% due 08/20/24

     1,041     1,089  

Fannie Mae7

              

1990-108, 7.00% due 09/25/20

     7,815     8,597  
             
Total Mortgage Backed Securities              

(Cost $6,591,589)

           6,644,760  
             
               
MUNICIPAL BONDS†† - 4.5%              
               
CALIFORNIA - 2.0%              

Cypress School District General

              

Obligation Unlimited

              

0.00% due 08/01/409

     4,400,000     1,394,095  

Stockton Unified School District General

              

Obligation Unlimited

              

0.00% due 08/01/369

     875,000     354,681  

0.00% due 08/01/359

     565,000     240,656  

Inland Valley Development Agency Tax Allocation

              

5.50% due 03/01/33

     500,000     517,030  

County of Sacramento California Revenue Bonds

              

7.25% due 08/01/25

     100,000     112,827  
             
Total California           2,619,289  
             
ALABAMA - 0.7%              

County of Jefferson Alabama Sewer Revenue

              

Revenue Bonds

              

0.00% due 10/01/349

     775,000     251,922  

0.00% due 10/01/369

     800,000     226,272  

0.00% due 10/01/359

     475,000     144,030  

0.00% due 10/01/329

     300,000     113,301  

0.00% due 10/01/319

     250,000     102,173  
             
Total Alabama           837,698  
             
PUERTO RICO - 0.6%              

Commonwealth of Puerto Rico General

              

Obligation Unlimited

              

5.00% due 07/01/31

     500,000     499,960  

Puerto Rico Highways & Transportation

              

Authority Revenue Bonds

              

5.50% due 07/01/28

     250,000     262,045  
             
Total Puerto Rico           762,005  
             
ILLINOIS - 0.6%              

State of Illinois General Obligation Unlimited

              

5.65% due 12/01/38

     500,000     520,090  

City of Chicago Illinois General Obligation

              

Unlimited

              

5.00% due 01/01/27

     150,000     159,431  

0.00% due 01/01/309

     150,000     72,356  
             
Total Illinois           751,877  
             
FLORIDA - 0.5%              

County of Miami-Dade Florida

              

Revenue Bonds

              

0.00% due 10/01/429

     2,500,000     608,799  
             
MICHIGAN - 0.1%              

Detroit City School District General

              

Obligation Unlimited

              

7.75% due 05/01/39

     100,000     125,031  

City of Detroit Michigan Water Supply

              

System Revenue Revenue Bonds

              

5.00% due 07/01/30

     50,000     50,020  
             
Total Michigan           175,051  
             
Total Municipal Bonds              

(Cost $5,395,179)

           5,754,719  
             
COMMERCIAL PAPER†† - 6.8%              

GATX Corp.

              

0.25% due 10/06/14

     2,000,000     1,999,931  

Cigna Corp.

              

0.20% due 10/01/14

     1,500,000     1,500,000  

Cox Enterprises, Inc.

              

0.25% due 10/01/14

     1,500,000     1,500,000  

Diageo Capital PLC

              

0.25% due 10/07/14

     1,500,000     1,499,938  

Kellogg Co.

              

0.16% due 10/15/14

     1,200,000     1,199,925  

Pentair Finance SA

              

0.23% due 10/03/14

     1,000,000     999,987  
             
Total Commercial Paper              

(Cost $8,699,781)

           8,699,781  
             
Total Investments - 103.4%              

(Cost $136,715,262)

         $ 132,632,478  
             
Other Assets & Liabilities, net - (3.4)%           (4,372,574 )
             
Total Net Assets - 100.0%         $ 128,259,904  
             

 
48 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS(concluded)   September 30, 2014
 
INVESTMENT GRADE BOND FUND    

CENTRALLY CLEARED INTEREST RATE SWAP AGREEMENTS††

                                  Unrealized  
    Floating                             Appreciation/  
Counterparty   Rate   Floating Rate Index   Fixed Rate   Maturity Date   Notional Amount   Market Value   (Depreciation )
 
Merrill Lynch   Pay   3-Month USD-LIBOR   3.89 %   09/09/43   $ 1,850,000   $ 265,845     $ 265,845  
Merrill Lynch   Pay   3-Month USD-LIBOR   3.68 %   08/29/43     1,450,000     151,670       151,670  
Merrill Lynch   Pay   3-Month USD-LIBOR   1.97 %   09/09/18     5,850,000     77,220       77,220  
Merrill Lynch   Pay   3-Month USD-LIBOR   3.65 %   09/26/43     450,000     43,155       43,155  
Merrill Lynch   Pay   3-Month USD-LIBOR   1.70 %   08/29/18     5,950,000     21,420       21,420  
Merrill Lynch   Pay   3-Month USD-LIBOR   1.59 %   09/26/18     1,350,000     (3,645 )     (3,645 )
                                       
                                    $ 555,665  
                                       

*   Non-income producing security.
†   Value determined based on Level 1 inputs, unless otherwise noted — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Perpetual maturity.
3   Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $70,256,060 (cost $74,580,230), or 54.8% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4   Security is a step up/step down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity.
5   Security or a portion thereof is held as collateral for reverse repurchase agreements — See Note 13.
6   Security is in default of interest and/or principal obligations.
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.
8   Illiquid security.
9   Zero coupon rate security.
10   Residual interest.
11   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $1,754,250 (cost $1,750,000), or 1.4% of total net assets — See Note 16.
    plc — Public Limited Company
    REIT — Real Estate Investment Trust

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 49

INVESTMENT GRADE BOND FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:        
Investments, at value        

(cost $136,715,262)

   $ 132,632,478  
Foreign currency, at value        

(cost $4,508)

     4,508  
Unrealized appreciation on swap agreements     559,310  
Segregated cash with broker     441,592  
Cash     57,599  
Prepaid expenses     28,662  
Receivables:        

Securities sold

     881,212  

Interest

     722,786  

Fund shares sold

     139,390  

Dividends

     32,681  
       
Total assets     135,500,218  
       
         
LIABILITIES:        
Reverse Repurchase Agreements     4,449,397  
Segregated cash from broker     781,494  
Unrealized depreciation on swap agreements     3,645  
Payable for:        

Securities purchased

     1,708,060  

Fund shares redeemed

     93,273  

Management fees

     32,691  

Distribution and service fees

     38,170  

Distributions to shareholders

     30,923  

Transfer agent/maintenance fees

     15,439  

Fund accounting/administration fees

     9,670  

Trustees’ fees*

     2,781  

Miscellaneous

     74,771  
       
Total liabilities     7,240,314  
       
NET ASSETS   $ 128,259,904  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 159,509,224  
Distributions in excess of net investment income     (620,132 )
Accumulated net realized loss on investments     (27,133,232 )
Net unrealized depreciation on investments     (3,495,956 )
       
Net assets   $ 128,259,904  
       
A-CLASS:        
Net assets   $ 99,565,402  
Capital shares outstanding     5,383,021  
Net asset value per share     $18.50  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $19.42  
       
B-CLASS:        
Net assets   $ 2,112,623  
Capital shares outstanding     114,701  
Net asset value per share     $18.42  
       
C-CLASS:        
Net assets   $ 20,672,518  
Capital shares outstanding     1,122,524  
Net asset value per share     $18.42  
       
INSTITUTIONAL CLASS:        
Net assets   $ 5,909,361  
Capital shares outstanding     319,985  
Net asset value per share     $18.47  
       

STATEMENT OF OPERATIONS
 
Year Ended September 30, 2014

INVESTMENT INCOME:        
Interest   $ 4,925,640  
Dividends from securities of unaffiliated issuers     247,745  
Dividends from securities of affiliated issuers     7,305  
       

Total investment income

     5,180,690  
       
         
EXPENSES:        
Management fees     563,405  
Transfer agent/maintenance fees:        

A-Class

     109,440  

B-Class

     17,539  

C-Class

     31,542  

Institutional Class

     631  
Distribution and service fees:        

A-Class

     226,505  

B-Class

     24,700  

C-Class

     185,243  
Fund accounting/administration fees     107,046  
Interest expense     33,696  
Trustees’ fees*     11,910  
Line of credit expense     9,948  
Custodian fees     6,304  
Tax expense     2  
Miscellaneous     193,684  
       

Total expenses

     1,521,595  
Less:        
Expenses waived by Adviser     (184,543 )
       
Net expenses     1,337,052  
       
Net investment income     3,843,638  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     851,625  

Investments in affiliated issuers

     (403 )

Swap agreements

     460,552  

Options purchased

     (139,562 )

Options written

     31,514  
       
Net realized gain     1,203,726  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     3,570,964  

Swap agreements

     245,395  
       
Net change in unrealized appreciation (depreciation)     3,816,359  
       
Net realized and unrealized gain     5,020,085  
       
Net increase in net assets resulting        

from operations

   $ 8,863,723  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
50 | THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

INVESTMENT GRADE BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
    Year Ended     Year Ended  
    September 30,     September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 3,843,638     $ 3,757,320  
Net realized gain on investments     1,203,726       4,952,858  
Net change in unrealized appreciation (depreciation) on investments     3,816,359       (4,987,231 )
 
Net increase in net assets resulting from operations     8,863,723       3,722,947  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (3,901,798 )     (3,408,190 )

B-Class

     (90,367 )     (119,783 )

C-Class

     (663,466 )     (654,081 )

Institutional Class

     (43,335 )     (2,951 )
 
Total distributions to shareholders     (4,698,966 )     (4,185,005 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     34,856,715       22,376,229  

B-Class

     113,376       432,699  

C-Class

     7,556,050       10,703,187  

Institutional Class

     6,598,753       174,306  
Distributions reinvested                

A-Class

     3,669,266       3,261,071  

B-Class

     90,089       119,401  

C-Class

     598,003       609,091  

Institutional Class

     43,339       2,451  
Cost of shares redeemed                

A-Class

     (25,960,887 )     (39,676,207 )

B-Class

     (1,240,203 )     (2,665,979 )

C-Class

     (6,049,767 )     (14,287,993 )

Institutional Class

     (925,391 )     —  
 
Net increase (decrease) from capital share transactions     19,349,343       (18,951,744 )
 
Net increase (decrease) in net assets     23,514,100       (19,413,802 )
                 
NET ASSETS:                

Beginning of year

     104,745,804       124,159,606  
 

End of year

   $ 128,259,904     $ 104,745,804  
 
Distributions in excess of net investment income at end of year   $ (620,132 )   $ (425,919 )
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     1,908,779       1,246,284  

B-Class

     6,183       24,231  

C-Class

     414,295       595,542  

Institutional Class

     357,987       9,638  
Shares issued from reinvestment of distributions                

A-Class

     201,435       181,120  

B-Class

     4,978       6,659  

C-Class

     33,009       33,953  

Institutional Class

     2,362       137  
Shares redeemed                

A-Class

     (1,424,258 )     (2,203,124 )

B-Class

     (68,669 )     (148,667 )

C-Class

     (333,003 )     (795,823 )

Institutional Class

     (50,139 )     —  
 
Net increase (decrease) in shares     1,052,959       (1,050,050 )
 

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 51

INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended       Period Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,       September 30,     December 31,     December 31,     December 31,  
A-Class     2014       2013       2012d       2011e       2010e       2009e  
 
Per Share Data                                                
Net asset value, beginning of period     $17.81       $17.92       $17.41       $16.71       $16.20       $15.12  
 
Income (loss) from investment operations:                                                
Net investment income (loss)a     .65       .61       .27       .42       .40       .48  
Net gain (loss) on investments (realized and unrealized)     .83       (.04 )     .51       .74       .59       1.12  
     
Total from investment operations     1.48       .57       .78       1.16       .99       1.60  
 
Less distributions from:                                                
Net investment income     (.79 )     (.68 )     (.27 )     (.46 )     (.48 )     (.52 )
     
Total distributions     (.79 )     (.68 )     (.27 )     (.46 )     (.48 )     (.52 )
 
Net asset value, end of period     $18.50       $17.81       $17.92       $17.41       $16.71       $16.20  
     
                                                 
 
Total Returnf     8.47%       3.21%       4.51%       6.94%       6.11%       10.63%  
 
Ratios/Supplemental Data                                                
Net assets, end of period (in thousands)     $99,565       $83,642       $98,063       $108,999       $101,971       $104,972  
 
Ratios to average net assets:                                                
Net investment income (loss)     3.55%       3.40%       2.04%       2.43%       2.51%       3.04%  
Total expenses     1.19%       1.21%       1.15%       1.15%       1.21%       1.31%  
Net expensesb,g     1.05%       1.04%       1.00%       1.00%       0.98%       0.95%  
 
Portfolio turnover rate     61%       119%       52%       43%       39%       89%  

    Year Ended     Year Ended       Period Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,       September 30,     December 31,     December 31,     December 31,  
B-Class     2014       2013       2012d       2011e       2010e       2009e  
 
Per Share Data                                                
Net asset value, beginning of period     $17.73       $17.82       $17.32       $16.62       $16.12       $15.04  
 
Income (loss) from investment operations:                                                
Net investment income (loss)a     .51       .47       .16       .29       .28       .36  
Net gain (loss) on investments (realized and unrealized)     .83       (.04 )     .51       .74       .54       1.12  
     
Total from investment operations     1.34       .43       .67       1.03       .82       1.48  
 
Less distributions from:                                                
Net investment income     (.65 )     (.52 )     (.17 )     (.33 )     (.32 )     (.40 )
     
Total distributions     (.65 )     (.52 )     (.17 )     (.33 )     (.32 )     (.40 )
 
Net asset value, end of period     $18.42       $17.73       $17.82       $17.32       $16.62       $16.12  
     
                                                 
 
Total Returnf     7.68%       2.42%       3.91%       6.35%       5.08%       9.87%  
 
Ratios/Supplemental Data                                                
Net assets, end of period (in thousands)     $2,113       $3,054       $5,168       $6,993       $11,619       $16,249  
 
Ratios to average net assets:                                                
Net investment income (loss)     2.82%       2.64%       1.29%       1.72%       1.76%       2.31%  
Total expenses     2.53%       2.67%       2.12%       1.92%       1.95%       2.06%  
Net expensesb,g     1.80%       1.79%       1.75%       1.75%       1.73%       1.70%  
 
Portfolio turnover rate     61%       119%       52%       43%       39%       89%  

 
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

INVESTMENT GRADE BOND FUND

FINANCIAL HIGHLIGHTS (continued)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Period Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     December 31,     December 31,     December 31,  
C-Class     2014       2013       2012d       2011e       2010e       2009e  
 
Per Share Data                                                
Net asset value, beginning of period     $17.73       $17.82       $17.31       $16.62       $16.12       $15.04  
 
Income (loss) from investment operations:                                                
Net investment income (loss)a     .51       .48       .17       .29       .28       .36  
Net gain (loss) on investments (realized and unrealized)     .83       (.05 )     .51       .73       .54       1.12  
     
Total from investment operations     1.34       .43       .68       1.02       .82       1.48  
 
Less distributions from:                                                
Net investment income     (.65 )     (.52 )     (.17 )     (.33 )     (.32 )     (.40 )
     
Total distributions     (.65 )     (.52 )     (.17 )     (.33 )     (.32 )     (.40 )
 
Net asset value, end of period     $18.42       $17.73       $17.82       $17.31       $16.62       $16.12  
     
                                                 
 
Total Returnf     7.69%       2.42%       3.95%       6.32%       5.05%       9.85%  
 
Ratios/Supplemental Data                                                
Net assets, end of period (in thousands)     $20,673       $17,876       $20,929       $22,035       $19,284       $20,843  
 
Ratios to average net assets:                                                
Net investment income (loss)     2.80%       2.65%       1.29%       1.68%       1.76%       2.28%  
Total expenses     1.99%       2.03%       1.92%       1.90%       1.96%       2.05%  
Net expensesb,g     1.80%       1.79%       1.75%       1.75%       1.73%       1.70%  
 
Portfolio turnover rate     61%       119%       52%       43%       39%       89%  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 53

INVESTMENT GRADE BOND FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Period Ended  
    September 30,     September 30,  
Institutional Class     2014       2013c  
 
Per Share Data                
Net asset value, beginning of period     $17.80       $18.00  
 
Income (loss) from investment operations:                
Net investment income (loss)a     .68       .46  
Net gain (loss) on investments (realized and unrealized)     .83       (.21 )
     
Total from investment operations     1.51       .25  
 
Less distributions from:                
Net investment income     (.84 )     (.45 )
     
Total distributions     (.84 )     (.45 )
 
Net asset value, end of period     $18.47       $17.80  
     
                 
 
Total Returnf     8.64%       1.35%  
 
Ratios/Supplemental Data                
Net assets, end of period (in thousands)     $5,909       $174  
 
Ratios to average net assets:                
Net investment income (loss)     3.72%       3.85%  
Total expenses     0.88%       1.17%  
Net expensesb,g     0.78%       0.82%  
 
Portfolio turnover rate     61%       119%  

a   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b   Net expense information reflects the expense ratios after expense waivers.
c   Since commencement of operations: January 29, 2013. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
d   The Fund changed its fiscal year end from December 31 to September 30 in 2012.
e   Per share amounts for the years ended December 31, 2009-December 31, 2010 and the period January 1, 2011 through April 8, 2011 have been restated to reflect a 1:4 reverse share split effective April 8, 2011.
f   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
g   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratios for the periods would be:

      09/30/14   09/30/13
   
  A-Class   1.00%   1.02%
  B-Class   1.75%   1.77%
  C-Class   1.75%   1.77%
  Institutional Class   0.75%   0.77%

 
54 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

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THE GUGGENHEIM FUNDS ANNUAL REPORT | 55

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders

Guggenheim Limited Duration Fund (the “Fund”) is managed by a team of seasoned professionals, including Anne B. Walsh, Senior Managing Director; James W. Michal, Managing Director and Portfolio Manager; and Steven H. Brown, Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the abbreviated fiscal year ended September 30, 2014.

For the abbreviated fiscal period ended September 30, 2014 (the “Period”), the Guggenheim Limited Duration Fund returned 1.75%1, compared with the 0.60% return of its benchmark, the Barclays U.S. Aggregate Bond 1-3 Year Total Return Index. The Fund’s inception date was December 16, 2013.

The Fund seeks to provide a high level of income consistent with preservation of capital. It invests at least 80% of its assets in a diversified portfolio of debt securities.

As the Period began, monetary accommodation by the Fed was propelling asset prices higher, while positive economic momentum was pushing interest rates higher. By the end of December 2013, the 10-year U.S. Treasury yield reached its highest point over the prior 2½ years at 3%, a level that was not revisited for the remainder of the Period.

Credit-spread and risk assets continued to find investor favor through 2014, even though severe winter weather produced volatility and mixed economic data. Additional liquidity from central banks outside the U.S. supported foreign capital flows into U.S. assets, which, along with the search for yield among U.S. investors, was positive for fixed income. But just as the market appeared to be growing complacent in the third quarter of 2014, leveraged credit had its first correction in a year, as mutual fund investors withdrew from the sector amid concerns about frothy valuations and talk of credit bubble. Volatility spread across risk assets, including equities.

The events that drove spread widening in the third quarter showed that investors are becoming increasingly reactive to factors outside of the fundamentals that underscore a generally positive outlook on credit. Even though U.S. economic data was mixed in September, it was strong year to date, and the improving health of the U.S. economy and low interest rates underscored our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening could present buying opportunities.

The Fund mainly invests in asset-backed securities (ABS), investment grade corporate bonds and non-agency residential mortgage-backed securities (RMBS). It has positions in high yield corporate bonds, bank loans, commercial mortgage-backed securities and preferred securities, among other holdings.

The ABS and non-agency RMBS sectors contributed positively for the Period. The BofA/ML ABS Master BBB-AA Index gained 3.36% in a 12-month Period as its spread tightened 48 basis points to 133 basis points. Credit performance across the commercial ABS and collateralized loan obligation (CLO) sectors remained strong given benign credit conditions and improving collateral valuations across the U.S. economy. 2014 issuance is well ahead of 2013’s pace and likely to break 2012’s post-crisis peak. New ABS issuance was diversified across all classes, with auto and credit card new issues remaining strong. Consumer ABS performance has been solid despite concern surrounding student loans and subprime auto lending. JPMorgan Research indicates the gradual improvement in the household balance sheet will continue to support credit performance of Consumer ABS. Year-to-date ABS issuance has now surpassed $94 billion, the all time annual record set in 2007. Housing activity has been uneven, as price appreciation has been slowing and sales remain below the post-crisis peak in 2013. With the economic outlook mostly positive and central banks maintaining accommodation, the backdrop for ABS and RMBS remains constructive. Amidst these positive fundamentals, the CLO market raised $93 billion through three quarters of 2014, already exceeding 2013’s full-year volume.

Investment grade corporate bonds weathered interest rate volatility in the fourth quarter of 2013, but low dealer inventory and heavy demand for most of the 12-month Period supported continued spread compression. The Barclays U.S. Corporate Investment Grade Index rose by 6.77% for the one-year Period. The credit spread on investment grade corporate bonds tightened by 29 basis points, and yields declined to 3.10% at the end of September 2014. The Barclays U.S. Investment Grade 1-3 Year Index rose by 1.65% and the credit spread on 1-3 year investment grade corporate bonds tightened by 16 basis points while yields

 
56 | THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded)   September 30, 2014
 

rose to 1.31% for the one year Period. Volatility in the third quarter also impacted issuance, but total investment grade corporate issuance still reached $647 billion through the three quarters of 2014.

High yield corporate bonds and bank loans posted their fifth consecutive year of positive returns in 2013 and strong performance continued through the first half of 2014. As upside potential declined in the leveraged credit space, the Fund rotated into higher quality credits. With the onset of a leveraged credit sell-off in the third quarter, the Fund was able to add exposure back to many of the names it had sold several months before.

In the third quarter of 2014, the Fund continued to see further price appreciation attributable to tightening of credit spreads outside of corporate bonds. Positive returns have largely been driven by the Fund’s investments in asset backed securities as spreads continued to normalize across various subsectors including collateralized loan obligations, commercial real estate CDOs, and aircraft lease securitizations.

Concentration of the Fund’s credit investments in relatively short-maturity high yield bonds and loans has muted the impact of recent turmoil of risk assets, and the Fund continues to use periods of weakness in those sectors to add attractive assets.

Performance displayed represents past performance which is no guarantee of future results.
 
1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.
 
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 | 57

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

LIMITED DURATION FUND

OBJECTIVE: Seeks to provide a high level of income consistent with preservation of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
    % of
Rating Total Investments
 
Fixed Income Instruments      

AAA

   1.3 %

AA

   7.7 %

A

   17.6 %

BBB

   39.7 %

BB

   10.4 %

B

   7.8 %

CCC

   3.8 %

Other

   3.7 %
Other Instruments      

Repurchase Agreements

   3.5 %

Short Term Investments

   3.4 %

Preferred Stocks

   1.1 %
 
Total Investments   100.0 %
 

The chart above reflects percentages of the value of total investments.

Inception Date:    
 
A-Class   December 16, 2013
C-Class   December 16, 2013
Institutional Class   December 16, 2013

Ten Largest Holdings (% of Total Net Assets)      
 
LSTAR Securities Investment Trust 2014-1   2.3 %
SRERS Funding Ltd. — Class A1B1   2.2 %
COMM 2014-KYO Mortgage Trust — Class E   1.7 %
City of Detroit Michigan General Obligation Unlimited   1.7 %
Flagship CLO VI — Class D   1.7 %
JPMorgan Chase & Co.   1.4 %
EPR Properties   1.3 %
Hilton USA Trust 2013-HLT — Class EFX   1.2 %
H2 Asset Funding Ltd.   1.2 %
CSMC Series   1.2 %
 
Top Ten Total   15.9 %
 

“Ten Largest Holdings" exclude any temporary cash or derivative investments.

* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
58 | THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*

Total Returns*
Period Ended September 30, 2014

    Since Inception
    (12/16/13)
 
A-Class Shares   1.75%  
 
A-Class Shares with sales charge‡   –0.55%  
 
C-Class Shares   1.13%  
 
C-Class Shares with CDSC†   0.13%  
 
Institutional Class Shares   1.98%  
 
Barclays U.S. Aggregate Bond 1-3 Total Return Index   0.60%  
 

* The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Barclays U.S. Aggregate Bond 1-3 Total Return Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
‡ Fund returns are calculated using the maximum sales charge of 2.25%.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 59

SCHEDULE OF INVESTMENTS   September 30, 2014
 
LIMITED DURATION FUND    

      SHARES     VALUE  
 
               
PREFERRED STOCKS† - 1.2%              

Seaspan Corp.

              

6.38% due 04/30/19

     20,000   $ 511,800  

Goldman Sachs Group, Inc.

              

5.50% due 05/10/231,2

     13,540     321,575  

Morgan Stanley

              

6.38%*,1,2

     10,000     250,700  
             
Total Preferred Stocks              

(Cost $1,079,774)

           1,084,075  
             
               
SHORT TERM INVESTMENTS† - 4.0%              

Dreyfus Treasury Prime Cash Management Fund

     3,422,705     3,422,705  
             
Total Short Term Investments              

(Cost $3,422,705)

           3,422,705  
             
               
      FACE        
      AMOUNT        
               
               
ASSET BACKED SECURITIES†† - 61.7%              

Fortress Credit Opportunities

              

V CLO Ltd. 2014-5A

              

2.88% due 10/15/261,3

   $ 1,000,000     989,500  

3.78% due 10/15/261,3

     1,000,000     980,800  

Flagship CLO VI 2007-1A

              

2.63% due 06/10/211,3

     1,500,000     1,453,351  

H2 Asset Funding Ltd. 2014-1

              

2.05% due 03/19/37

     1,000,000     1,008,500  

Copper River CLO Ltd. 2007-1A

              

0.00% due 01/20/211,3,7

     500,000     548,500  

1.73% due 01/20/211,3

     500,000     456,900  

ACAs CLO Ltd. 2014-1AR

              

2.55% due 09/20/231,3

     1,000,000     1,000,801  

Ares XXIII CLO Ltd. 2014-1AR

              

3.43% due 04/19/231,3

     1,000,000     1,000,000  

Highbridge Loan Management 2012-1 Ltd.

              

2.48% due 09/20/221,3

     1,000,000     999,500  

Miramax LLC 2014-1A

              

3.34% due 07/20/263

     1,000,000     996,848  

Cent CLO 16, LP 2014-16AR

              

2.74% due 08/01/241,3

     500,000     498,800  

3.74% due 08/01/241,3

     500,000     497,500  

Madison Park Funding VIII Ltd. 2014-8AR

              

2.43% due 04/22/221,3

     500,000     498,000  

3.03% due 04/22/221,3

     500,000     497,300  

CIFC Funding 2012-III Ltd.

              

3.23% due 01/29/251,3

     600,000     596,700  

4.48% due 01/29/251,3

     400,000     397,840  

Encore Credit Receivables Trust 2005-4

              

0.59% due 01/25/361

     1,077,390     991,763  

Drug Royalty II Limited Partnership 2 2014-1

              

3.08% due 07/15/231,3

     490,435     493,588  

3.48% due 07/15/233

     490,435     490,373  

Fortress Credit Opportunities III CLO, LP 2014-3A

              

2.73% due 04/28/261,3

     1,000,000     981,900  

Duane Street CLO IV Ltd. 2007-4A

              

2.48% due 11/14/211,3

     1,000,000     967,200  

Black Diamond CLO 2005-2 Delaware Corp.

              

2.03% due 01/07/181,3

     1,000,000     960,700  

San Gabriel CLO Ltd. 2007-1A

              

2.48% due 09/10/211,3

     1,000,000     954,200  

CIFC Funding 2007-I Ltd.

              

1.73% due 05/10/211,3

     1,000,000     951,200  

Westbrook CLO Ltd. 2006-1A

              

1.93% due 12/20/201,3

     1,000,000     947,700  

West Coast Funding Ltd. 2006-1A

              

0.38% due 11/02/411,3

     961,844     944,050  

UCFC Manufactured Housing Contract 1997-2

              

7.38% due 10/15/28

     853,526     930,090  

Structured Asset Investment Loan Trust 2005-2

              

0.89% due 03/25/351

     1,000,000     922,501  

Connecticut Valley Structured Credit

              

CDO III Ltd. 2006-3A

              

0.88% due 03/23/231,3

     500,000     476,000  

6.68% due 03/23/233

     441,767     438,365  

Castlelake Aircraft Securitization Trust 2014-1

              

5.25% due 02/15/29

     446,105     447,800  

7.50% due 02/15/29

     446,105     446,640  

Rockwall CDO II Ltd. 2007-1A

              

0.79% due 08/01/241,3

     1,000,000     891,500  

CCR Incorporated MT100 Payment

              

Rights Master Trust 2010-CX

              

0.60% due 07/10/17†††,1

     912,662     888,202  

Venture VI CDO Ltd. 2006-1A

              

1.72% due 08/03/201,3

     850,000     796,875  

Race Point V CLO Ltd. 2014-5AR

              

3.98% due 12/15/221,3

     750,000     748,275  

Golub Capital Partners CLO 10 Ltd. 2014-10AR

              

3.18% due 10/20/211,3

     700,000     696,500  

Gramercy Park CLO Ltd. 2014-1AR

              

3.18% due 07/17/231,3

     700,000     696,430  

Wrightwood Capital Real Estate CDO 2005-1 Ltd.

              

0.66% due 11/21/401,3

     700,000     643,370  

Structured Asset Investment Loan Trust 2005-1

              

0.87% due 02/25/351,3

     550,000     519,336  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2007-BC1

              

0.28% due 02/25/371

     600,000     518,630  

Helios Series I Multi Asset CBO Ltd. 2001-1A

              

1.17% due 12/13/361,3

     540,766     513,998  

FREMF 2012-K501 Mortgage Trust

              

3.60% due 11/25/461,3

     500,000     510,329  

Marine Park CLO Ltd. 2012-1A

              

4.73% due 05/18/231,3

     500,000     501,300  

Symphony CLO IX, LP 2012-9A

              

3.48% due 04/16/221,3

     500,000     500,000  

OZLM Funding Ltd. 2012-2A

              

3.49% due 10/30/231,3

     500,000     500,000  

LCM X, LP 2014-10AR

              

3.08% due 04/15/221,3

     500,000     497,750  

Gallatin CLO VII 2014-1 Ltd.

              

3.06% due 07/15/231,3

     500,000     497,400  

CSMC Series 2014-2R

              

0.36% due 02/27/461,3

     529,134     495,843  

BlueMountain CLO 2012-2 Ltd.

              

2.98% due 11/20/241,3

     500,000     494,750  

Shackleton II CLO Ltd. 2012-2A

              

4.28% due 10/20/231,3

     500,000     493,450  

CKE Restaurant Holdings, Inc. 2013-1A

              

4.47% due 03/20/433

     488,750     493,281  

 
60 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued) September 30, 2014
 
LIMITED DURATION FUND  

      FACE        
      AMOUNT     VALUE  
 
               

CIFC Funding 2006-I B Ltd.

              

4.23% due 12/22/201,3

   $ 500,000   $ 492,750  

COA Summit CLO Limited 2014-1

              

4.09% due 04/20/231,3

     500,000     492,450  

Marathon CLO II Ltd. 2005-2A

              

2.03% due 12/20/191,3

     500,000     491,900  

Halcyon Loan Advisors Funding 2012-1 Ltd.

              

3.23% due 08/15/231,3

     500,000     491,300  

ALM VII R-2 Ltd. 2013-7R2A

              

2.83% due 04/24/241,3

     500,000     490,900  

Figueroa CLO 2013-1 Ltd.

              

2.98% due 03/21/241,3

     500,000     490,650  

T2 Income Fund CLO Ltd. 2007-1A

              

2.98% due 07/15/191,3

     250,000     246,550  

1.73% due 07/15/191,3

     250,000     244,000  

Gale Force 4 CLO Ltd. 2007-4A

              

3.73% due 08/20/211,3

     500,000     489,600  

Golub Capital Partners CLO 18 Ltd. 2014-18A

              

3.73% due 04/25/261,3

     250,000     248,175  

4.23% due 04/25/261,3

     250,000     240,950  

Anchorage Capital CLO 4 Ltd. 2014-4A

              

2.44% due 07/28/261,3

     500,000     488,750  

Katonah Ltd. 2007-10A

              

2.24% due 04/17/201,3

     500,000     487,250  

KVK CLO 2014-2 Ltd.

              

3.25% due 04/15/261,3

     500,000     486,700  

Race Point IV CLO Ltd. 2007-4A

              

2.24% due 08/01/211,3

     500,000     485,850  

Apidos CDO III Ltd. 2006-3A

              

1.98% due 06/12/201,3

     500,000     484,850  

Telos CLO 2013-4 Ltd.

              

2.98% due 07/17/241,3

     500,000     484,750  

NewStar Arlington Senior Loan Program LLC 2014-1A

              

3.53% due 07/25/251,3

     250,000     243,600  

4.48% due 07/25/251,3

     250,000     239,425  

Babson Mid-Market CLO Incorporated 2007-II

              

1.93% due 04/15/211,3

     500,000     483,000  

ColumbusNova CLO Limited 2007-I

              

1.58% due 05/16/191,3

     500,000     480,700  

GSAA Home Equity Trust 2006-18

              

6.00% due 11/25/36

     670,125     473,917  

Madison Park Funding III Ltd. 2006-3A

              

1.65% due 10/25/201,3

     500,000     473,450  

Tricadia CDO 2006-6 Ltd.

              

0.79% due 11/05/411,3

     500,000     472,800  

Shasta CLO Ltd. 2007-1A

              

1.63% due 04/20/211,3

     500,000     472,550  

ALM XIV Ltd. 2014-14A

              

3.68% due 07/28/261,3

     500,000     471,900  

WhiteHorse IV Ltd. 2007-4A

              

1.68% due 01/17/201,3

     500,000     469,600  

Katonah IX CLO Ltd. 2006-9A

              

1.63% due 01/25/191,3

     500,000     468,500  

CIT Mortgage Loan Trust 2007-1

              

1.60% due 10/25/371,3

     500,000     464,524  

Accredited Mortgage Loan Trust 2007-1

              

0.28% due 02/25/371

     488,353     462,720  

Icon Brand Holdings LLC 2013-1A

              

4.35% due 01/25/433

     460,771     458,743  

Keuka Park CLO Limited 2013-1

              

due 10/21/243,7

     500,000     427,500  

Gramercy Real Estate CDO 2007-1 Ltd.

              

0.51% due 08/15/561,3

     474,013     417,748  

GSAMP Trust 2005-HE6

              

0.59% due 11/25/351

     450,000     414,339  

Centerline REIT, Inc. 2004-RR3

              

4.76% due 09/21/451,3

     374,039     379,066  

Soundview Home Loan Trust 2003-1

              

2.40% due 08/25/311

     306,435     303,494  

ALM IV Ltd. 2011-4A

              

2.98% due 07/18/221,3

     250,000     250,000  

Hewett’s Island CDO Ltd. 2007-6A

              

2.48% due 06/09/191,3

     250,000     249,050  

Great Lakes CLO 2014-1 Ltd. 2014-1A

              

3.93% due 04/15/251,3

     250,000     248,625  

Cerberus Onshore II CLO LLC 2014-1A

              

2.93% due 10/15/231,3

     250,000     246,025  

Kingsland IV Ltd. 2007-4A

              

1.68% due 04/16/211,3

     250,000     226,725  

OFSI Fund V Ltd. 2013-5A

              

3.43% due 04/17/251,3

     200,000     199,440  
             
Total Asset Backed Securities              

(Cost $53,554,359)

           53,496,945  
             
               
CORPORATE BONDS†† - 19.6%              
               
FINANCIAL - 11.0%              

JPMorgan Chase & Co.

              

5.00%1,2,4

     1,280,000     1,247,744  

EPR Properties

              

5.75% due 08/15/22

     1,000,000     1,094,839  

Bank of America Corp.

              

5.13%1,2,4

     900,000     870,750  

Citigroup, Inc.

              

5.35%1,2,4

     890,000     832,150  

6.30%1,2

     30,000     29,628  

Corporation Financiera de Desarrollo S.A.

              

3.25% due 07/15/193,4

     500,000     498,750  

5.25% due 07/15/291,3,4

     350,000     354,813  

ICICI Bank Ltd.

              

4.75% due 11/25/163,4

     750,000     789,979  

HSBC Holdings plc

              

5.63%1,2

     750,000     744,750  

General Motors Financial Company, Inc.

              

2.63% due 07/10/174

     535,000     537,427  

Cadence Financial Corp.

              

4.88% due 06/28/198

     500,000     502,500  

Icahn Enterprises. LP / Icahn Enterprises

              

Finance Corp.

              

6.00% due 08/01/204

     400,000     411,000  

Schahin II Finance Company SPV Ltd.

              

5.88% due 09/25/223,4

     404,700     383,453  

Morgan Stanley

              

5.45%1,2,4

     350,000     347,375  

Icahn Enterprises Limited Partnership / Icahn

              

Enterprises Finance Corp.

              

3.50% due 03/15/174

     350,000     346,500  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 61

SCHEDULE OF INVESTMENTS (continued) September 30, 2014
 
LIMITED DURATION FUND  
      FACE        
      AMOUNT     VALUE  
 
               

Assured Guaranty US Holdings, Inc.

              

5.00% due 07/01/244

   $ 300,000   $ 303,137  

Nordea Bank AB

              

5.50%1,2,3

   250,000     245,625  
             

Total Financial

           9,540,420  
             

MORTGAGE SECURITIES - 2.3%

CSMC Series

              

2.41% due 02/15/291,3

     1,000,000     1,003,114  

CSMC Series 2014-ICE

              

2.30% due 04/15/271,3

     1,000,000     1,001,587  
             

Total Mortgage Securities

           2,004,701  
             

ENERGY - 1.5%

              

Crestwood Midstream Partners, LP / Crestwood

              

Midstream Finance Corp.

              

7.75% due 04/01/194

     500,000     523,750  

California Resources Corp.

              

5.00% due 01/15/20

     350,000     355,250  

Bill Barrett Corp.

              

7.63% due 10/01/19

     250,000     258,125  

Precision Drilling Corp.

              

6.63% due 11/15/204

     190,000     197,125  
             

Total Energy

           1,334,250  
             

INDUSTRIAL - 1.5%

              

Quality Distribution LLC / QD Capital Corp.

              

9.88% due 11/01/184

     750,000     787,500  

Dynagas LNG Partners Limited Partnership/

              

Dynagas Finance, Inc.

              

6.25% due 10/30/19

     500,000     500,000  
             

Total Industrial

           1,287,500  
             

BASIC MATERIALS - 1.1%

              

Yamana Gold, Inc.

              

4.95% due 07/15/244

     750,000     746,600  

KGHM International Ltd.

              

7.75% due 06/15/193,4

     200,000     211,000  
             

Total Basic Materials

           957,600  
             

CONSUMER, CYCLICAL - 0.9%

              

United Airlines 2014-2 Class B

              

Pass Through Trust

              

4.63% due 09/03/22

     500,000     491,250  

AmeriGas Finance LLC / AmeriGas Finance Corp.

              

6.75% due 05/20/204

     250,000     260,000  
             

Total Consumer, Cyclical

           751,250  
             

CONSUMER, NON-CYCLICAL - 0.7%

              

Bumble Bee Holdings, Inc.

              

9.00% due 12/15/173

     600,000     628,500  
             

GOVERNMENT - 0.6%

              

Magyar Export-Import Bank Zrt

              

4.00% due 01/30/203

     500,000     495,250  
             

Total Corporate Bonds

              

(Cost $17,153,102)

          16,999,471  
             
               

SENIOR FLOATING RATE INTERESTS††,1 - 7.8%

              
               

INDUSTRIAL - 2.4%

              

Rise Ltd.

              

4.74% due 02/12/39

     481,771     488,419  

AABS Ltd.

              

4.87% due 01/15/38

     447,917     455,173  

HD Supply, Inc.

              

4.00% due 06/28/18

     396,954     392,191  

Doncasters Group Ltd.

              

4.50% due 04/09/20

     249,368     247,343  

Dematic S.A.

              

4.25% due 12/28/19

     248,125     244,249  

Sabre, Inc.

              

4.00% due 02/19/19

     198,485     195,633  
             

Total Industrial

           2,023,008  
             

CONSUMER, CYCLICAL - 1.7%

              

American Tire Distributors, Inc.

              

5.75% due 06/01/18

     300,000     299,439  

BJ’s Wholesale Club, Inc.

              

4.50% due 09/26/19

     300,000     295,077  

Smart & Final Stores LLC

              

4.75% due 11/15/19

     270,796     269,951  

Fitness International LLC

              

5.50% due 07/01/20

     249,375     246,881  

Arby ’s

              

4.75% due 11/15/20

     198,500     198,004  

Michaels Stores, Inc.

              

4.00% due 01/28/20

     200,000     197,638  
             

Total Consumer, Cyclical

           1,506,990  
             

TECHNOLOGY - 1.7%

              

Avago Technologies Ltd.

              

3.75% due 05/06/21

     698,250     691,359  

MSC Software Corp.

              

5.00% due 05/29/20

     498,750     496,256  

Blue Coat Systems, Inc.

              

4.00% due 05/31/19

     198,995     194,850  

Epicor Software

              

4.00% due 05/16/18

     97,464     96,197  
             

Total Technology

           1,478,662  
             

BASIC MATERIALS - 0.8%

              

Fortescue Metals Group Ltd.

              

3.75% due 06/30/19

     744,984     728,572  
             

CONSUMER, NON-CYCLICAL - 0.6%

              

Diamond Foods, Inc.

              

4.25% due 08/20/18

     498,123     492,211  
             

FINANCIAL - 0.4%

              

USI Holdings Corp.

              

4.25% due 12/27/19

     375,000     367,969  
             

COMMUNICATIONS - 0.2%

              

Asurion Corp.

              

5.00% due 05/24/19

     198,459     197,294  
             

Total Senior Floating Rate Interests

              

(Cost $6,855,085)

          6,794,706  
             

 
62 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (concluded) September 30, 2014
 
LIMITED DURATION FUND  
      FACE        
      AMOUNT     VALUE  
 
               

COLLATERALIZED MORTGAGE OBLIGATIONS†† - 7.3%

              

LSTAR Securities Investment Trust 2014-1

              

3.25% due 09/01/211,8

   $ 2,000,000   $ 2,000,000  

CSMC Series 2014-6R

              

0.33% due 09/27/361,3

     996,851     945,625  

Resource Capital Corp.

              

2.65% due 04/15/32

     500,000     500,000  

Structured Asset Mortgage Investments II

              

Trust 2006-AR1

              

0.38% due 02/25/361

     563,331     482,139  

HarborView Mortgage Loan Trust 2006-12

              

0.34% due 01/19/381

     559,460     477,545  

Residential Asset Securitization Trust 2006-A12

              

6.25% due 11/25/36

     604,638     456,315  

Nomura Resecuritization Trust 2012-1R

              

0.59% due 08/27/471,3

     484,903     448,536  

First Horizon Alternative Mortgage Securities

              

Trust 2006-FA1

              

5.75% due 04/25/36

     524,108     443,849  

GreenPoint Mortgage Funding Trust

              

Series 2007-AR1

              

0.23% due 02/25/471

     419,159     388,139  

Morgan Stanley Re-REMIC Trust 2010-R5

              

0.54% due 06/26/361,3

     268,463     199,779  
             

Total Collateralized Mortgage Obligations

              

(Cost $6,379,465)

           6,341,927  
             

MORTGAGE BACKED SECURITIES†† - 6.5%

              

SRERS Funding Ltd. 2011-RS

              

0.40% due 05/09/461,3

     1,999,606     1,904,625  

COMM 2014-KYO Mortgage Trust

              

2.50% due 06/11/271,3

     1,500,000     1,500,494  

Hilton USA Trust 2013-HLT

              

5.61% due 11/05/181,3

     1,000,000     1,015,504  

JP Morgan Chase Commercial Mortgage

              

Securities Trust 2014-FL5

              

2.25% due 07/15/311,3

     1,000,000     1,000,000  

Motel 6 Trust 2012-MTL6

              

3.78% due 10/05/253

     250,000     250,208  
             

Total Mortgage Backed Securities

              

(Cost $5,626,831)

           5,670,831  
             
               

MUNICIPAL BONDS†† - 1.7%

              
               

MICHIGAN - 1.7%

              

City of Detroit Michigan General

              

Obligation Unlimited

              

3.50% due 10/07/161

     1,500,000     1,500,000  
             

Total Municipal Bonds

              

(Cost $1,500,000)

           1,500,000  
             

REPURCHASE AGREEMENTS††,5,6 - 4.0%

              

Jefferies & Company, Inc.

              

issued 09/08/14 at

              

2.55% due 10/08/14

     1,331,000     1,331,000  

Jefferies & Company, Inc.

              

issued 09/23/14 at

              

2.15% due 10/17/14

     988,000     988,000  

Jefferies & Company, Inc.

              

issued 09/15/14 at

              

2.65% due 10/15/14

     724,000     724,000  

Jefferies & Company, Inc.

              

issued 09/29/14 at

              

2.65% due 10/30/14

     445,000     445,000  
             

Total Repurchase Agreements

              

(Cost $3,488,000)

           3,488,000  
             

Total Investments - 113.8%

              

(Cost $99,059,321)

         $ 98,798,660  
             

Other Assets & Liabilities, net - (13.8)%

           (11,970,448)  
             

Total Net Assets - 100.0%

         $ 86,828,212  
             


*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Perpetual maturity.
3   Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $59,667,038 (cost $59,740,118), or 68.7% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4   Security or a portion thereof is held as collateral for reverse repurchase agreements — See Note 13.
5   Repurchase Agreements — See Note 12
6   Illiquid security.
7   Residual interest.
8   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $2,502,500 (cost $2,500,000), or 2.9% of total net assets — See Note 16.
    plc — Public Limited Company
    REIT — Real Estate Investment Trust

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 63

LIMITED DURATION FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:        
Investments, at value        

(cost $95,571,321)

   $ 95,310,660  
Repurchase agreements, at value        

(cost $3,488,000)

     3,488,000  
       
Total investments        

(cost $99,059,321)

     98,798,660  
Cash     502,823  
Prepaid expenses     24,056  
Receivables:        

Securities sold

     1,002,581  

Fund shares sold

     894,715  

Interest

     437,776  
       
Total assets     101,660,611  
       
         
LIABILITIES:        
Reverse Repurchase Agreements     7,534,716  
Payable for:        

Securities purchased

     7,141,972  

Fund shares redeemed

     96,391  

Management fees

     11,886  

Distributions to shareholders

     10,292  

Fund accounting/administration fees

     6,236  

Distribution and service fees

     3,442  

Transfer agent/maintenance fees

     312  

Trustees’ fees*

     238  

Miscellaneous

     26,914  
       
Total liabilities     14,832,399  
       
NET ASSETS   $ 86,828,212  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 86,967,802  
Undistributed net investment income     121,071  
Accumulated net realized gain on investments     —  
Net unrealized depreciation on investments     (260,661 )
       
Net assets   $ 86,828,212  
       
A-CLASS:        
Net assets   $ 17,034,832  
Capital shares outstanding     682,178  
Net asset value per share     $24.97  
       
Maximum offering price per share        

(Net asset value divided by 97.75%)

     $25.54  
       
C-CLASS:        
Net assets   $ 643,349  
Capital shares outstanding     25,779  
Net asset value per share     $24.96  
       
INSTITUTIONAL CLASS:        
Net assets   $ 69,150,031  
Capital shares outstanding     2,769,884  
Net asset value per share     $24.96  
       

STATEMENT OF OPERATIONS
 
Period Ended September 30, 2014**

INVESTMENT INCOME:        
Interest   $ 1,247,529  
Dividends from securities of unaffiliated issuers     15,014  
Dividends from securities of affiliated issuers     62,823  
       

Total investment income

     1,325,366  
       
         
EXPENSES:        
Management fees     171,493  
Transfer agent/maintenance fees:        

A-Class

     1,656  

C-Class

     708  

Institutional Class

     231  
Distribution and service fees:        

A-Class

     8,562  

C-Class

     2,845  
Fund accounting/administration fees     36,204  
Registration fees     42,237  
Legal fees     41,453  
Printing expenses     26,962  
Interest expense     11,949  
Custodian fees     3,456  
Trustees’ fees*     2,778  
Line of credit expense     434  
Miscellaneous     24,657  
       

Total expenses

     375,625  
Less:        
Expenses waived by Adviser     (147,314 )
       
Net expenses     228,311  
       
Net investment income     1,097,055  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     110,642  

Investments in affiliated issuers

     (1,611 )

Realized gain distributions received from

        

investment company shares

     3,443  
       
Net realized gain     112,474  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (260,661 )
       
Net change in unrealized appreciation (depreciation)     (260,661 )
       
Net realized and unrealized loss     (148,187 )
       
Net increase in net assets resulting        

from operations

   $ 948,868  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
** Since commencement of operations: December 16, 2013.

 
64 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

LIMITED DURATION FUND

STATEMENT OF CHANGES IN NET ASSETS
 
    Period Ended  
    September 30,  
      2014a  
 
         
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:        
Net investment income   $ 1,097,055  
Net realized gain on investments     112,474  
Net change in unrealized appreciation (depreciation) on investments     (260,661 )
 
Net increase in net assets resulting from operations     948,868  
 
         
DISTRIBUTIONS TO SHAREHOLDERS FROM:        
Net investment income        

A-Class

     (89,880 )

C-Class

     (5,453 )

Institutional Class

     (993,125 )
 
Total distributions to shareholders     (1,088,458 )
 
         
CAPITAL SHARE TRANSACTIONS:        
Proceeds from sale of shares        

A-Class

     25,872,935  

C-Class

     1,176,069  

Institutional Class

     85,617,617  
Distributions reinvested        

A-Class

     71,252  

C-Class

     4,971  

Institutional Class

     802,150  
Cost of shares redeemed        

A-Class

     (8,887,662 )

C-Class

     (537,027 )

Institutional Class

     (17,152,503 )
 
Net increase from capital share transactions     86,967,802  
 
Net increase in net assets     86,828,212  
         
NET ASSETS:        

Beginning of period

    —  
 

End of period

   $ 86,828,212  
 
Undistributed net investment income at end of period   $ 121,071  
 
         
CAPITAL SHARE ACTIVITY:        
Shares sold        

A-Class

     1,034,665  

C-Class

     47,044  

Institutional Class

     3,423,937  
Shares issued from reinvestment of distributions        

A-Class

     2,851  

C-Class

     200  

Institutional Class

     32,093  
Shares redeemed        

A-Class

     (355,338 )

C-Class

     (21,465 )

Institutional Class

     (686,146 )
 
Net increase in shares     3,477,841  
 

a Since commencement of operations: December 16, 2013.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 65

LIMITED DURATION FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Period Ended       Period Ended       Period Ended  
      September 30,       September 30,       September 30,  
      2014a       2014a       2014a  
      A-Class       C-Class       Institutional Class  
 
Per Share Data                        
Net asset value, beginning of period     $25.00       $25.00       $25.00  
 
Income (loss) from investment operations:                        
Net investment income (loss)b     .52       .38       .57  
Net gain (loss) on investments (realized and unrealized)     (.08 )     (.09 )     (.08 )
     
Total from investment operations     .44       .29       .49  
Less distributions from:                        
Net investment income     (.47 )     (.33 )     (.53 )
     
Total distributions     (.47 )     (.33 )     (.53 )
 
Net asset value, end of period     $24.97       $24.96       $24.96  
     
                         
 
Total Returnd     1.75%       1.13%       1.98%  
 
Ratios/Supplemental Data                        
Net assets, end of period (in thousands)     $17,035       $643       $69,150  
 
Ratios to average net assets:                        
Net investment income (loss)     2.67%       1.93%       2.90%  
Total expenses     1.14%       2.14%       0.96%  
Net expensesc,e     0.83%       1.56%       0.57%  
 
Portfolio turnover rate     40%       40%       40%  

a   Since commencement of operations: December 16, 2013. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c   Net expense information reflects the expense ratios after expense waivers.
d   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
e   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratio for the period would be:

      09/30/14
   
  A-Class   0.79 %
  C-Class   1.52 %
  Institutional Class   0.54 %

 
66 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

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  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  67


MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders

Guggenheim Macro Opportunities Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director; Kevin H. Gundersen, Senior Managing Director and Portfolio Manager; and James W. Michal, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the “Period”), the Guggenheim Macro Opportunities Fund returned 6.88%1, compared with the 0.05% return of its benchmark, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index.

The Fund seeks to provide total return, comprised of current income and capital appreciation. The Fund pursues its investment objective by investing in a wide range of fixed income and other debt and equity securities selected from a variety of sectors and credit qualities.

As the Period began, monetary accommodation by the Fed was propelling asset prices higher, while positive economic momentum was pushing interest rates higher. By the end of December 2013, the 10-year U.S. Treasury yield reached its highest point over the prior 2½ years at 3%, a level that was not revisited for the remainder of the Period.

Credit-spread and risk assets continued to find investor favor through 2014, even though severe winter weather produced volatility and mixed economic data. Additional liquidity from central banks outside the U.S. supported foreign capital flows into U.S. assets, which, along with the search for yield among U.S. investors, was positive for fixed income. But just as the market appeared to be growing complacent in the third quarter of 2014, leveraged credit had its first correction in a year, as mutual fund investors withdrew from the sector amid concerns about frothy valuations and talk of credit bubble. Volatility spread across risk assets, including equities.

The events that drove spread widening in the third quarter showed that investors are becoming increasingly reactive to factors outside of the fundamentals that underscore a generally positive outlook on credit. Even though U.S. economic data was mixed in September, it had been strong year to date, and the improving health of the U.S. economy and low interest rates underscored our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening could present buying opportunities.

The Fund mainly invests high yield corporate bonds, bank loans, asset-backed securities (ABS) and non-agency residential mortgage-backed securities (RMBS). It has positions in preferred securities, investment grade corporate bonds and equity ETFs.

High yield corporate bonds and bank loans posted their fifth consecutive year of positive returns in 2013 and strong performance continued through the first half of 2014. As upside potential declined in the leveraged credit space, the Fund rotated into higher quality credits. With the onset of a leveraged credit sell-off in the third quarter, the Fund was able to add exposure back to many of the names it had sold several months before.

The ABS and non-agency RMBS sectors contributed positively for the Period. The BofA/ML ABS Master BBB-AA Index gained 3.36% in the 12-month Period as its spread tightened 48 basis points to 133 basis points. Credit performance across the commercial ABS and collateralized loan obligation (CLO) sectors remained strong given benign credit conditions and improving collateral valuations across the U.S. economy. 2014 issuance is well ahead of 2013’s pace and likely to break 2012’s post-crisis peak. New ABS issuance was diversified across all classes, with auto and credit card new issues remaining strong. Consumer ABS performance has been solid despite concern surrounding student loans and subprime auto lending. JPMorgan Research indicates the gradual improvement in the household balance sheet will continue to support credit performance of Consumer ABS. Year-to-date ABS issuance has now surpassed $94 billion, the all time annual record set in 2007. Housing activity has been uneven, as price appreciation has been slowing and sales remain below the post-crisis peak in 2013. With the economic outlook mostly positive and central banks maintaining accommodation, the backdrop for ABS and RMBS remains constructive. Amidst these positive fundamentals, the CLO market raised $93 billion through three quarters of 2014, already exceeding 2013’s full-year volume.

 
68  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


MANAGERS’ COMMENTARY (Unaudited) (concluded) September 30, 2014
 

Much of the Fund’s outperformance stemmed from credit spread compression and the gradual decline in the benchmark 10-year U.S. Treasury yield. The Fund maintains very little interest rate duration, particularly at the front end of the yield curve, and thus has largely avoided losses due to a flattening curve. Concentration of the Fund’s credit investments in relatively short-maturity high yield bonds and loans has muted the impact of recent turmoil of risk assets, and the Fund continues to use periods of weakness in those sectors to add attractive assets. While the Fund remains largely invested in floating rate assets, it will continue to take advantage of periods of rate volatility to invest in attractive fixed rate debt.

The Fund may engage in derivative transactions for speculative purposes to enhance total return, seek to hedge against fluctuations in securities prices, interest rates or currency rates, change the effective duration of its portfolio, manage certain investment risks and/or as a substitute for the purchase or sale of securities or currencies. Throughout the fiscal year, the Fund utilized a number of macroeconomic themed trades to take positions based on the Chief Investment Officer’s views on certain segments of financial markets or to hedge against changes in interest rates, equity prices and to improve the Fund’s Diversification. Among the macro themed trades that helped performance were exposure to European equities and a basket of U.S. equities in the for-profit education industry. Over the course of the year, long dollar and short euro positions also added to performance.

Detractors from Fund performance included a few higher-duration assets such as fixed-rate corporate bonds and preferred debt in late 2013 when rates were
rising, and macro-themed trades intended to hedge against a decline in U.S. equity markets when stocks were strong. Over the course of the year, a long gold position was a minor detractor.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  69


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

MACRO OPPORTUNITIES FUND

OBJECTIVE:    Seeks to provide total return, comprised of current income and capital appreciation.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
  % of
Rating Total Investments
 
Fixed Income Instruments    

AAA

 0.9 %

AA

 3.0 %

A

 10.9 %

BBB

 18.6 %

BB

 12.8 %

B

 26.1 %

CCC

 12.9 %

Other

 3.1 %
Other Instruments    

Mutual Funds

 3.6 %

Exchange-Traded Funds

 2.8 %

Short Term Investments

 2.7 %

Preferred Stocks

 2.3 %

Common Stocks

 0.3 %

Options Purchased

 0.0 %

Options Written

 0.0 %
 
Total Investments 100.0 %
 

The chart above reflects percentages of the value of total investments.

Inception Dates:  
 
A-Class November 30, 2011
C-Class November 30, 2011
Institutional Class November 30, 2011

Ten Largest Holdings (% of Total Net Assets)
 
Guggenheim Limited Duration      

Fund — Institutional Class

   3.0 %
LSTAR Securities Investment Trust 2014-1   1.1 %
JPMorgan Chase & Co.   1.0 %
iShares MSCI Italy Capped ETF   1.0 %
SPDR EURO STOXX 50 ETF   1.0 %
iShares MSCI Spain Capped ETF   1.0 %
Bank of America Corp.   1.0 %
Gramercy Real Estate      

CDO 2007-1 Ltd. — Class A1

   0.9 %
City of Detroit Michigan General      

Obligation Unlimited

   0.9 %
Nomura Resecuritization Trust      

2012-1R — Class A

   0.9 %
 
Top Ten Total   11.8 %
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
70  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*
Periods Ended September 30, 2014

          Since Inception
    1 Year   (11/30/11)
 
A-Class Shares   6.88 %   7.78 %
 
A-Class Shares with sales charge†   1.81 %   5.94 %
 
C-Class Shares   6.10 %   7.01 %
 
C-Class Shares with CDSC‡   5.10 %   7.01 %
 
Institutional Class Shares   7.23 %   8.15 %
 
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index   0.05 %   0.07 %
 

*   The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
†   Fund returns are calculated using the maximum sales charge of 4.75%.
‡   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  71

SCHEDULE OF INVESTMENTS   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 0.2%              
               
CONSUMER DISCRETIONARY - 0.2%              

Travelport LLC*

     204,224   $ 3,361,528  
             
COMMUNICATIONS - 0.0%              

Cengage Learning Acquisitions, Inc.*,††

     21,660     695,286  
             
BASIC MATERIALS - 0.0%              

Mirabela Nickel Ltd.*

     7,057,522     407,789  
             
Total Common Stocks              

(Cost $6,455,604)

           4,464,603  
             
               
PREFERRED STOCKS†† - 2.4%              

Seaspan Corp.

              

6.38% due 04/30/19†

     490,000     12,539,100  

Aspen Insurance Holdings Ltd.

              

5.95%†,1,2

     440,000     10,986,800  

Goldman Sachs Group, Inc.

              

5.50%†,1,2

     260,000     6,175,000  

Morgan Stanley

              

6.38%*,†,1,2

     200,000     5,014,000  

Alm Loan Funding

              

due 06/20/23*,1,15

     1,373     1,222,148  

GSC Partners CDO Fund Limited / GSC

              

Partners CDO Fund Corp.

              

due 11/20/16*,1,3,15

     5,200     30,368  

WhiteHorse II Ltd.

              

due 06/15/17*,1,3,15

     2,100,000     21,000  
             
Total Preferred Stocks              

(Cost $36,012,599)

           35,988,416  
             
               
EXCHANGE-TRADED FUNDS† - 3.0%              

iShares MSCI Italy Capped ETF

     966,700     15,167,523  

SPDR EURO STOXX 50 ETF

     372,291     14,779,953  

iShares MSCI Spain Capped ETF

     376,577     14,648,845  
             
Total Exchange-Traded Funds              

(Cost $43,778,334)

           44,596,321  
             
               
MUTUAL FUNDS† - 3.7%              

Guggenheim Limited Duration Fund -

              

Institutional Class4

     1,822,842     45,498,128  

Guggenheim Risk Managed Real Estate Fund -

              

Institutional Class4

     401,612     10,843,512  
             
Total Mutual Funds              

(Cost $55,632,515)

           56,341,640  
             
               
SHORT TERM INVESTMENTS† - 2.8%              

Federated U.S. Treasury Cash Reserve Fund

     42,783,907     42,783,907  
             
Total Short Term Investments              

(Cost $42,783,907)

           42,783,907  
             
               
      FACE        
      AMOUNT        
             
               
ASSET BACKED SECURITIES†† - 35.2%              

Copper River CLO Ltd. 2007-1A

              

due 01/20/211,3,15

   $ 8,150,000     8,940,550  

0.63% due 01/20/211,3

     5,050,000     4,849,515  

1.73% due 01/20/211,3

     2,500,000     2,284,500  

1.03% due 01/20/211,3

     1,000,000     936,700  

Gramercy Real Estate CDO 2007-1 Ltd.

              

0.51% due 08/15/561,3

     15,484,440     13,646,438  

Castlelake Aircraft Securitization Trust 2014-1

              

5.25% due 02/15/29

     7,673,007     7,702,164  

7.50% due 02/15/29

     5,710,145     5,716,997  

Cedar Woods CRE CDO Ltd. 2006-1A

              

0.42% due 07/25/51

     15,202,688     13,016,542  

N-Star Real Estate CDO IX Ltd.

              

0.47% due 02/01/4112

     13,318,680     12,776,609  

RAIT CRE CDO I Ltd. 2006-1X

              

0.48% due 11/20/46

     12,501,447     11,233,800  

KKR Financial CLO 2007-1 Ltd.

              

2.48% due 05/15/211,3

     10,850,000     10,639,510  

Highbridge Loan Management 2012-1 Ltd.

              

3.48% due 09/20/221,3

     6,500,000     6,507,150  

4.48% due 09/20/221,3

     3,500,000     3,504,900  

Gramercy Park CLO Ltd. 2014-AR

              

3.18% due 07/17/231,3

     7,500,000     7,461,750  

4.28% due 07/17/231,3

     1,750,000     1,738,275  

Centerline REIT, Inc. 2004-RR3

              

4.76% due 09/21/451,3

     8,369,125     8,481,606  

GreenPoint Mortgage Funding Trust 2005-HE4

              

0.86% due 07/25/301

     8,650,000     8,097,793  

CCR Incorporated MT100 Payment

              

Rights Master Trust 2010-CX

              

0.60% due 07/10/17†††,1

     8,302,277     8,079,776  

MWAM CBO 2001-1 Ltd.

              

3.08% due 01/30/311,3

     4,445,663     4,136,245  

14.09% due 01/30/313

     3,261,457     3,546,182  

N-Star REL CDO VIII Ltd. 2006-8A

              

0.51% due 02/01/411,3

     5,350,000     4,812,325  

0.44% due 02/01/411,3

     2,538,873     2,435,033  

Cent CLO 16, LP 2014-16AR

              

3.74% due 08/01/241,3

     7,250,000     7,213,750  

West Coast Funding Ltd. 2006-1A

              

0.38% due 11/02/411,3

     7,240,204     7,106,260  

ARES XXVI CLO Ltd. 2013-1A

              

due 04/15/253,15

     6,450,000     4,867,815  

2.98% due 04/15/251,3

     2,000,000     1,951,200  

Emerald Aviation Finance Ltd. 2013-1

              

6.35% due 10/15/383,5

     6,598,958     6,701,242  

Jasper CLO Ltd. 2005-1A

              

1.14% due 08/01/171,3

     7,000,000     6,692,700  

Fortress Credit Opportunities V CLO Ltd. 2014-5A

              

4.73% due 10/15/261,3

     3,500,000     3,422,650  

3.78% due 10/15/261,3

     3,000,000     2,942,400  

Dryden XXIII Senior Loan Fund 2014-23RA

              

3.18% due 07/17/231,3

     6,000,000     5,968,800  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2006-OPT1

              

0.41% due 04/25/361

     6,613,922     5,953,912  

Babson CLO Limited 2014-I

              

due 07/20/253,15

     6,400,000     5,825,280  

Willis Engine Securitization Trust II 2012-A

              

5.50% due 09/15/373,6

     5,490,075     5,503,800  

Fortress Credit Opportunities III CLO, LP 2014-3A

              

3.48% due 04/28/261,3

     5,500,000     5,462,600  

ALM XIV Ltd. 2014-14A

              

3.18% due 07/28/261,3

     3,100,000     3,051,330  

3.68% due 07/28/261,3

     2,500,000     2,359,500  

Neuberger Berman CLO XII Ltd. 2014-12AR

              

3.33% due 07/25/231,3

     5,300,000     5,280,920  

 
72 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Highland Park CDO I Ltd. 2006-1A

              

0.56% due 11/25/511,3

   $ 5,499,204   $ 5,244,041  

Telos CLO Ltd. 2013-3A

              

3.23% due 01/17/241,3

     2,750,000     2,706,000  

4.48% due 01/17/241,3

     2,550,000     2,489,310  

Lehman XS Trust 2007-9

              

0.27% due 06/25/371

     5,372,400     4,848,027  

NewStar Arlington Senior Loan

              

Program LLC 2014-1A

              

4.48% due 07/25/251,3

     2,750,000     2,633,675  

3.53% due 07/25/251,3

     2,000,000     1,948,800  

Great Lakes CLO 2014-1 Ltd.

              

3.93% due 04/15/251,3

     3,000,000     2,983,500  

4.43% due 04/15/251,3

     1,500,000     1,433,850  

GSAA Home Equity Trust 2007-7

              

0.42% due 07/25/371

     5,199,271     4,410,853  

AMMC CDO 2012-11A

              

due 10/30/233,15

     5,650,000     4,265,185  

Turbine Engines Securitization Ltd. 2013-1A

              

5.13% due 12/13/483

     4,051,108     4,091,619  

Flagship CLO VI 2007-1A

              

2.63% due 06/10/211,3

     4,200,000     4,069,380  

Putnam Structured Product CDO 2002-1 Ltd.

              

0.83% due 01/10/381,3

     4,361,558     4,009,144  

Golub Capital Partners CLO 10 Ltd. 2014-10AR

              

3.18% due 10/20/211,3

     4,000,000     3,980,000  

Newstar Commercial Loan Funding 2013-1 LLC

              

4.78% due 09/20/231,3

     3,250,000     3,191,175  

5.53% due 09/20/231,3

     750,000     748,125  

Saxon Asset Securities Trust 2005-4

              

0.59% due 11/25/371

     4,550,000     3,930,540  

Rockwall CDO II Ltd. 2007-1A

              

0.49% due 08/01/241,3

     2,592,421     2,481,206  

0.79% due 08/01/241,3

     1,500,000     1,337,250  

Atlas Senior Loan Fund IV Ltd. 2014-2A

              

2.93% due 02/17/261,3

     3,900,000     3,739,320  

Northwoods Capital VII Ltd. 2006-7A

              

3.73% due 10/22/211,3

     2,000,000     1,993,600  

1.78% due 10/22/211,3

     1,600,000     1,575,680  

CIT Mortgage Loan Trust 2007-1

              

1.60% due 10/25/371,3

     3,750,000     3,483,926  

Atlas Senior Loan Fund II Ltd. 2012-2A

              

due 01/30/243,15

     3,650,000     3,429,175  

Grayson CLO Ltd. 2006-1A

              

0.65% due 11/01/211,3

     3,700,000     3,428,790  

GSAA Home Equity Trust 2006-14

              

0.40% due 09/25/361

     5,430,724     3,415,719  

GSAA Home Equity Trust 2006-18

              

6.00% due 11/25/365

     4,812,240     3,403,250  

ACA CLO 2007-1 Ltd.

              

1.18% due 06/15/221,3

     3,550,000     3,352,265  

First Franklin Mortgage Loan Trust 2006-FF1

              

0.49% due 01/25/361

     2,750,000     2,417,869  

0.59% due 01/25/361

     1,225,000     932,575  

Golub Capital Partners CLO 18 Ltd. 2014-18A

              

3.73% due 04/25/261,3

     2,200,000     2,183,940  

4.23% due 04/25/261,3

     1,200,000     1,156,560  

DIVCORE CLO Ltd. 2013-1A B

              

4.05% due 11/15/32

     3,250,000     3,251,950  

CIFC Funding 2012-I Ltd. 2014-1AR

              

3.31% due 08/14/241,3

     3,250,000     3,233,425  

Primus Clo II Ltd. 2007-2A

              

1.18% due 07/15/211,3

     3,500,000     3,212,300  

Marathon CLO II Ltd. 2005-2A

              

2.03% due 12/20/191,3

     2,050,000     2,016,790  

due 12/20/193,15

     2,250,000     1,177,200  

ALM VII R-2 Ltd. 2013-7R2A

              

2.83% due 04/24/241,3

     3,250,000     3,190,850  

Drug Royalty II Limited Partnership 2 2014-1

              

3.48% due 07/15/233

     3,187,826     3,187,428  

Duane Street CLO II Ltd. 2006-2A

              

3.98% due 08/20/181,3

     3,250,000     3,153,800  

ALM VII R Ltd. 2013-7RA

              

3.68% due 04/24/241,3

     3,250,000     3,107,975  

Helios Series I Multi Asset CBO Ltd. 2001-1A

              

1.17% due 12/13/361,3

     3,244,594     3,083,987  

Carlyle Global Market Strategies

              

CLO 2012-2 Ltd.

              

4.13% due 07/20/231,3

     3,000,000     2,976,600  

Battalion Clo 2007-I Ltd.

              

2.38% due 07/14/221,3

     3,100,000     2,967,320  

Home Equity Asset Trust 2005-7

              

0.60% due 01/25/361

     3,250,000     2,936,593  

KVK CLO 2014-2 Ltd.

              

3.25% due 04/15/261,3

     3,000,000     2,920,200  

Vibrant CLO II Ltd. 2013-2A

              

2.98% due 07/24/241,3

     3,000,000     2,908,200  

KVK CLO 2014-1 Ltd.

              

3.13% due 05/15/261,3

     3,000,000     2,898,600  

Race Point V CLO Ltd. 2014-5AR

              

3.98% due 12/15/221,3

     2,900,000     2,893,330  

Franklin CLO Ltd. 2007-6A

              

2.48% due 08/09/191,3

     3,000,000     2,849,100  

Wachovia Asset Securitization Issuance II

              

LLC 2007-HE1 Trust

              

0.29% due 07/25/371,3

     3,239,075     2,841,187  

Citigroup Mortgage Loan Trust 2007-WFHE2

              

0.50% due 03/25/371

     3,200,000     2,835,216  

Park Place Securities Incorporated

              

Series 2005-WHQ2

              

0.61% due 05/25/351

     3,000,000     2,795,271  

Great Lakes CLO 2012-1 Ltd.

              

due 01/15/233,15

     3,250,000     2,790,125  

Finn Square CLO Ltd. 2012-1A

              

due 12/24/233,15

     3,250,000     2,736,500  

Turbine Engines Securitization Ltd.

              

6.38% due 12/13/483

     2,675,275     2,715,404  

Octagon Loan Funding Ltd.

              

due 11/18/26†††,3,15

     3,000,000     2,614,800  

Icon Brand Holdings LLC 2013-1A

              

4.35% due 01/25/433

     2,580,317     2,568,963  

Keuka Park CLO Limited 2013-1

              

due 10/21/243,15

     3,000,000     2,565,000  

New Century Home Equity Loan Trust 2004-4

              

0.95% due 02/25/351

     2,760,236     2,530,093  

Callidus Debt Partners Clo Fund VI Ltd. 2007-6A

              

3.23% due 10/23/211,3

     2,100,000     2,015,790  

1.48% due 10/23/211,3

     500,000     475,250  

Wells Fargo Home Equity Asset-Backed

              

Securities 2005-4 Trust

              

0.41% due 05/25/361

     2,800,000     2,466,895  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 73

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

San Gabriel CLO Ltd. 2007-1A

              

2.48% due 09/10/211,3

   $ 2,450,000   $ 2,337,790  

Global Leveraged Capital Credit

              

Opportunity Fund 2006-1A

              

1.23% due 12/20/181,3

     2,376,000     2,296,404  

GSAA Trust 2005-10

              

0.80% due 06/25/351

     2,462,000     2,276,249  

Halcyon Structured Asset Management Long

              

Secured/Short Unsecured 2007-1 Ltd.

              

2.54% due 08/07/211,3

     2,100,000     2,072,070  

Acis CLO 2013-1 Ltd.

              

4.73% due 04/18/241,3

     2,100,000     2,071,020  

Bear Stearns Asset Backed Securities

              

Trust 2005-3

              

0.90% due 09/25/351

     2,162,727     2,063,069  

Sound Point CLO Ltd. 2012-1A

              

4.81% due 10/20/231,3

     2,000,000     2,007,600  

Ableco Capital LLC 2013-1

              

4.92% due 05/31/191,12

     2,000,000     2,000,000  

OCP CLO 2014-6 Ltd.

              

3.36% due 07/17/261,3

     2,000,000     1,982,000  

CIFC Funding 2006-I B Ltd.

              

4.23% due 12/22/201,3

     2,000,000     1,971,000  

TCW Global Project Fund III Ltd. 2005-1A

              

0.88% due 09/01/17†††,1,3

     1,500,000     1,443,900  

1.08% due 09/01/17†††,1,3

     600,000     514,680  

Gale Force 4 CLO Ltd. 2007-4A

              

3.73% due 08/20/211,3

     2,000,000     1,958,400  

Salus CLO 2012-1 Ltd.

              

6.98% due 03/05/211,3

     1,200,000     1,186,560  

4.98% due 03/05/211,3

     750,000     751,650  

AMMC CLO XIV Ltd. 2014-14A

              

3.15% due 07/27/261,3

     2,000,000     1,922,000  

Cerberus Onshore II CLO LLC 2014-1A

              

3.73% due 10/15/231,3

     1,000,000     972,500  

4.23% due 10/15/231,3

     1,000,000     943,100  

Lime Street CLO Corp. 2007-1A

              

2.73% due 06/20/211,3

     2,000,000     1,891,200  

NewStar Commercial Loan Trust 2007-1

              

1.53% due 09/30/221,3

     1,000,000     945,700  

2.53% due 09/30/221,3

     1,000,000     940,900  

Churchill Financial Cayman Ltd. 2007-1A

              

1.48% due 07/10/191,3

     1,000,000     946,600  

2.83% due 07/10/191,3

     1,000,000     937,700  

New Century Home Equity Loan Trust 2005-1

              

0.87% due 03/25/351

     2,059,536     1,831,842  

Kingsland III Ltd. 2006-3A

              

1.83% due 08/24/211,3

     1,890,000     1,798,524  

Acis CLO 2013-2 Ltd.

              

4.08% due 10/14/221,3

     1,800,000     1,738,620  

Liberty CLO Ltd. 2005-1A

              

0.74% due 11/01/171,3

     1,750,000     1,732,850  

Shackleton II CLO Ltd. 2012-2A

              

4.28% due 10/20/231,3

     1,750,000     1,727,075  

Airplanes Pass Through Trust 2001-1A

              

0.70% due 03/15/191

     3,990,370     1,720,847  

CIFC Funding 2014 Ltd.

              

3.03% due 04/18/251,3

     1,750,000     1,702,925  

Carlyle Global Market Strategies

              

CLO 2012-3 Ltd.

              

due 10/04/243,15

     1,800,000     1,679,220  

OHA Park Avenue CLO I Ltd. 2007-1A

              

3.48% due 03/14/221,3

     1,667,510     1,609,981  

Telos CLO 2007-2 Ltd.

              

2.43% due 04/15/221,3

     1,650,000     1,573,935  

Landmark VIII CLO Ltd. 2006-8A

              

1.68% due 10/19/201,3

     1,650,000     1,538,295  

Ares XXV CLO Ltd. 2013-3A

              

due 01/17/243,15

     2,000,000     1,530,000  

Avalon IV Capital Ltd. 2014-1AR

              

4.08% due 04/17/231,3

     1,500,000     1,497,900  

LCM X, LP 2014-10AR

              

3.98% due 04/15/221,3

     1,500,000     1,492,500  

MCF CLO I LLC 2013-1A

              

3.78% due 04/20/231,3

     1,500,000     1,483,950  

Asset Backed Securities Corporation Home

              

Equity Loan Trust Series OOMC 2006-HE5

              

0.30% due 07/25/361

     1,596,290     1,483,699  

OZLM Funding V Ltd. 2013-5A

              

3.23% due 01/17/261,3

     1,500,000     1,482,750  

Steele Creek CLO 2014-1 Ltd.

              

3.43% due 08/21/261,3

     1,500,000     1,465,950  

Greywolf CLO III Ltd. 2014-1A

              

3.08% due 04/22/261,3

     1,500,000     1,465,650  

Bacchus 2006-1 Ltd.

              

1.78% due 01/20/191,3

     1,500,000     1,462,800  

Covenant Credit Partners CLO I Ltd.

              

3.15% due 07/20/261,3

     1,500,000     1,458,750  

Black Diamond CLO 2005-2 Delaware Corp.

              

2.03% due 01/07/181,3

     1,500,000     1,441,050  

Sands Point Funding Ltd. 2006-1A

              

1.98% due 07/18/201,3

     1,500,000     1,435,050  

Westwood CDO II Ltd. 2007-2X

              

2.03% due 04/25/22

     1,550,000     1,432,355  

ALM VI Ltd. 2012-6A

              

due 06/14/233,15

     1,600,000     1,424,160  

TCW Global Project Fund II Ltd. 2004-1A

              

1.58% due 06/24/161,3

     1,403,262     1,392,737  

Connecticut Valley Structured

              

Credit CDO III Ltd. 2006-3A

              

0.88% due 03/23/231,3

     1,000,000     952,000  

6.68% due 03/23/233

     441,767     438,365  

Structured Asset Investment Loan

              

Trust 2005-2

              

0.89% due 03/25/351

     1,500,000     1,383,752  

Kingsland IV Ltd. 2007-4A

              

1.68% due 04/16/211,3

     1,500,000     1,360,350  

Duane Street CLO IV Ltd. 2007-4A

              

2.48% due 11/14/211,3

     1,400,000     1,354,080  

Cerberus Offshore Levered I, LP 2012-1A

              

6.23% due 11/30/181,3

     1,350,000     1,350,270  

TICP CLO II Ltd. 2014-2A

              

3.23% due 07/20/261,3

     1,300,000     1,272,440  

Ivy Hill Middle Market Credit Fund Ltd. 2011-3A

              

6.73% due 01/15/221,3

     1,250,000     1,250,000  

Newstar Commercial Loan Funding 2014-1 LLC

              

5.07% due 04/20/251,3

     1,250,000     1,232,500  

COA Summit CLO Limited 2014-1

              

4.09% due 04/20/231,3

     1,250,000     1,231,125  

Halcyon Loan Advisors Funding 2012-2 Ltd.

              

3.08% due 12/20/241,3

     1,250,000     1,220,250  

 
74 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

ING IM CLO 2011-1 Ltd.

              

3.53% due 06/22/211,3

   $ 1,250,000   $ 1,212,375  

Gallatin CLO VII 2014-1 Ltd.

              

3.92% due 07/15/231,3

     1,250,000     1,210,500  

ColumbusNova CLO Limited 2007-I

              

1.58% due 05/16/191,3

     1,250,000     1,201,750  

ICE EM CLO 2007-1A

              

1.18% due 08/15/221,3

     1,250,000     1,150,000  

T2 Income Fund CLO Ltd. 2007-1A

              

2.98% due 07/15/191,3

     700,000     690,340  

1.73% due 07/15/191,3

     400,000     390,400  

Tricadia CDO 2006-6 Ltd.

              

0.99% due 11/05/411,3

     1,150,000     1,056,620  

Blade Engine Securitization Ltd. 2006-1A

              

1.15% due 09/15/411

     825,522     619,142  

3.15% due 09/15/411,3

     1,035,829     414,332  

Black Diamond CLO 2006-1 Luxembourg S.A.

              

0.92% due 04/29/191,3

     1,100,000     1,013,430  

OHA Credit Partners VII Ltd. 2012-7A

              

4.23% due 11/20/231,3

     1,000,000     994,600  

CIFC Funding 2012-II Ltd. 2012-2A

              

3.23% due 12/05/241,3

     1,000,000     990,200  

Halcyon Loan Advisors Funding 2012-1 Ltd.

              

3.23% due 08/15/231,3

     1,000,000     982,600  

Fortress Credit Opportunities 2005-1A

              

0.57% due 07/15/19

     1,100,000     980,100  

Palmer Square CLO 2014-1 Ltd.

              

2.82% due 10/17/221,3

     1,000,000     976,700  

Katonah Ltd. 2007-10A

              

2.24% due 04/17/201,3

     1,000,000     974,500  

Aames Mortgage Investment Trust 2006-1

              

0.47% due 04/25/361

     1,033,697     970,094  

Cavalry CLO II 2013-2A

              

4.23% due 01/17/241,3

     1,000,000     966,250  

WhiteHorse VIII Ltd. 2014-1A

              

2.99% due 05/01/261,3

     1,000,000     962,700  

Gleneagles CLO Ltd. 2005-1A

              

1.14% due 11/01/171,3

     1,000,000     959,400  

Pangaea CLO Ltd. 2007-1A

              

0.73% due 10/21/211,3

     1,000,000     951,100  

Halcyon Loan Investors CLO II, Inc. 2007-2A

              

1.63% due 04/24/211,3

     1,000,000     934,000  

Eastland CLO Ltd. 2007-1A

              

0.64% due 05/01/221,3

     1,000,000     931,700  

Wrightwood Capital Real Estate

              

CDO 2005-1 Ltd.

              

0.66% due 11/21/401,3

     1,000,000     919,100  

MCF CLO III LLC 2014-3A

              

3.46% due 01/20/241,3

     1,000,000     904,100  

Babcock & Brown Air Funding I Ltd. 2007-1A

              

0.45% due 11/14/331,3

     981,286     834,093  

KKR Financial CLO Ltd.

              

5.23% due 05/15/21

     800,000     798,640  

Aerco Ltd. 2000-2A

              

0.61% due 07/15/251

     1,472,561     795,183  

Garrison Funding 2013-2 Ltd.

              

4.88% due 09/25/231,3

     750,000     742,575  

Central Park CLO Ltd. 2011-1A

              

3.43% due 07/23/221,3

     750,000     739,650  

Venture XV CLO Ltd. 2013-15A

              

3.33% due 07/15/251,3

     750,000     739,650  

Octagon Investment Partners XV Ltd. 2013-1A

              

3.08% due 01/19/251,3

     750,000     735,750  

Venture XIV CLO Ltd. 2013-14A

              

2.99% due 08/28/251,3

     750,000     725,325  

Asset Backed Securities Corporation

              

Home Equity Loan Trust Series 2004-HE8

              

1.20% due 12/25/341

     710,939     664,648  

Westwood CDO I Ltd. 2007-1A

              

0.90% due 03/25/211,3

     700,000     649,670  

Northwind Holdings LLC 2007-1A

              

1.01% due 12/01/371,3

     673,052     612,478  

ACS 2007-1 Pass Through Trust

              

0.47% due 06/14/371,3

     617,496     603,602  

Credit Card Pass-Through Trust 2012-BIZ

              

0.00% due 12/15/493,14

     617,989     533,943  

MC Funding Limited / MC Funding 2006-1 LLC

              

1.18% due 12/20/201,3

     500,000     482,250  

OFSI Fund Ltd. 2006-1A

              

1.08% due 09/20/191,3

     370,000     357,198  

Diversified Asset Securitization

              

Holdings II, LP 2000-1A

              

0.72% due 09/15/351,3

     313,600     307,046  

Garanti Diversified Payment Rights

              

Finance Co. 2007-A

              

0.42% due 07/09/17

     312,000     302,266  

Structured Asset Receivables Trust

              

Series 2005-1

              

0.73% due 01/21/151,3

     291,489     280,937  

Raspro Trust 2005-1A

              

0.63% due 03/23/241,3

     248,780     244,426  

Drug Royalty Limited Partnership 1 2012-1

              

5.48% due 07/15/241,3

     232,205     239,767  

Vega Containervessel plc 2006-1A

              

5.56% due 02/10/213

     143,926     141,594  

Atlas Air 1999-1 Class A-1 Pass Through Trust

              

7.20% due 01/02/1912

     77,989     81,693  

SBI Home Equity Loan Trust 2006-1

              

0.30% due 04/25/351,3

     48,394     47,535  

BlackRock Senior Income Series Corp.

              

due 09/15/1615

     2,400,000     240  
             
Total Asset Backed Securities              

(Cost $529,340,206)

           535,175,841  
             
               
SENIOR FLOATING RATE INTERESTS††,1,13 - 21.8%              
               
INDUSTRIAL - 6.0%              

Rise Ltd.

              

4.74% due 02/12/39

     6,744,792     6,837,869  

Berlin Packaging LLC

              

5.75% due 04/02/19

     1,980,000     1,976,297  

4.50% due 09/24/21

     1,500,000     1,496,250  

9.75% due 04/02/20

     600,000     595,500  

SIRVA Worldwide, Inc.

              

7.50% due 03/27/19

     3,841,500     3,899,123  

AABS Ltd.

              

4.87% due 01/15/38

     3,538,542     3,595,866  

Multiplan, Inc.

              

4.00% due 03/31/21

     3,683,432     3,593,667  

Connolly Corp.

              

5.00% due 05/14/21

     3,591,000     3,568,556  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 75

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Nord Anglia Education Finance LLC

              

4.50% due 03/31/21

   $ 3,292,250   $ 3,267,558  

Flakt Woods

              

2.63% due 03/20/1712

   EUR 2,650,000     3,213,135  

Brickman Group Holdings, Inc.

              

4.00% due 12/18/20

     3,042,356     2,972,625  

Univision Communications, Inc.

              

4.00% due 03/01/20

     2,911,046     2,852,825  

syncreon

              

5.25% due 10/28/20

     2,828,625     2,800,339  

Sabre, Inc.

              

4.00% due 02/19/19

     2,798,595     2,758,380  

Gates Global, Inc.

              

4.25% due 07/05/21

     2,750,000     2,697,860  

AlliedBarton Security Services LLC

              

4.25% due 02/12/21

     2,524,447     2,485,798  

GYP Holdings III Corp.

              

4.75% due 04/01/21

     2,493,750     2,456,344  

Knowledge Learning Corp.

              

5.25% due 03/18/21

     2,388,000     2,388,000  

Thermasys Corp.

              

5.25% due 05/03/19

     2,334,688     2,321,076  

MRC Global, Inc.

              

5.52% due 11/08/19

     2,227,500     2,224,248  

Ceva Logistics US Holdings

              

6.50% due 03/19/21

     1,999,803     1,932,310  

NVA Holdings, Inc.

              

4.75% due 08/14/21

     1,150,000     1,144,975  

8.00% due 08/14/22

     750,000     745,313  

Goodpack Ltd.

              

4.75% due 09/09/21

     1,700,000     1,691,500  

Mast Global

              

8.75% due 09/12/19†††,12

     1,636,250     1,622,573  

Ceridian Corp.

              

4.50% due 05/09/17

     818,642     808,409  

4.15% due 05/09/17

     784,823     781,393  

Dematic S.A.

              

4.25% due 12/28/19

     1,425,226     1,402,964  

Ceva Logistics Holdings BV (Dutch)

              

6.50% due 03/19/21

     1,449,857     1,400,924  

Sutherland Global Services, Inc.

              

7.25% due 03/06/19

     1,387,500     1,384,032  

Ceva Group plc (United Kingdom)

              

6.50% due 03/19/21

     1,381,773     1,333,411  

Power Borrower, LLC

              

4.25% due 05/06/20

     1,086,321     1,061,880  

8.25% due 11/06/20

     275,000     266,750  

Phillips-Medsize Corp.

              

4.75% due 06/16/21

     1,296,750     1,289,462  

CPM Acquisition Corp.

              

6.25% due 08/29/17

     810,962     808,934  

10.25% due 03/01/18

     450,000     454,500  

IntraWest Holdings S.à r.l.

              

5.50% due 12/09/20

     1,221,750     1,221,750  

Gogo LLC

              

11.25% due 03/21/1812

     1,027,875     1,079,269  

SI Organization

              

5.75% due 11/23/19

     1,057,164     1,060,800  

CareCore National LLC

              

5.50% due 03/05/21

     1,044,750     1,036,914  

Element Materials Technology

              

5.25% due 08/06/21

     1,000,000     997,500  

Exopack Holdings SA

              

5.25% due 05/08/19

     992,500     995,289  

Mitchell International, Inc.

              

8.50% due 10/11/21

     900,000     896,625  

NaNa Development Corp.

              

8.00% due 03/15/1812

     910,000     891,800  

Hillman Group, Inc.

              

4.50% due 06/30/21

     798,000     794,010  

V.Group Ltd.

              

5.00% due 06/25/21

     798,000     792,015  

Hunter Defense Technologies

              

6.50% due 08/05/19

     800,000     790,000  

Doncasters Group Ltd.

              

9.50% due 10/09/20

     744,828     742,966  

Ranpak

              

8.50% due 04/23/20

     650,000     655,415  

Hunter Fan Co.

              

6.50% due 12/20/17

     576,741     575,299  

SRA International, Inc.

              

6.50% due 07/20/18

     573,077     571,644  

VAT Holding AG

              

4.75% due 02/11/21

     497,500     492,525  

Gogo LLC

              

7.50% due 03/21/18

     479,538     484,333  

Panolam Industries International, Inc.

              

7.76% due 08/23/17

     415,938     413,859  

Ceva Logistics Canada, ULC

              

6.50% due 03/19/21

     249,975     241,539  

Max Broadcast Group LLC

              

6.25% due 03/31/15†††,12

     163,562     156,379  

Camp Systems International

              

8.25% due 11/29/19

     120,000     120,750  
             
Total Industrial           91,141,327  
             
               
CONSUMER, CYCLICAL - 4.6%              

Lions Gate Entertainment Corp.

              

5.00% due 07/19/20

     7,650,000     7,669,124  

Burger King Corp.

              

4.50% due 09/24/21

     5,000,000     4,961,099  

Neiman Marcus Group, Inc.

              

4.25% due 10/25/20

     4,768,292     4,680,222  

Landry’s, Inc.

              

4.00% due 04/24/18

     4,250,415     4,210,206  

Advantage Sales & Marketing, Inc.

              

4.25% due 07/21/21

     4,258,065     4,180,525  

National Vision, Inc.

              

4.00% due 03/12/21

     3,134,250     3,045,457  

ServiceMaster Co.

              

4.25% due 07/01/21

     3,050,000     3,000,926  

CHG Healthcare Services, Inc.

              

4.25% due 11/19/19

     2,300,218     2,284,415  

La Quinta Intermediate Holdings

              

4.00% due 04/14/21

     2,309,688     2,281,786  

J. Crew Group, Inc.

              

4.00% due 03/05/21

     2,295,250     2,177,205  

 
76 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Sears Holdings Corp.

              

5.50% due 06/30/18

   $ 2,183,500   $ 2,120,724  

Fitness International LLC

              

5.50% due 07/01/20

     2,095,500     2,074,545  

Nassa Midco AS

              

4.25% due 05/14/21

   EUR 1,650,000     2,060,546  

Men’s Wearhouse

              

4.50% due 06/18/21

     1,900,000     1,887,327  

Compucom Systems, Inc.

              

4.25% due 05/07/20

     1,930,000     1,847,975  

Burlington Coat Factory Warehouse Corp.

              

4.25% due 08/13/21

     1,850,000     1,828,799  

Capital Automotive LP

              

6.00% due 04/30/20

     1,770,000     1,787,700  

Stuart Weitzman Acquisition Co.

              

4.50% due 04/08/2012

     1,795,500     1,759,590  

Fleetpride Corp.

              

5.25% due 11/19/19

     1,713,760     1,694,480  

Southern Graphics, Inc.

              

4.25% due 10/17/19

     1,514,929     1,500,734  

Ollies Bargain Outlet

              

4.75% due 09/28/19

     1,510,473     1,498,208  

American Tire Distributors, Inc.

              

5.75% due 06/01/18

     1,469,385     1,466,638  

Alexander Mann Solutions Ltd.

              

5.75% due 12/20/19

     1,290,250     1,277,348  

TI Automotive Ltd.

              

4.25% due 07/02/21

     1,286,775     1,268,284  

Ipreo Holdings

              

4.25% due 08/06/21

     1,250,000     1,217,713  

Jacobs Entertainment, Inc.

              

5.25% due 10/29/18

     1,225,000     1,139,250  

1-800 Contacts, Inc.

              

4.25% due 01/29/21

     1,094,500     1,078,083  

California Pizza Kitchen, Inc.

              

5.25% due 03/29/18

     943,824     902,239  

GCA Services Group, Inc.

              

9.25% due 11/01/20

     440,000     438,900  

4.29% due 11/01/19

     322,358     319,270  

Dave & Busters, Inc.

              

4.50% due 07/25/20

     725,000     718,055  

Armored AutoGroup, Inc.

              

6.00% due 11/05/16

     615,848     608,920  

Navistar, Inc.

              

5.75% due 08/17/17

     298,611     298,984  

Arby’s

              

4.75% due 11/15/20

     198,500     198,004  

Container Store, Inc.

              

4.25% due 04/06/19

     80,340     78,733  

CKX Entertainment, Inc.

              

9.00% due 06/21/1712

     43,475     36,954  
             
Total Consumer, Cyclical           69,598,968  
             
               
TECHNOLOGY - 3.0%              

Greenway Medical Technologies

              

6.00% due 11/04/2012

     3,622,625     3,604,511  

9.25% due 11/04/2112

     550,000     544,500  

P2 Energy Solutions

              

5.00% due 10/30/20

     2,977,500     2,958,891  

9.00% due 04/30/21

     600,000     601,500  

Telx Group

              

4.50% due 04/09/20

     2,395,000     2,352,345  

7.50% due 04/09/21

     875,000     867,711  

Evergreen Skill

              

5.75% due 04/28/21

     3,190,000     3,127,540  

Wall Street Systems

              

4.50% due 04/30/21

     2,862,391     2,833,767  

EIG Investors Corp.

              

5.00% due 11/09/19

     2,741,737     2,731,456  

Blue Coat Systems, Inc.

              

4.00% due 05/31/19

     2,655,437     2,600,124  

Renaissance Learning Corp.

              

4.50% due 04/09/21

     2,517,599     2,462,539  

Deltek, Inc.

              

4.50% due 10/10/18

     2,382,110     2,363,053  

LANDesk Group, Inc.

              

5.00% due 02/25/20

     2,227,556     2,217,354  

Active Network, Inc., The

              

5.50% due 11/13/20

     2,072,812     2,054,675  

Sparta Holding Corp.

              

6.25% due 07/28/20†††

     1,900,000     1,881,511  

Paradigm Ltd

              

4.75% due 07/30/1912

     1,698,877     1,679,239  

Data Device Corp.

              

5.75% due 07/15/20

     1,291,875     1,290,260  

ION Trading Technologies Ltd.

              

4.50% due 06/10/21

   EUR 997,500     1,253,959  

Flexera Software LLC

              

4.50% due 04/02/20

     871,663     863,670  

8.00% due 04/02/21

     350,000     339,500  

Sophos

              

5.00% due 01/29/21

     1,194,000     1,189,523  

GlobalLogic Holdings, Inc.

              

6.25% due 05/31/19

     1,191,000     1,152,293  

Aspect Software, Inc.

              

7.25% due 05/07/16

     1,151,281     1,148,046  

Quorum Business Solutions

              

5.75% due 08/07/21

     900,000     897,750  

Hyland Software, Inc.

              

4.75% due 02/19/21

     636,800     634,609  

Attachmate Group, Inc., The

              

7.25% due 11/22/17

     610,702     610,891  

Eze Castle Software, Inc.

              

7.25% due 04/05/21

     400,000     396,332  

Go Daddy Operating Company, LLC

              

4.75% due 05/13/21

     335,587     330,345  
             
Total Technology           44,987,894  
             
               
FINANCIAL - 3.1%              

Intertrust Group

              

7.50% due 04/16/21

     4,760,000     4,727,869  

8.00% due 04/11/22

     1,900,000     1,877,827  

Magic Newco, LLC

              

5.00% due 12/12/18

     3,406,590     3,398,073  

12.00% due 06/12/19

     1,075,000     1,212,955  

STG-Fairway Acquisitions, Inc.

              

6.25% due 02/28/19

     2,807,270     2,802,020  

10.50% due 08/28/19†††,12

     1,400,000     1,389,383  

Expert Global Solutions

              

8.50% due 04/03/18

     3,872,407     3,862,726  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 77

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Lineage Logistics LLC

              

4.50% due 04/07/21

   $ 3,621,800   $ 3,576,528  

HBSC Holdings

              

due 03/30/207

     3,500,000     3,395,000  

First Data Corp.

              

3.65% due 03/23/18

     3,110,000     3,046,836  

4.15% due 03/24/21

     178,213     175,540  

National Financial Partners Corp.

              

4.50% due 07/01/20

     2,930,507     2,901,202  

Transunion Holding Co.

              

4.00% due 04/09/21

     2,587,000     2,543,357  

USI Holdings Corp.

              

4.25% due 12/27/19

     2,294,112     2,251,097  

RCS Capital

              

6.50% due 04/29/19

     1,975,000     1,982,406  

York Risk Services

              

4.75% due 10/01/21†††

     1,579,268     1,570,393  

AssuredPartners

              

4.50% due 04/02/21

     1,500,000     1,478,445  

7.75% due 04/02/22

     200,000     197,000  

American Stock Transfer & Trust

              

5.75% due 06/26/20

     1,594,716     1,583,425  

Nuveen Investments, Inc.

              

4.16% due 05/13/17

     800,000     797,568  

Cunningham Lindsey U.S., Inc.

              

5.00% due 12/10/19

     687,750     675,714  

9.25% due 06/10/20

     116,932     116,786  

Genex Services, Inc.

              

5.25% due 05/28/21

     698,250     693,886  

HDV Holdings

              

5.75% due 12/18/1812

     571,658     567,371  
             
Total Financial           46,823,407  
             
               
CONSUMER, NON-CYCLICAL - 2.4%              

Albertson’s (Safeway) Holdings LLC

              

5.50% due 08/25/21

     4,250,000     4,226,964  

Nextech Systems LLC

              

6.00% due 10/28/18†††,12

     3,561,250     3,502,459  

Grocery Outlet, Inc.

              

6.50% due 12/17/18

     2,512,379     2,504,540  

Continental Foods

              

4.33% due 08/20/21

   EUR 2,000,000     2,500,436  

Performance Food Group

              

6.25% due 11/14/19

     2,345,560     2,336,764  

Reddy Ice Holdings, Inc.

              

6.75% due 04/01/1912

     1,086,745     1,026,974  

10.75% due 10/01/1912

     1,125,000     1,001,250  

Diamond Foods, Inc.

              

4.25% due 08/20/18

     1,840,750     1,818,900  

AdvancePierre Foods, Inc.

              

9.50% due 10/10/17

     1,076,000     1,059,860  

5.75% due 07/10/17

     734,417     734,109  

Harvard Drug

              

5.00% due 08/16/20

     1,733,899     1,733,899  

Arctic Glacier Holdings, Inc.

              

5.00% due 05/10/19

     1,545,845     1,522,657  

Hearthside Foods

              

4.50% due 06/02/21

     1,396,500     1,387,185  

ABG Intermediate Holdings 2 LLC

              

5.50% due 05/27/21

     1,393,000     1,386,035  

NES Global Talent

              

6.50% due 10/03/19

     1,275,625     1,262,869  

DJO Finance LLC

              

4.25% due 09/15/17

     1,228,203     1,217,714  

CTI Foods Holding Co. LLC

              

8.25% due 06/28/21

     1,205,000     1,209,519  

Winebow, Inc.

              

4.75% due 07/01/21

     997,500     991,266  

Jacobs Douwe Egberts

              

4.25% due 07/02/21

     1,000,000     976,250  

Akorn, Inc.

              

4.50% due 04/16/21

     850,000     843,889  

Fender Musical Instruments Corp.

              

5.75% due 04/03/19

     798,750     795,755  

Hostess Brands

              

6.75% due 04/09/20

     562,175     573,419  

Bauer Performance Sports

              

4.00% due 04/15/21

     514,045     507,943  

Catalent Pharma Solutions, Inc.

              

4.50% due 05/20/21

     346,008     343,773  

6.50% due 12/31/17

     44,182     44,071  

Mitel Networks Corp.

              

5.25% due 01/31/20

     376,928     377,558  

DS Waters of America, Inc.

              

5.25% due 08/30/20

     198,000     199,980  

VWR Funding, Inc.

              

3.40% due 04/03/17

     196,477     192,978  

Targus Group International, Inc.

              

12.00% due 05/24/1612

     229,401     186,389  

Rite Aid Corp.

              

5.75% due 08/21/20

     100,000     101,125  
             
Total Consumer, Non-cyclical           36,566,530  
             
               
COMMUNICATIONS - 1.6%              

Avaya, Inc.

              

7.75% due 10/26/17

     3,820,231     3,636,975  

6.50% due 03/31/18

     2,893,698     2,866,583  

Anaren, Inc.

              

5.50% due 02/18/21

     1,985,000     1,970,113  

9.25% due 08/18/21

     1,500,000     1,492,500  

Cengage Learning Acquisitions, Inc.

              

7.00% due 03/31/20

     2,736,250     2,730,394  

Interactive Data Corp.

              

4.75% due 05/02/21

     2,294,250     2,280,622  

Cumulus Media, Inc.

              

4.25% due 12/23/20

     2,284,808     2,243,865  

Proquest LLC

              

5.25% due 09/24/21

     2,000,000     1,994,160  

Bureau van Dijk Electronic Publishing BV

              

7.75% due 09/17/21

   GBP 1,000,000     1,623,928  

Trader Media Corporation Ltd.

              

5.01% due 12/08/17

   GBP 1,000,000     1,620,378  

MergerMarket Ltd.

              

4.50% due 02/04/21

     995,000     965,150  

Liberty Cablevision of Puerto Rico LLC

              

4.50% due 01/07/22

     600,000     595,002  

Univision Communications, Inc.

              

4.00% due 03/01/20

     298,496     292,714  
             
Total Communications           24,312,384  
             

 
78 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
MACRO OPPORTUNITIES FUND    

      FACE        
      AMOUNT     VALUE  
 
               
BASIC MATERIALS - 0.5%              

Ennis-Flint

              

4.25% due 03/31/21

   $ 1,990,000   $ 1,930,300  

7.75% due 09/30/21

     1,150,000     1,106,875  

Atkore International, Inc.

              

4.50% due 04/09/21

     1,995,000     1,975,049  

7.75% due 10/09/21

     850,000     841,500  

Noranda Aluminum Acquisition Corp.

              

5.75% due 02/28/19

     1,094,898     1,063,880  

Royal Adhesives and Sealants

              

5.50% due 07/31/18

     824,644     827,737  

Hoffmaster Group, Inc.

              

6.28% due 05/09/1912

     142,857     127,409  
             
Total Basic Materials           7,872,750  
             
               
UTILITIES - 0.3%              

Expro Holdings UK 3 Ltd.

              

5.75% due 08/12/21

     1,800,000     1,790,243  

Astoria Generating Company Acquisitions LLC

              

9.25% due 10/26/17

     1,354,091     1,377,788  

Terraform Power, Inc

              

4.75% due 07/23/19

     798,000     799,995  

Texas Competitive Electric Holdings Company LLC

              

3.75% due 05/05/16

     733,663     736,877  
             
Total Utilities           4,704,903  
             
               
ENERGY - 0.3%              

Cactus Wellhead

              

7.00% due 07/31/20

     1,500,000     1,470,000  

Panda Temple II Power

              

7.25% due 04/03/19

     1,000,000     1,020,000  

FTS International

              

5.75% due 04/16/21

     872,727     872,570  

PSS Companies

              

5.50% due 01/28/20

     872,724     868,361  

Atlas Energy LP

              

6.50% due 07/31/19

     445,500     448,284  
             
Total Energy           4,679,215  
             
Total Senior Floating Rate Interests              

(Cost $332,497,991)

           330,687,378  
             
               
BONDS††,13 - 20.5%              
               
FINANCIAL - 9.4%              

JPMorgan Chase & Co.

              

5.00%1,2

     15,740,000     15,343,351  

5.15%1,2,6

     8,875,000     8,453,438  

Bank of America Corp.

              

5.13%1,2

     15,100,000     14,609,249  

6.25%1,2

     8,350,000     8,295,199  

Fifth Third Bancorp

              

5.10%1,2

     11,720,000     11,046,099  

4.90%1,2

     3,000,000     2,935,800  

HSBC Holdings plc

              

5.63%1,2

     8,850,000     8,788,049  

6.38%1,2

     2,850,000     2,846,438  

Citigroup, Inc.

              

5.35%1,2

     6,725,000     6,287,875  

5.95%1,2

     3,800,000     3,798,814  

Nordea Bank AB

              

6.13%1,2,3

     5,050,000     4,949,000  

5.50%1,2,3

     3,900,000     3,831,750  

Kennedy-Wilson, Inc.

              

8.75% due 04/01/196

     7,425,000     7,889,063  

CIC Receivables Master Trust

              

4.89% due 10/07/21†††

     6,500,000     6,506,500  

Customers Bank

              

6.13% due 06/26/291,3

     6,000,000     6,052,500  

Wilton Re Finance LLC

              

5.88% due 03/30/331,3

     5,750,000     5,980,000  

Cadence Financial Corp.

              

4.88% due 06/28/193,16

     4,000,000     4,020,000  

Oxford Finance LLC / Oxford

              

Finance Company-Issuer, Inc.

              

7.25% due 01/15/183

     3,801,000     3,953,040  

Barclays plc

              

8.25%1,2,6

     3,150,000     3,232,688  

Schahin II Finance Company SPV Ltd.

              

5.88% due 09/25/223,6

     2,338,267     2,215,508  

Skyway Concession Company LLC

              

0.61% due 06/30/261,3

     2,500,000     2,000,000  

QBE Capital Funding III Ltd.

              

7.25% due 05/24/411,3,6

     1,650,000     1,798,500  

Credit Suisse Group AG

              

6.25%1,2,3

     1,845,000     1,785,038  

Jefferies LoanCore LLC / JLC Finance Corp.

              

6.88% due 06/01/203

     1,700,000     1,644,750  

Jefferies Finance LLC / JFIN Company-Issuer Corp.

              

7.38% due 04/01/203

     1,075,000     1,099,188  

Prosight Global Inc.

              

7.50% due 11/26/20†††,12

     850,000     871,420  

Nationstar Mortgage LLC / Nationstar

              

Capital Corp.

              

6.50% due 07/01/21

     730,000     695,325  

Ironshore Holdings US, Inc.

              

8.50% due 05/15/203

     315,000     378,781  

Scottrade Financial Services, Inc.

              

6.13% due 07/11/213

     125,000     130,015  

LCP Dakota Fund

              

10.00% due 08/17/1512

     69,000     69,000  
             
Total Financial           141,506,378  
             
               
ENERGY - 2.5%              

Regency Energy Partners, LP /

              

Regency Energy Finance Corp.

              

8.38% due 06/01/19

     8,251,000     8,746,059  

Crestwood Midstream Partners, LP /

              

Crestwood Midstream Finance Corp.

              

7.75% due 04/01/196

     4,700,000     4,923,250  

Penn Virginia Resource Partners Limited

              

Partnership / Penn Virginia Resource

              

Finance Corp.

              

8.38% due 06/01/206

     3,999,000     4,358,910  

Exterran Holdings, Inc.

              

7.25% due 12/01/18

     4,060,000     4,222,400  

BreitBurn Energy Partners LP / BreitBurn

              

Finance Corp.

              

7.88% due 04/15/226

     4,075,000     4,125,937  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 79

SCHEDULE OF INVESTMENTS (continued) September 30, 2014
 
MACRO OPPORTUNITIES FUND  

      FACE        
      AMOUNT     VALUE  
 
               

Atlas Energy Holdings Operating Company LLC /

              

Atlas Resource Finance Corp.

              

9.25% due 08/15/216

   $ 1,610,000   $ 1,642,200  

7.75% due 01/15/21

     1,100,000     1,083,500  

ContourGlobal Power Holdings S.A.

              

7.13% due 06/01/193

     2,250,000     2,227,500  

SandRidge Energy, Inc.

              

7.50% due 03/15/216

     1,525,000     1,486,875  

7.50% due 02/15/23

     250,000     242,813  

Pacific Drilling S.A.

              

5.38% due 06/01/203

     1,400,000     1,281,000  

Bill Barrett Corp.

              

7.00% due 10/15/22

     550,000     545,875  

7.63% due 10/01/19

     327,000     337,628  

IronGate Energy Services LLC

              

11.00% due 07/01/183

     600,000     602,250  

Ultra Petroleum Corp.

              

5.75% due 12/15/183

     200,000     201,000  
             

Total Energy

          36,027,197  
             

INDUSTRIAL - 2.0%

              

Quality Distribution LLC / QD Capital Corp.

              

9.88% due 11/01/18

     10,127,000     10,633,349  

Xefin Lux SCA

              

3.91% due 06/01/191,3

   EUR 5,000,000     6,267,761  

Dynagas LNG Partners Limited Partnership /

              

Dynagas Finance, Inc.

              

6.25% due 10/30/19

     3,750,000     3,750,000  

Princess Juliana International Airport

              

Operating Company N.V.

              

5.50% due 12/20/273

     1,980,058     1,980,058  

Chicago Bridge & Iron Co.

              

5.15% due 12/27/22†††,12

     1,650,000     1,698,180  

Ultra Resources, Inc.

              

4.51% due 10/12/20†††,12

     1,500,000     1,427,250  

Marquette Transportation Company LLC/

              

Marquette Transportation Finance Corp.

              

10.88% due 01/15/17

     1,340,000     1,403,650  

Odebrecht Offshore Drilling Finance Ltd.

              

6.63% due 10/01/223,6

     1,220,125     1,256,729  

SBM Baleia Azul Sarl

              

5.50% due 09/15/27†††,12

     1,011,340     1,026,409  

CEVA Group plc

              

7.00% due 03/01/213

     525,000     525,000  

Unifrax I LLC / Unifrax Holding Co.

              

7.50% due 02/15/193

     500,000     505,000  

LMI Aerospace, Inc.

              

7.38% due 07/15/193

     500,000     500,000  
             

Total Industrial

          30,973,386  
             
               

CONSUMER, NON-CYCLICAL - 1.8%

              

Vector Group Ltd.

              

7.75% due 02/15/21

              

Bumble Bee Holdings, Inc.

     7,410,000     7,799,025  

9.00% due 12/15/173

              

Central Garden and Pet Co.

     6,076,000     6,364,610  

8.25% due 03/01/186

              

Reynolds Group Issuer Incorporated /

     3,875,000     3,942,813  

Reynolds Group Issuer LLC / Reynolds

              

Group Issuer Lu

              

7.88% due 08/15/19

     3,500,000     3,718,750  

Premier Foods Finance plc

              

5.56% due 03/16/201,3

   GBP 1,250,000     1,864,918  

6.50% due 03/15/213

   GBP 1,000,000     1,432,277  

R&R Ice Cream plc

              

8.25% due 05/15/203

   AUD 1,300,000     1,145,505  

Symbion, Inc.

              

8.00% due 06/15/16

     600,000     622,500  

KeHE Distributors LLC / KeHE Finance Corp.

              

7.63% due 08/15/213

     500,000     530,000  

Physio-Control International, Inc.

              

9.88% due 01/15/193

     303,000     324,210  

FTI Consulting, Inc.

              

6.75% due 10/01/20

     300,000     311,625  
             

Total Consumer, Non-cyclical

           28,056,233  
             

COMMUNICATIONS - 1.2%

              

MDC Partners, Inc.

              

6.75% due 04/01/203

     8,700,000     8,961,000  

Avaya, Inc.

              

7.00% due 04/01/193

     6,605,000     6,406,850  

SITEL LLC / Sitel Finance Corp.

              

11.00% due 08/01/173

     2,245,000     2,323,575  

Expo Event Transco, Inc.

              

9.00% due 06/15/213

     725,000     746,750  
             

Total Communications

          18,438,175  
             
               

CONSUMER, CYCLICAL - 0.8%

              

GRD Holdings III Corp.

              

10.75% due 06/01/193,6

     4,555,000     5,021,887  

Guitar Center, Inc.

              

6.50% due 04/15/193

     3,455,000     3,109,500  

Men’s Wearhouse, Inc.

              

7.00% due 07/01/22

     1,900,000     1,919,000  

Sabre GLBL, Inc.

              

8.50% due 05/15/193

     1,188,000     1,271,160  

Checkers Drive-In Restaurants, Inc.

              

11.00% due 12/01/173

     450,000     492,750  

PF Chang’s China Bistro, Inc.

              

10.25% due 06/30/203

     465,000     461,513  

Seminole Hard Rock Entertainment Incorporated /

              

Seminole Hard Rock International LLC

              

5.88% due 05/15/213

     400,000     386,000  

Global Partners Limited Partnership/GLP

              

Finance Corp.

              

6.25% due 07/15/22

     100,000     99,500  
             

Total Consumer, Cyclical

           12,761,310  
             

TECHNOLOGY - 0.7%

              

Infor US, Inc.

              

9.38% due 04/01/19

     7,250,000     7,830,000  

Eagle Midco, Inc.

              

9.00% due 06/15/183

     3,050,000     3,114,813  
             

Total Technology

          10,944,813  
             

 
80 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued) September 30, 2014
 
MACRO OPPORTUNITIES FUND  

      FACE        
      AMOUNT     VALUE  
 
               

BASIC MATERIALS - 0.6%

              

TPC Group, Inc.

              

8.75% due 12/15/203

   $ 5,550,000   $ 5,896,875  

Mirabela Nickel Ltd.

              

9.50% due 05/20/19†††,12

     1,566,000     1,566,000  

1.00% due 09/10/44†††,12

     37,316     —  

KGHM International Ltd.

              

7.75% due 06/15/193,6

     1,435,000     1,513,925  

Kaiser Aluminum Corp.

              

8.25% due 06/01/20

     250,000     275,625  
             

Total Basic Materials

           9,252,425  
             

DIVERSIFIED - 0.6%

              

Opal Acquisition, Inc.

              

8.88% due 12/15/213

     7,675,000     7,924,438  

Harbinger Group, Inc.

              

7.88% due 07/15/19

     511,000     544,215  
             

Total Diversified

           8,468,653  
             
               

UTILITIES - 0.4%

              

AES Corp.

              

3.23% due 06/01/191

     3,900,000     3,841,500  

NGL Energy Partners, LP / NGL Energy

              

Finance Corp.

              

6.88% due 10/15/213

     2,390,000     2,485,600  

FPL Energy National Wind LLC

              

5.61% due 03/10/243

     51,255     50,217  
             

Total Utilities

          6,377,317  
             

MATERIALS - 0.3%

              

Reynolds Group Issuer Incorporated /

              

Reynolds Group Issuer LLC / Reynolds

              

Group Issuer Lu

              

7.13% due 04/15/19

     4,950,000     5,129,438  

GOVERNMENT - 0.2%

              
             

El Salvador Government International Bond

              

6.38% due 01/18/273,6

     3,100,000     3,100,000  
             

Total Bonds

             

(Cost $314,078,915)

           311,035,325  
             
               

COLLATERALIZED MORTGAGE OBLIGATIONS†† - 10.2%

              

LSTAR Securities Investment Trust 2014-1

              

3.25% due 09/01/211,16

     17,400,000     17,400,000  

Nomura Resecuritization Trust 2012-1R

              

0.59% due 08/27/471,3

     14,482,444     13,396,261  

IndyMac INDX Mortgage Loan Trust 2006-AR4

              

0.37% due 05/25/461

     12,794,417     10,981,897  

Luminent Mortgage Trust 2006-2

              

0.35% due 02/25/461

     14,190,555     10,520,579  

American Home Mortgage Assets Trust 2007-1

              

0.82% due 02/25/471

     16,477,740     10,392,675  

Lehman XS Trust Series 2006-16N

              

0.34% due 11/25/461

     12,184,463     10,139,593  

HarborView Mortgage Loan Trust 2006-12

              

0.34% due 01/19/381

     10,525,833     8,984,672  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2006-AR9 Trust

              

0.96% due 11/25/461

     11,917,647     8,452,746  

CSMC Trust 2014-SURF

              

3.26% due 02/15/291,3

     7,300,000     7,318,206  

GreenPoint Mortgage Funding Trust 2006-AR1

              

0.44% due 02/25/361

     8,348,170     7,005,492  

GreenPoint Mortgage Funding Trust

              

Series 2007-AR1

              

0.23% due 02/25/471

     7,034,884     6,514,268  

Wells Fargo Alternative Loan 2007-PA3 Trust

              

6.25% due 07/25/37

     6,475,890     5,902,650  

American Home Mortgage Assets

              

Trust 2006-6

              

0.34% due 12/25/461

     7,133,812     4,999,832  

American Home Mortgage Investment

              

Trust 2006-1

              

0.35% due 03/25/461

     5,688,664     4,828,458  

Structured Asset Mortgage Investments II

              

Trust 2006-AR1

              

0.38% due 02/25/361

     5,492,474     4,700,855  

Alliance Bancorp Trust 2007-OA1

              

0.39% due 07/25/37

     5,194,799     3,588,972  

Chase Mortgage Finance Trust Series 2006-S3

              

6.00% due 11/25/36

     3,607,809     3,094,612  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2006-8 Trust

              

5.76% due 10/25/36

     4,328,312     3,076,715  

Residential Asset Securitization

              

Trust 2006-A12

              

6.25% due 11/25/36

     3,943,294     2,975,968  

First Horizon Alternative Mortgage

              

Securities Trust 2006-FA1

              

5.75% due 04/25/36

     2,849,838     2,413,431  

Washington Mutual Mortgage Pass-Through

              

Certificates WMALT Series 2007-OA4 Trust

              

0.88% due 04/25/471

     3,034,724     2,301,899  

Morgan Stanley Re-REMIC Trust 2010-R5

              

0.54% due 06/26/361,3

     2,919,532     2,172,599  

American Home Mortgage Assets Trust 2006-4

              

0.34% due 10/25/461

     2,509,312     1,705,077  

Bear Stearns Mortgage Funding Trust 2007-AR5

              

0.32% due 06/25/471

     1,833,049     1,502,530  

Resource Capital Corporation CRE

              

Notes 2013 Ltd.

              

3.65% due 12/15/28 1,3

     1,000,000     1,009,590  
             

Total Collateralized Mortgage Obligations

              

(Cost $154,343,817)

           155,379,577  
             

MORTGAGE BACKED SECURITIES†† - 2.4%

              

COMM 2014-KYO Mortgage Trust

              

2.50% due 06/11/271,3

     10,500,000     10,503,466  

SRERS Funding Ltd. 2011-RS

              

0.40% due 05/09/461,3

     8,419,393     8,019,472  

GE Business Loan Trust 2007-1

              

0.60% due 04/16/351,3

     6,178,386     5,575,623  

Hilton USA Trust 2013-HLT

              

5.61% due 11/05/181,3

     4,300,000     4,366,667  

BAMLL Commercial Mortgage Securities

              

Trust 2014-ICTS

              

3.10% due 06/15/28

     3,000,000     2,996,235  

HSI Asset Securitization Corporation

              

Trust 2007-WF1

              

0.32% due 05/25/371

     2,296,757     2,142,208  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 81

SCHEDULE OF INVESTMENTS (continued) September 30, 2014
 
MACRO OPPORTUNITIES FUND  

      FACE        
      AMOUNT     VALUE  
 
               

Wachovia Bank Commercial Mortgage

              

Trust Series 2007-WHALE 8

              

0.85% due 06/15/201,3

   $ 2,190,914   $ 2,106,213  

BAMLL-DB Trust 2012-OSI

              

6.79% due 04/13/293

     550,000     582,806  

Total Mortgage Backed Securities

              
             

(Cost $32,949,042)

           36,292,690  
             

MUNICIPAL BONDS†† - 1.1%

              
               

MICHIGAN - 0.9%

              

City of Detroit Michigan General Obligation

              

Unlimited

              

3.50% due 10/07/161

     13,600,000     13,600,000  
             

PUERTO RICO - 0.2%

              

Puerto Rico Highways & Transportation

              

Authority Revenue Bonds

              

5.50% due 07/01/28

     3,200,000     3,354,176  
             

Total Municipal Bonds

              

(Cost $16,704,763)

           16,954,176  
             
               
      CONTRACTS        
               

OPTIONS PURCHASED† - 0.0%

              

Call options on:

              

SPDR Gold Trust Expiring January 2015

              

with strike price of $140.00

     4,355     69,680  
             

Total Options Purchased

              

(Cost $6,367,174)

           69,680  
             

Total Investments - 103.3%

              

(Cost $1,570,944,867)

         $ 1,569,769,554  
             

OPTIONS WRITTEN† - 0.0%

              

Call options on:

              

SPDR Gold Trust Expiring January 2015

              

with strike price of $155.00

     354   $ (1,416 )
             

Total Options Written

              

(Premiums received $225,834)

           (1,416 )
             

Other Assets & Liabilities, net - (3.3)%

           (49,279,102 )
             

Total Net Assets - 100.0%

         $ 1,520,489,036  
 

            UNREALIZED  
      UNITS     GAIN (LOSS)  
 
               

OTC CURRENCY SWAP AGREEMENTS††

              

Bank of America

              

December 2014 U.S. Dollar

              

Index Future Swap, Terminating

              

12/15/148 (Notional Value $32,609,160)

     379   $ 605,756  
             

OTC INTEREST RATE SWAP AGREEMENTS SOLD SHORT ††

              

Bank of America

              

December 2014 Japan Government Bond 10 Year

              

Future Index Swap, Terminating

              

12/09/149 (Notional Value $143,638,917)

     108   $ (220,401 )
             

OTC EQUITY INDEX SWAP AGREEMENTS††

              

Bank of America S&P 500 Home

              

Building Index

              

December 2014 Swap,

              

Terminating 12/23/1410

              

(Notional Value $9,399,442)

     17,377   $ (602,181 )

Bank of America S&P

              

1500 Education Services Sub-

              

Industry Index

              

October 2014 Swap,

              

Terminating 10/13/1411

              

(Notional Value $39,166,398)

     766,016     (2,098,425 )

Bank of America S&P 500 Home

              

Building Index

              

October 2014 Swap,

              

Terminating 10/13/1410

              

(Notional Value $27,210,618)

     50,305     (3,309,132 )
             

(Total Notional Value $81,783,783)

         $ (6,009,738 )
             

CENTRALLY CLEARED INTEREST RATE SWAP AGREEMENTS††

Counterparty   Floating
Rate		   Floating Rate Index   Fixed Rate   Maturity Date   Notional Amount   Market Value     Unrealized
Appreciation/
Depreciation		  
 
Merrill Lynch   Pay   3-Month USD-LIBOR   3.13 %   06/08/25   $45,300,000     $1,010,190       $ 1,010,190  
Merrill Lynch   Pay   3-Month USD-LIBOR   2.93 %   08/24/25   52,200,000     (109,621 )     (109,621 )
Merrill Lynch   Receive   3-Month USD-LIBOR   1.59 %   07/02/18   (34,550,000 )   (110,560 )     (110,560 )
Merrill Lynch   Receive   6-Month EUR-EURIBOR   1.42 %   08/24/25   (36,653,000 )   (314,796 )     (314,796 )
Merrill Lynch   Receive   3-Month USD-LIBOR   2.73 %   07/02/23   (23,800,000 )   (564,060 )     (564,060 )
Merrill Lynch   Receive   6-Month EUR-EURIBOR   1.89 %   06/08/25   (31,500,000 )   (2,263,782 )     (2,263,782 )
                                       
                                    $(2,352,629 )
                                       


 
82 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (concluded) September 30, 2014
 
MACRO OPPORTUNITIES FUND  

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS††

                            Value at   Net Unrealized
Counterparty     Contracts to Sell     Currency     Settlement Date   Settlement Value   September 30, 2014   Appreciation
 
Bank of America     30,372,557     EUR     12/01/14   $39,512,935   $38,388,611   $1,124,324
BNY Mellon     15,800,000     EUR     10/07/14     20,778,633     19,958,442     820,191
BNY Mellon     2,100,000     AUD     10/07/14     1,957,956     1,837,596     120,360
BNY Mellon     3,300,000     GBP     10/07/14     5,427,002     5,349,862     77,140
                                     
                                  $2,142,015
                                     

*   Non-income producing security.
†   Value determined based on Level 1 inputs, unless otherwise noted — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Perpetual maturity.
3   Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $587,975,382 (cost $587,359,632), or 38.7% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4   Affiliated issuer.
5   Security is a step up/step down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity.
6   Security or a portion thereof is held as collateral for reverse repurchase agreements — See Note 13.
7   Security with no rate was unsettled at September 30, 2014.
8   Total return based on U.S. Dollar Index +/- financing at a variable rate.
9   Total return based on Japan Government Bond 10 Year Future Index +/- financing at a variable rate.
10   Total return based on S&P 500 Home Building Index +/- financing at a variable rate.
11   Total return based on S&P 1500 Education Services Sub-Industry Index +/- financing at a variable rate.
12   Illiquid security.
13   The face amount is denominated in U.S. Dollars unless otherwise indicated.
14   Zero coupon rate security.
15   Residual interest.
16   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $21,420,000 (cost $21,400,000), or 1.4% of total net assets — See Note 16.
    plc — Public Limited Company
    REIT — Real Estate Investment Trust

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 83

 MACRO OPPORTUNITIES FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments in unaffiliated issuers, at value        

(cost $1,515,312,352)

   $ 1,513,427,914  
Investments in affiliated issuers, at value        

(cost $55,632,515)

     56,341,640  
       
Total investments        

(cost $1,570,944,867)

     1,569,769,554  
Foreign currency, at value        

(cost $101,566)

     101,026  
Segregated cash with broker     8,077,928  
Cash     2,191,733  
Unrealized appreciation on forward foreign currency        

exchange contracts

     2,142,015  
Unrealized appreciation on swap agreements     1,615,946  
Prepaid expenses     100,970  
Receivables:        

Fund shares sold

     11,494,789  

Interest

     8,958,349  

Securities sold

     6,357,694  

Dividends

     295,622  

Foreign taxes reclaim

     7,948  
       
Total assets     1,611,113,574  
       
         
LIABILITIES:        
Reverse Repurchase Agreements     42,234,309  
Unrealized depreciation on swap agreements     9,592,958  
Unfunded loan commitments, at value        

(commitment fees received $651,645)

     593,215  
Options written, at value        

(premiums received $225,834)

     1,416  
Payable for:        

Securities purchased

     32,813,336  

Fund shares redeemed

     3,104,010  

Management fees

     891,029  

Distributions to shareholders

     834,101  

Distribution and service fees

     271,977  

Fund accounting/administration fees

     115,996  

Transfer agent/maintenance fees

     47,853  

Trustees’ fees*

     4,560  

Miscellaneous

     119,778  
       
Total liabilities     90,624,538  
       
NET ASSETS   $ 1,520,489,036  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 1,547,942,694  
Distributions in excess of net investment income     (7,364,111 )
Accumulated net realized loss on investments     (13,218,702 )
Net unrealized depreciation on investments     (6,870,845 )
       
Net assets   $ 1,520,489,036  
       
A-CLASS:        
Net assets   $ 357,764,821  
Capital shares outstanding     13,343,826  
Net asset value per share     $26.81  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $28.15  
       
C-CLASS:        
Net assets   $ 248,358,592  
Capital shares outstanding     9,270,392  
Net asset value per share     $26.79  
       
INSTITUTIONAL CLASS:        
Net assets   $ 914,365,623  
Capital shares outstanding     34,064,477  
Net asset value per share     $26.84  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Interest (net of foreign withholding tax of $8,991)   $ 56,343,833  
Dividends from securities of unaffiliated issuers     4,773,730  
Dividends from securities of affiliated issuers     615,129  
       

Total investment income

     61,732,692  
       
         
EXPENSES:        
Management fees     10,146,509  
Transfer agent/maintenance fees:        

A-Class

     402,441  

C-Class

     147,242  

Institutional Class

     205,426  
Distribution and service fees:        

A-Class

     918,839  

C-Class

     1,964,672  
Fund accounting/administration fees:     1,083,036  
Interest expense     751,757  
Trustees’ fees*     100,229  
Line of credit expense     95,241  
Custodian fees     30,396  
Tax expense     20  
Miscellaneous     862,481  
       

Total expenses

     16,708,289  
Less:        
Expenses waived by Adviser     (1,378,478 )
Expenses waived by Transfer Agent        

A-Class

     (99,091 )

C-Class

     (9,019 )

Institutional Class

     (205,443 )
       
Total expenses waived     (1,692,031 )
       
Net expenses     15,016,258  
       
Net investment income     46,716,434  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     3,256,793  

Swap agreements

     2,708,845  

Foreign currency

     (412,320 )

Forward foreign currency exchange contracts

     3,489,884  

Options purchased

     (5,646,796 )

Options written

     937,231  
       
Net realized gain     4,333,637  
       
Net change in unrealized appreciation (depreciation) on:        

Investments in unaffiliated issuers

     20,820,521  

Investments in affiliated issuers

     709,125  

Swap agreements

     (6,499,398 )

Options purchased

     (2,331,031 )

Options written

     (23,812 )

Foreign currency

     (347,118 )

Forward foreign currency exchange contracts

     2,142,015  
       
Net change in unrealized appreciation (depreciation)     14,470,302  
       
Net realized and unrealized gain     18,803,939  
       
Net increase in net assets resulting        

from operations

   $ 65,520,373  
       





*   Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
84 |   THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.


 MACRO OPPORTUNITIES FUND

STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 46,716,434     $ 34,053,445  
Net realized gain (loss) on investments     4,333,637       (4,447,248 )
Net change in unrealized appreciation (depreciation) on investments     14,470,302       (26,368,248 )
 
Net increase in net assets resulting from operations     65,520,373       3,237,949  
 
 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (17,086,055 )     (12,522,539 )

C-Class

     (7,695,611 )     (4,768,075 )

Institutional Class

     (28,337,889 )     (17,291,805 )
Net realized gains                

A-Class

     —       (501,652 )

C-Class

     —       (204,259 )

Institutional Class

     —       (603,940 )
Return of capital                

A-Class

     (289,690 )     —  

C-Class

     (132,073 )     —  

Institutional Class

     (511,136 )     —  
 
Total distributions to shareholders     (54,052,454 )     (35,892,270 )
 
 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     293,031,487       444,592,091  

C-Class

     122,101,340       180,978,622  

Institutional Class

     693,090,752       608,202,900  
Value of proceeds of merger                

A-Class

     —       12,881,126  

C-Class

     —       6,546,846  

Institutional Class

     —       2,252,116  
Distributions reinvested                

A-Class

     13,577,467       10,739,892  

C-Class

     6,480,901       4,399,264  

Institutional Class

     23,567,363       14,904,818  
Cost of shares redeemed                

A-Class

     (289,559,280 )     (204,778,201 )

C-Class

     (45,738,386 )     (56,074,395 )

Institutional Class

     (222,136,368 )     (299,893,193 )
 
Net increase from capital share transactions     594,415,276       724,751,886  
 
Net increase in net assets     605,883,195       692,097,565  
 
NET ASSETS:                

Beginning of year

     914,605,841       222,508,276  
 

End of year

   $ 1,520,489,036     $ 914,605,841  
 
Distributions in excess of net investment income at end of year   $ (7,364,111 )   $ (416,937 )
 
 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     10,851,399       13,508,658 †  

C-Class

     4,522,005       5,550,606 †  

Institutional Class

     25,608,053       18,519,609 †  
Shares issued from reinvestment of distributions                

A-Class

     503,489       391,935  

C-Class

     240,545       160,703  

Institutional Class

     872,812       544,723  
Shares redeemed                

A-Class

     (10,733,837 )     (4,309,477 )

C-Class

     (1,696,813 )     (740,595 )

Institutional Class

     (8,236,308 )     (7,262,144 )
 
Net increase in shares     21,931,345       26,364,018  
 

† Includes 470,457 A-Class, 239,285 C-Class, and 82,164 Institutional Class shares issued in connection with Fund merger.


 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT | 85  

 MACRO OPPORTUNITIES FUND

FINANCIAL HIGHLIGHTS
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended     Year Ended     Period Ended  
      September 30,     September 30,     September 30,  
A-Class     2014     2013     2012a  
 
Per Share Data                    
Net asset value, beginning of period     $26.31     $26.53     $25.00  
 
Income (loss) from investment operations:                    
Net investment income (loss)b     1.10     1.37     .99  
Net gain (loss) on investments (realized and unrealized)     .69     (.04 )   1.52  
     
Total from investment operations     1.79     1.33     2.51  
 
Less distributions from:                    
Net investment income     (1.27 )   (1.43 )   (.98 )
Net realized gains     —     (.12 )   —  
Return of capital     (.02 )   —     —  
     
Total distributions     (1.29 )   (1.55 )   (.98 )
 
Net asset value, end of period     $26.81     $26.31     $26.53  
     
                     
 
Total Returne     6.88%     5.01%     10.19%  
 
Ratios/Supplemental Data                    
Net assets, end of period (in thousands)     $357,765     $334,751     $83,081  
 
Ratios to average net assets:                    
Net investment income (loss)     4.08%     5.11%     4.61%  
Total expensesc     1.51%     1.56%     1.61%  
Net expensesd,f     1.36%     1.41%     1.37%  
 
Portfolio turnover rate     54%     84%     46%  
                     
      Year Ended     Year Ended     Period Ended  
      September 30,     September 30,     September 30,  
C-Class     2014     2013     2012a  
 
Per Share Data                    
Net asset value, beginning of period     $26.29     $26.51     $25.00  
 
Income (loss) from investment operations:                    
Net investment income (loss)b     .90     1.17     .82  
Net gain (loss) on investments (realized and unrealized)     .69     (.03 )   1.53  
     
Total from investment operations     1.59     1.14     2.35  
 
Less distributions from:                    
Net investment income     (1.07 )   (1.24 )   (.84 )
Net realized gains     —     (.12 )   —  
Return of capital     (.02 )   —     —  
     
Total distributions     (1.09 )   (1.36 )   (.84 )
 
Net asset value, end of period     $26.79     $26.29     $26.51  
     
                     
 
Total Returne     6.10%     4.26%     9.54%  
 
Ratios/Supplemental Data                    
Net assets, end of period (in thousands)     $248,359     $163,129     $32,711  
 
Ratios to average net assets:                    
Net investment income (loss)     3.34%     4.36%     3.83%  
Total expensesc     2.22%     2.29%     2.31%  
Net expensesd,f     2.10%     2.15%     2.11%  
 
Portfolio turnover rate     54%     84%     46%  

 
86  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

 MACRO OPPORTUNITIES FUND

FINANCIAL HIGHLIGHTS (concluded)
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended     Year Ended     Period Ended  
      September 30,     September 30,     September 30,  
Institutional Class     2014     2013     2012a  
 
Per Share Data                    
Net asset value, beginning of period     $26.34     $26.56     $25.00  
 
Income (loss) from investment operations:                    
Net investment income (loss)b     1.18     1.46     1.12  
Net gain (loss) on investments (realized and unrealized)     .70     (.04 )   1.47  
     
Total from investment operations     1.88     1.42     2.59  
 
Less distributions from:                    
Net investment income     (1.36 )   (1.52 )   (1.03 )
Net realized gains     —     (.12 )   —  
Return of capital     (.02 )   —     —  
     
Total distributions     (1.38 )   (1.64 )   (1.03 )
 
Net asset value, end of period     $26.84     $26.34     $26.56  
     
                     
 
Total Returne     7.23%     5.35%     10.55%  
 
Ratios/Supplemental Data                    
Net assets, end of period (in thousands)     $914,366     $416,727     $106,716  
 
Ratios to average net assets:                    
Net investment income (loss)     4.37%     5.43%     5.22%  
Total expensesc     1.18%     1.23%     1.31%  
Net expensesd,f     1.02%     1.09%     1.06%  
 
Portfolio turnover rate     54%     84%     46%  

a Since commencement of operations: November 30, 2011. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c Does not include expenses of the underlying funds in which the Fund invests.
d Net expense information reflects the expense ratios after expense waivers.
e Total return does not reflect the impact of any applicable sales charge and has not been annualized.
f Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratios for the periods would be:

      09/30/14   09/30/13   09/30/12  
 
  A-Class   1.27%   1.29%   1.27%  
  C-Class   2.01%   2.02%   2.01%  
  Institutional Class   0.94%   0.96%   0.95%  

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  87

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders

Guggenheim Investments Municipal Income Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director; and James E. Pass, Senior Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the annual fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the “Period”), the Guggenheim Municipal Income Fund (the “Fund”) returned 11.20%1, compared with the 7.93% return of the Barclays Municipal Bond Index, the Fund’s Benchmark. The return for the Barclays Municipal Long Bond Index, the previous benchmark, was 12.88%.

At the beginning of the Period, the municipal market had just emerged from a rough few months, as fears about rising interest rates, the end of quantitative easing and headlines about some troubled issuers contributed to tens of billions of dollars in mutual fund outflows and significant underperformance of the municipal market. That trend began to reverse in the fourth quarter of 2013, and carried through for the next 12 months, when the municipal sector was one of the best returning sectors in the fixed income market.

Despite some pockets of volatility, municipal bonds have generally benefited from the benign interest rate environment over the past 12 months and the slowly improving U.S. economy. Outperformance of the municipal market compared with other sectors of the fixed income market has led to some relatively richer valuations and strong mutual fund flows.

Municipals have rallied over the Period in response to the continuing positive credit picture of state and local governments, when viewed on the basis of tax receipts, unemployment and debt burdens. The pace of municipal bond redemptions also slowed to more historic levels, and municipal bonds’ attractive relative value helped renew demand.

The rise in municipal bond prices was helped by depressed supply of new bonds and increased redemptions of maturing bonds. New issuance through the third quarter of 2014 was about 10% below the same period last year, and the entire year’s supply could amount to only about $300 million—among the lowest totals of past few years. The trend in issuance is unlikely to reverse any time soon, given that many state and local governments have already taken advantage of the extended low interest rate environment to refinance existing debt, and the in the meantime have imposed austerity in new projects.

Demand is reflected by continued strong flows into tax-exempt mutual funds and ETFs, which exceeded $13 billion in 2014 through September. The high-yield sector and intermediate sector have been the main catalysts, as investors seek incremental yield or better relative value.

Negative headlines related to Puerto Rico, Detroit and some other issuers remain a concern, but the market seems to view these situations as isolated. The improving economy has been beneficial to the finances of most issuers. Default risk remains in the background for now, having declined steadily since peaking in 2009.

Helping Fund performance for the Period was renewed investor interest in credits believed to have been unfairly devalued in the mid-2013 bond market selloff. The Fund took advantage of opportunities during the last 12 months to add to its bonds in the A-rated category and bonds in the 10-15 year range, where the municipal/Treasury ratio periodically indicated attractive relative value. The overriding goal is to generate current income without increasing the risk profile of the Fund.

The Fund holds mostly revenue bonds, typically issued by utilities, transportation agencies, and health care providers, with the rest general obligation issues, which are issued by state and local governments. From a sector perspective, utility bonds are the Fund’s largest allocation, including power, water and sewer services, and transportation. School districts compose the second-largest sector. Michigan and California are the most heavily represented states in the Fund, accounting for about half of holdings.

The Fund benefited from rising prices of bonds backed by essential services, such as utilities, which represent secured claims backed by dedicated revenue streams, and certain story bonds, where the Fund has familiarity with the issuer and the situation behind the bonds in the search for value among distressed credits. The Fund opportunistically added some City of Detroit essential service bonds during the Period, which are secured by dedicated revenue streams and wrapped by an investment grade rated mono-line insurer.

 
88  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded)   September 30, 2014
 

The Commonwealth of Puerto Rico introduced the Puerto Rico Public Corporation Debt Enforcement and Recovery Act earlier in 2014, which was perceived as negative for certain Puerto Rico revenue bond issuers. The intent of the legislation was to provide certain revenue bond issuers the ability to restructure their debt. The island’s general obligation bonds and sales-tax backed issues were excluded from the Act. The passage of this Act led the rating agencies to downgrade many Puerto Rican issuers, resulting in significant decreases in market value and a widening of their credits spreads. However, it also presented an opportunity to purchase Puerto Rico bonds that met the Fund’s relative value investment criteria at attractive prices, which we did on a selective basis.

Despite the outperformance for the Period, the team believes that current relative value opportunities continue to be limited, as technical conditions, such as modest supply and strong demand, have been enhanced by the improving national economy. This has supported the Fund’s focus on issues with coupons of 5% or greater.

The team’s outlook remains positive, although it looks to take profits when appropriate to be ready for a time when short term rates move up more sharply than long-term rates, a bear flattener scenario which could negatively affect sector performance.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  89

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

MUNICIPAL INCOME FUND

OBJECTIVE:  Seeks to provide current income with an emphasis on income exempt from federal income tax, while also considering capital appreciation.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
    % of
Rating   Total Investments
 
Fixed Income Instruments    

AA

   60.4%

A

   21.1%

BBB

   11.7%

BB

   2.0%
Other Instruments    

Short Term Investments

   4.8%
 
Total Investments   100.0%
 

The chart above reflects percentages of the value of total investments.

Inception Dates:      
 
A-Class     April 28, 2004
C-Class     January 13, 2012
Institutional Class     January 13, 2012
       
Ten Largest Holdings (% of Total Net Assets)      
 
North Texas Tollway Authority Revenue Bonds     5.5%
City of Detroit Michigan Water      

Supply System Revenue Revenue Bonds

     5.1%
City of New York New York General      

Obligation Unlimited

     3.9%
City of Detroit Michigan General      

Obligation Unlimited

     3.9%
Michigan Finance Authority Revenue Bonds     3.8%
Tustin Unified School District General      

Obligation Unlimited

     3.7%
Arizona Health Facilities Authority      

Revenue Bonds

     3.4%
Hudson County Improvement      

Authority Revenue Bonds

     3.3%
Regents of the University of      

California Medical Center Pooled

      

Revenue Revenue Bonds

     3.2%
Guam Government Waterworks Authority      

Revenue Bonds

     2.6%
 
Top Ten Total     38.4%
 

“Ten Largest Holdings" exclude any temporary cash or derivative investments.

* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
90  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*,**

Average Annual Returns*,**        
Periods Ended September 30, 2014        
    1 Year   5 Year   10 Year
 
A-Class Shares§   11.20 %   7.65 %   4.62 %
 
A-Class Shares with sales charge†   5.90 %   6.60 %   4.11 %
 
Barclays Municipal Long Bond Index   12.88 %   5.98 %   5.43 %
 
Barclays Municipal Bond Index   7.93 %   4.67 %   4.72 %
 

    1 Year   Since Inception
(01/13/12)
 
C-Class Shares   10.28 %   4.03%  
 
C-Class Shares with CDSC‡   9.28 %   4.03%  
 
Institutional Class Shares   11.38 %   5.05%  
 
Barclays Municipal Long Bond Index   12.88 %   5.17%  
 
Barclays Municipal Bond Index   7.93 %   3.62%  
 

*   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 Municipal Long Bond Index and the Barclays Municipal Bond Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns.
**   Effective May 19, 2014, the Fund’s benchmark index changed to the Barclays Municipal Bond Index from the Barclays Municipal Long Bond Index. The benchmark index was changed in order to better represent the Fund’s investment strategies for comparison purposes. It also allows for greater investment flexibility, including the ability to shorten or extend the Fund’s average maturity and duration should conditions warrant, without greatly deviating from its benchmark.
†   Fund returns are calculated using the maximum sales charge of 4.75%.
‡   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
§   Effective January 13, 2012, the Fund acquired all of the assets and liabilities of the TS&W/Claymore Tax-Advantage Balanced Fund (“TYW”), a registered closed-end management investment company. The A-Class performance prior to that date reflects performance of TYW.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT   |  91

SCHEDULE OF INVESTMENTS   September 30, 2014
 MUNICIPAL INCOME FUND    
               
      SHARES     VALUE  
 
               
SHORT TERM INVESTMENTS†- 4.7%              

Fidelity Institutional Tax-Exempt Portfolio

     2,443,260   $ 2,443,260  
             
Total Short Term Investments              

(Cost $2,443,260)

           2,443,260  
             
               
      FACE        
      AMOUNT        
             
MUNICIPAL BONDS†† - 93.5%              
               
MICHIGAN - 27.5%              

Michigan Finance Authority Revenue Bonds

              

5.00% due 07/01/31

   $ 1,800,000     1,973,016  

5.00% due 07/01/32

     1,200,000     1,310,232  

5.00% due 07/01/44

     1,200,000     1,252,768  

5.00% due 07/01/33

     400,000     435,048  

5.00% due 07/01/34

     300,000     320,760  

City of Detroit Michigan Water Supply

              

System Revenue Revenue Bonds

              

5.00% due 07/01/33

     2,530,000     2,617,654  

5.00% due 07/01/30

     300,000     300,240  

4.75% due 07/01/29

     230,000     242,836  

5.00% due 07/01/41

     200,000     208,712  

5.00% due 07/01/34

     155,000     156,843  

4.25% due 07/01/16

     125,000     132,085  

City of Detroit Michigan General

              

Obligation Unlimited

              

3.50% due 10/07/161

     2,000,000     1,997,580  

Detroit City School District General

              

Obligation Unlimited

              

5.00% due 05/01/32

     1,000,000     1,072,960  

5.00% due 05/01/30

     300,000     325,377  

Detroit Wayne County Stadium

              

Authority Revenue Bonds

              

5.00% due 10/01/26

     1,100,000     1,191,729  

City of Detroit Michigan Sewage Disposal

              

System Revenue Revenue Bonds

              

5.00% due 07/01/15

     500,000     516,805  

5.00% due 07/01/24

     155,000     155,124  
             
Total Michigan           14,209,769  
             
               
CALIFORNIA - 18.8%              

Tustin Unified School District General

              

Obligation Unlimited

              

6.00% due 08/01/36

     1,600,000     1,913,168  

Oakland Unified School District/Alameda

              

County General Obligation Unlimited

              

5.50% due 08/01/322

     1,200,000     1,338,792  

5.00% due 08/01/222

     300,000     335,703  

Regents of the University of California Medical

              

Center Pooled Revenue Revenue Bonds

              

0.90% due 05/15/431

     2,000,000     1,636,160  

Stockton Public Financing Authority

              

Revenue Bonds

              

6.25% due 10/01/38

     1,000,000     1,175,320  

6.25% due 10/01/40

     250,000     293,415  

Stockton Unified School District

              

General Obligation Unlimited

              

5.00% due 07/01/282

     500,000     570,550  

5.00% due 01/01/292

     200,000     227,180  

Southwestern Community College District

              

General Obligation Unlimited

              

0.00% due 08/01/413

     2,380,000     623,060  

Los Angeles County Regional Financing

              

Authority Revenue Bonds

              

5.00% due 11/15/44

     500,000     544,135  

Inland Valley Development Agency

              

Tax Allocation

              

5.00% due 09/01/44

     500,000     541,355  

Santa Barbara Secondary High School

              

District General Obligation Unlimited

              

0.00% due 08/01/403

     1,060,000     332,999  

Culver Redevelopment Agency

              

Tax Allocation

              

0.00% due 11/01/233

     195,000     135,681  
             
Total California           9,667,518  
             
               
TEXAS - 8.0%              

North Texas Tollway Authority

              

Revenue Bonds

              

5.75% due 01/01/40

     2,500,000     2,824,949  

0.83% due 01/01/501

     1,000,000     999,980  

New Hope Cultural Education

              

Facilities Corp. Revenue Bonds

              

5.00% due 04/01/46

     250,000     269,590  
             
Total Texas           4,094,519  
             
               
ILLINOIS - 7.4%              

Will County Township High School

              

District No. 204 Joliet General

              

Obligation Limited

              

6.25% due 01/01/31

     1,000,000     1,184,790  

Southern Illinois University

              

Revenue Bonds

              

5.00% due 04/01/32

     1,000,000     1,097,320  

Chicago Park District General

              

Obligation Limited

              

5.00% due 01/01/36

     1,000,000     1,083,960  

University of Illinois Revenue Bonds

              

6.00% due 10/01/29

     200,000     235,452  

City of Chicago Illinois General

              

Obligation Unlimited

              

5.00% due 01/01/24

     100,000     100,730  

5.00% due 01/01/23

     70,000     74,619  

5.00% due 01/01/22

     55,000     56,960  
             
Total Illinois           3,833,831  
             
               
NEW JERSEY - 5.2%              

Hudson County Improvement Authority

              

Revenue Bonds

              

6.00% due 01/01/40

     1,500,000     1,720,245  

New Jersey State Turnpike Authority

              

Revenue Bonds

              

0.67% due 01/01/241

     1,000,000     1,001,010  
             
Total New Jersey           2,721,255  
             
               
NEW YORK - 4.9%              

City of New York New York General

              

Obligation Unlimited

              

0.02% due 08/01/201

     2,000,000     2,000,000  

 
92 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 MUNICIPAL INCOME FUND    

      FACE        
      AMOUNT     VALUE  
 

Metropolitan Transportation Authority

              

Revenue Bonds

              

0.71% due 11/01/321

   $ 500,000   $ 501,365  
             
Total New York           2,501,365  
             
               
ARIZONA - 3.4%              

Arizona Health Facilities Authority

              

Revenue Bonds

              

0.97% due 01/01/371

     2,000,000     1,773,640  
             
GUAM - 2.6%              

Guam Government Waterworks

              

Authority Revenue Bonds

              

5.00% due 07/01/35

     1,250,000     1,357,413  
             
MASSACHUSETTS - 2.3%              

Massachusetts Development Finance

              

Agency Revenue Bonds

              

6.88% due 01/01/41

     1,000,000     1,182,450  
             
WEST VIRGINIA - 2.2%              

West Virginia Higher Education Policy

              

Commission Revenue Bonds

              

5.00% due 04/01/29

     1,000,000     1,144,310  
             
WASHINGTON - 2.0%              

Greater Wenatchee Regional Events

              

Center Public Facilities Dist

              

Revenue Bonds

              

5.00% due 09/01/272

     500,000     527,385  

5.25% due 09/01/322

     500,000     518,660  
             
Total Washington           1,046,045  
             
               
PENNSYLVANIA - 2.0%              

Pennsylvania Turnpike Commission

              

Revenue Bonds

              

1.30% due 12/01/201

     500,000     512,320  

1.01% due 12/01/211

     500,000     501,650  
             
Total Pennsylvania           1,013,970  
             
               
IOWA - 1.9%              

Iowa Finance Authority Revenue Bonds

              

0.02% due 02/15/351

     1,000,000     1,000,000  
             
PUERTO RICO - 1.9%              

Puerto Rico Electric Power Authority

              

Revenue Bonds

              

5.00% due 07/01/23

     200,000     202,032  

5.00% due 07/01/24

     190,000     191,199  

Puerto Rico Municipal Finance Agency

              

General Obligation Unlimited

              

5.00% due 08/01/27

     350,000     335,878  

Commonwealth of Puerto Rico General

              

Obligation Unlimited

              

5.13% due 07/01/30

     200,000     199,982  
             
Total Puerto Rico           929,091  
             
               
MISSISSIPPI - 1.6%              

Mississippi Development Bank Revenue Bonds

              

6.50% due 10/01/31

     500,000     572,735  

6.25% due 10/01/26

     230,000     265,356  
             
Total Mississippi           838,091  
             
               
INDIANA - 1.0%              

County of Knox Indiana Revenue Bonds

              

5.00% due 04/01/27

     470,000     508,592  
             
FLORIDA - 0.4%              

Miami-Dade County Health Facilities

              

Authority Revenue Bonds

              

5.00% due 08/01/24

     200,000     230,488  
             
KENTUCKY - 0.4%              

City of Owensboro Kentucky Electric

              

Light & Power System Revenue

              

Revenue Bonds

              

5.00% due 01/01/26

     200,000     217,876  
             
Total Municipal Bonds              

(Cost $46,053,071)

           48,270,223  
             
Total Investments - 98.2%              

(Cost $48,496,331)

         $ 50,713,483  
             
Other Assets & Liabilities, net - 1.8%           908,881  
             
Total Net Assets - 100.0%         $ 51,622,364  
             

†   Value determined based on Level 1 inputs — See Note 4.
††   Value determined based on Level 2 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Illiquid security.
3   Zero coupon rate security.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 93

 MUNICIPAL INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $48,496,331)

   $ 50,713,483  
Prepaid expenses     18,751  
Cash     12  
Receivables:        

Fund shares sold

     592,000  

Interest

     461,489  

Investment adviser

     5,803  
       
Total assets     51,791,538  
       
         
LIABILITIES        
Payable for:        

Distributions to shareholders

     52,277  

Fund shares redeemed

     41,657  

Direct shareholders expense

     28,037  

Distribution and service fees

     9,841  

Fund accounting/administration fees

     4,043  

Trustees’ fees*

     4,015  

Transfer agent/maintenance fees

     2,435  

Miscellaneous

     26,869  
       
Total liabilities     169,174  
       
NET ASSETS   $ 51,622,364  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 77,814,238  
Undistributed net investment income     —  
Accumulated net realized loss on investments     (28,409,026 )
Net unrealized appreciation on investments     2,217,152  
       
Net assets   $ 51,622,364  
       
A-CLASS:        
Net assets   $ 44,090,048  
Capital shares outstanding     3,525,454  
Net asset value per share     $12.51  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $13.13  
       
C-CLASS:        
Net assets   $ 1,081,594  
Capital shares outstanding     86,523  
Net asset value per share     $12.50  
       
INSTITUTIONAL CLASS:        
Net assets   $ 6,450,722  
Capital shares outstanding     515,569  
Net asset value per share     $12.51  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Interest   $ 2,068,421  
       

Total investment income

     2,068,421  
       
         
EXPENSES:        
Management fees     270,177  
Transfer agent/maintenance fees:        

A-Class

     61,200  

C-Class

     1,643  

Institutional Class

     4,456  
Distribution and service fees:        

A-Class

     115,805  

C-Class

     9,240  
Fund accounting/administration fees     51,333  
Registration fees     50,665  
Trustees’ fees*     8,432  
Line of credit expense     5,569  
Custodian fees     4,211  
Tax expense     1  
Miscellaneous     97,808  
       

Total expenses

     680,540  
Less:        
Expenses waived by Adviser     (242,274 )
       
Net expenses     438,266  
       
Net investment income     1,630,155  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     597,388  
       
Net realized gain     597,388  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     3,446,106  
       
Net change in unrealized appreciation (depreciation)     3,446,106  
       
Net realized and unrealized gain     4,043,494  
       
Net increase in net assets resulting        

from operations

   $ 5,673,649  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.


 
94  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

.


 MUNICIPAL INCOME FUND

STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 1,630,155     $ 2,227,579  
Net realized gain on investments     597,388       745,503  
Net change in unrealized appreciation (depreciation) on investments     3,446,106       (6,505,597 )
 
Net increase (decrease) in net assets resulting from operations     5,673,649       (3,532,515 )
 
 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (1,390,241 )     (2,041,962 )

C-Class

     (20,717 )     (48,584 )

Institutional Class

     (219,197 )     (137,034 )
 
Total distributions to shareholders     (1,630,155 )     (2,227,580 )
 
 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     7,402,924       4,925,340  

C-Class

     333,716       1,778,562  

Institutional Class

     5,038,833       7,258,077  
Distributions reinvested                

A-Class

     803,386       1,250,808  

C-Class

     13,179       38,482  

Institutional Class

     101,486       50,050  
Cost of shares redeemed                

A-Class

     (18,029,547 )     (28,310,051 )

C-Class

     (826,566 )     (1,263,296 )

Institutional Class

     (5,559,429 )     (1,502,777 )
 
Net decrease from capital share transactions     (10,722,018 )     (15,774,805 )
 
Net decrease in net assets     (6,678,524 )     (21,534,900 )
 
NET ASSETS:                

Beginning of year

     58,300,888       79,835,788  
 

End of year

   $ 51,622,364     $ 58,300,888  
 
Undistributed net investment income at end of year   $ —     $ —  
 
 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     621,507       388,242  

C-Class

     27,623       139,985  

Institutional Class

     423,863       582,166  
Shares issued from reinvestment of distributions                

A-Class

     67,225       101,493  

C-Class

     1,099       3,135  

Institutional Class

     8,465       4,176  
Shares redeemed                

A-Class

     (1,515,958 )     (2,302,372 )

C-Class

     (71,141 )     (107,647 )

Institutional Class

     (463,637 )     (122,904 )
 
Net decrease in shares     (900,954 )     (1,313,726 )
 

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT | 95

 MUNICIPAL INCOME FUND

FINANCIAL HIGHLIGHTS                                                
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
 
      Year Ended       Year Ended       Period Ended       Year Ended       Year Ended       Year Ended  
      September 30,       September 30,       September 30,       December 31,       December 31,       December 31,  
A-Class†     2014       2013       2012*       2011       2010       2009  
 
Per Share Data                                                
Net asset value, beginning of period     $11.59       $12.59     $ $11.82       $11.54       $11.01       $8.47  
 

Income (loss) from investment operations:

                                                

Net investment income (loss)a

     .36       .38       .26       .64       .71       .75  

Distributions to preferred shareholders from:

                                                

Net investment income

     —       —       (.01 )     (.10 )     (.10 )     (.11 )

Net gain (loss) on investments (realized and unrealized)

     .92       (1.00 )     .78       .54       .68       2.69  
     

Total from investment operations

     1.28       (.62 )     1.03       1.08       1.29       3.33  
     
                                                 
 

Less distributions from:

                                                

Net investment income

     (.36 )     (.38 )     (.26 )     (.80 )     (.76 )     (.79 )
     

Total distributions

     (.36 )     (.38 )     (.26 )     (.80 )     (.76 )     (.79 )
 

Net asset value, end of period

     $12.51       $11.59       $12.59       $11.82       $11.54       $11.01  
     
                                                 
 
Total Returnd     11.20 %     (5.09 %)     8.91 %     9.64 %     12.03 %     41.34 %
 

Ratios/Supplemental Data

                                                

Net assets, end of period (in thousands)

     $44,090       $50,463       $77,609       $182,150       $177,868       $169,674  
 

Ratios to average net assets:

                                                

Net investment income (loss)

     3.00 %     3.04 %     2.78 %     4.60 %     5.37 %     6.73 %

Total expenses

     1.29 %     1.14 %     1.15 %     2.09 %     1.80 %     1.94 %

Net expensesb,e

     0.83 %     0.82 %     0.87 %     2.09 %     1.80 %     1.94 %
 

Portfolio turnover rate

     173 %     91 %     121 %     104 %     156 %     151 %

      Year Ended       Year Ended       Period Ended  
      September 30,       September 30,       September 30,  
C-Class     2014       2013       2012c  
 
Per Share Data                        

Net asset value, beginning of period

     $11.59       $12.58       $11.98  
 

Income (loss) from investment operations:

                        

Net investment income (loss)a

     .27       .28       .20  

Net gain (loss) on investments (realized and unrealized)

     .91       (.98 )     .62  
     

Total from investment operations

     1.18       (.70 )     .82  
 

Less distributions from:

                        

Net investment income

     (.27 )     (.29 )     (.22 )
     

Total distributions

     (.27 )     (.29 )     (.22 )
 

Net asset value, end of period

     $12.50       $11.59       $12.58  
     
                         
 

Total Returnd

     10.28 %     (5.70 %)     7.04 %
 

Ratios/Supplemental Data

                        

Net assets, end of period (in thousands)

     $1,082       $1,495       $1,176  
 

Ratios to average net assets:

                        

Net investment income (loss)

     2.24 %     2.30 %     2.36 %

Total expenses

     2.08 %     1.93 %     1.94 %

Net expensesb,e

     1.58 %     1.57 %     1.55 %
 

Portfolio turnover rate

     173 %     91 %     121 %


 
96  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

 MUNICIPAL INCOME FUND

FINANCIAL HIGHLIGHTS (concluded)
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended       Year Ended       Period Ended  
      September 30,       September 30,       September 30,  
Institutional Class     2014       2013       2012 c  
 
Per Share Data                        
Net asset value, beginning of period     $11.60       $12.59       $11.98  
 
Income (loss) from investment operations:                        
Net investment income (loss)a     .39       .40       .29  
Net gain (loss) on investments (realized and unrealized)     .91       (.98 )     62  
     
Total from investment operations     1.30       (.58 )     91  
 
Less distributions from:                        
Net investment income     (.39 )     (.41 )     (.30 )
     
Total distributions     (.39 )     (.41 )     (.30 )
 
Net asset value, end of period     $12.51       $11.60       $12.59  
     
 
Total Return4     11.38 %     (4.76 %)     7.76 %
 
Ratios/Supplemental Data                        
Net assets, end of period (in thousands)     $6,451       $6,343       $1,051  
 
Ratios to average net assets:                        
Net investment income (loss)     3.23 %     3.35 %     3.37 %
Total expenses     0.97 %     0.93 %     0.86 %
Net expensesb,e     0.97 %     0.93 %     0.86 %
 
Portfolio turnover rate     173 %     91 %     121 %

†   Effective January 13, 2012, the Fund acquired all of the assets and liabilities of the TS&W/Claymore Tax-Advantage Balanced Fund (“TYW”), a registered closed-end management investment company. The A-Class financial highlights for the periods prior to that date reflect performance of TYW.
*   Prior to January 13, 2012, the Fund’s fiscal year end was December 31. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
a   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b   Net expense information reflects the expense ratios after expense waivers.
c   Since commencement of operations: January 13, 2012. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
d   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
e   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratio for the year would be:

    09/30/14  
 
A-Class   0.80 %
C-Class   1.54 %
Institutional Class   0.55 %

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT | 97

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders

Guggenheim Total Return Bond Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Anne B. Walsh, Senior Managing Director; Jeffrey B. Abrams, Senior Managing Director and Portfolio Manager; and James W. Michal, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and the Fund’s performance for the fiscal year ended September 30, 2014.

For the one-year period ended September 30, 2014 (the “Period”), the Guggenheim Total Return Bond Fund returned 8.34%1, compared with the 3.96% return of its benchmark, the Barclays U.S. Aggregate Bond Index.

The Fund seeks to provide total return, comprised of current income and capital appreciation. The Fund pursues its investment objective by investing at least 80% of its assets in debt securities. The Fund may hold fixed income securities of any quality, rated or unrated, including those that are rated below investment grade, or if unrated, determined to be of comparable quality (also known as “high yield securities” or “junk bonds”). However, the Fund may not invest more than 33 1/3% of its assets in fixed-income securities that are below investment grade. The Fund may hold securities of any duration or maturity.

As the Period began, monetary accommodation by the Fed was propelling asset prices higher, while positive economic momentum was pushing interest rates higher. By the end of December 2013, the 10-year U.S. Treasury yield reached its highest point over the prior 2½ years at 3%, a level that was not revisited for the remainder of the Period.

Credit-spread and risk assets continued to find investor favor through 2014, even though severe winter weather produced volatility and mixed economic data. Additional liquidity from central banks outside the U.S. supported foreign capital flows into U.S. assets, which, along with the search for yield among U.S. investors, was positive for fixed income. But just as the market appeared to be growing complacent in the third quarter of 2014, leveraged credit had its first correction in a year, as mutual fund investors withdrew from the sector amid concerns about frothy valuations and talk of credit bubble. Volatility spread across risk assets, including equities.

The events that drove spread widening in the third quarter showed that investors are becoming increasingly reactive to factors outside of the fundamentals that underscore a generally positive outlook on credit. Even though U.S. economic data was mixed in September, it was strong year to date, and the improving health of the U.S. economy and low interest rates underscored our expectation that spreads can compress further. Volatility is likely to continue, but as the economy improves, brief periods of spread widening could present buying opportunities.

The Fund mainly invests asset-backed securities (ABS), investment grade corporate bonds and non-agency residential mortgage-backed securities (RMBS). It has positions in high yield corporate bonds, municipal bonds, bank loans, preferred securities, among other holdings.

Investment grade corporate bonds weathered interest rate volatility in the fourth quarter of 2013, but low dealer inventory and heavy demand for most of the Period supported continued spread compression. The Barclays U.S. Corporate Investment Grade Index rose by 6.77% for the Period. The credit spread on investment grade corporate bonds tightened by 29 basis points, and yields declined to 3.10% at the end of September 2014. Volatility in the third quarter also impacted issuance, but it still reached $647 billion through the three quarters of 2014.

High yield corporate bonds and bank loans posted their fifth consecutive year of positive returns in 2013 and strong performance continued through the first half of 2014. As upside potential declined in the leveraged credit space, the Fund rotated into higher quality credits. With the onset of a leveraged credit sell-off in the third quarter, the Fund was able to add exposure back to many of the names it had sold several months before.

 
98  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


MANAGERS’ COMMENTARY (Unaudited) (concluded)   September 30, 2014
 

The ABS and non-agency RMBS sectors contributed positively for the Period. The BofA/ML ABS Master BBB-AA Index gained 3.36% for the 12-month period as its spread tightened 48 basis points to 133 basis points. Credit performance across the commercial ABS and collateralized loan obligation (CLO) sectors remained strong given benign credit conditions and improving collateral valuations across the U.S. economy. 2014 issuance is well ahead of 2013’s pace and likely to break 2012’s post-crisis peak. New ABS issuance was diversified across all classes, with auto and credit card new issues remaining strong. Consumer ABS performance has been solid despite concern surrounding student loans and subprime auto lending. JPMorgan Research indicates the gradual improvement in the household balance sheet will continue to support credit performance of Consumer ABS. Year-to-date ABS issuance has now surpassed $94 billion, the all time annual record set in 2007. Housing activity has been uneven, as price appreciation has been slowing and sales remain below the post-crisis peak in 2013. With the economic outlook mostly positive and central banks maintaining accommodation, the backdrop for ABS and RMBS remains constructive. Amidst these positive fundamentals, the CLO market raised $93 billion through three quarters of 2014, already exceeding 2013’s full-year volume.

Much of the Fund’s outperformance stemmed from credit spread compression and the gradual decline in the benchmark 10-year U.S. Treasury yield. Positive returns have largely been driven by the Fund’s investments in asset backed securities as spreads continued to normalize across various subsectors including collateralized loan obligations, commercial real estate collateralized debt obligations (CDOs), and aircraft lease securitizations. Detractors from Fund performance included a few higher-duration assets such as fixed-rate corporate bonds and preferred debt in late 2013 when rates were rising.

The Fund maintains low interest rate duration, particularly at the front end of the yield curve, and thus has largely avoided losses due to a flattening curve. Concentration of the Fund’s credit investments in relatively short-maturity high yield bonds and loans has muted the impact of recent turmoil of risk assets, and the Fund continues to use periods of weakness in those sectors to add attractive assets.








Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  99

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

TOTAL RETURN BOND FUND

OBJECTIVE:   Seeks to provide total return, comprised of current income and capital appreciation.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating*
 
  % of
Rating Total Investments
 
Fixed Income Instruments  

AAA

 3.2%

AA

 16.9%

A

 18.3%

BBB

 30.1%

BB

 8.2%

B

 6.9%

CCC

 9.4%

Other

 2.4%
Other Instruments  

Short Term Investments

 2.2%

Preferred Stocks

 1.9%

Mutual Funds

 0.5%
 
Total Investments 100.0%
 

The chart above reflects percentages of the value of total investments.

Inception Dates:  
 
A-Class November 30, 2011
C-Class November 30, 2011
Institutional Class November 30, 2011

Ten Largest Holdings (% of Total Net Assets)
 
State of Illinois General Obligation Unlimited 1.4%
Luminent Mortgage Trust 2006-2 — Class A1A 1.3%
LSTAR Securities Investment Trust 2014-1 1.1%
ACAs CLO Ltd. — Class BR 1.0%
City of Detroit Michigan General Obligation Unlimited 1.0%
American Home Mortgage Investment Trust 2006-1 — Class 12A1 1.0%
Yamana Gold, Inc. 1.0%
CKE Restaurant Holdings, Inc. — Class A2 1.0%
Bank of America Corp. 0.9%
Teachers Insurance & Annuity Association of America 0.9%
 
Top Ten Total 10.6%
 

“Ten Largest Holdings" exclude any temporary cash or derivative investments.




* Source: Factset. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All rated 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.

 
100   |   THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*
Periods Ended September 30, 2014

          Since Inception
    1 Year   (11/30/11)
 
A-Class Shares   8.34 %   7.61 %
 
A-Class Shares with sales charge†   3.21 %   5.78 %
 
C-Class Shares   7.58 %   6.83 %
 
C-Class Shares with CDSC‡   6.58 %   6.83 %
 
Institutional Class Shares   8.74 %   7.99 %
 
Barclays U.S. Aggregate Bond Index   3.96 %   2.57 %
 






* 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. Aggregate Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Fund returns are calculated using the maximum sales charge of 4.75%.
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  101

SCHEDULE OF INVESTMENTS   September 30, 2014
 
TOTAL RETURN BOND FUND    

      SHARES     VALUE  
 
               
PREFERRED STOCKS†† - 2.0%              

Aspen Insurance Holdings Ltd.

              

5.95%†,1,2

     94,000   $ 2,347,180  

Morgan Stanley

              

6.38%*,†,1,2

     48,000     1,203,360  

7.13%†,1,2

     16,000     430,560  

Goldman Sachs Group, Inc.

              

5.50%†,1,2

     52,100     1,237,375  

Seaspan Corp.

              

6.38% due 04/30/19†

     44,000     1,125,960  

Wells Fargo & Co.

              

5.85%†,1,2

     30,000     768,900  

AgriBank FCB

              

6.88%†,1,2

     2,500     267,031  

City National Corp.

              

6.75%†,1,2

     8,000     222,800  

GSC Partners CDO Fund Limited /

              

GSC Partners CDO Fund Corp.

              

due 11/20/16*,1,3,10

     1,325     7,738  

WhiteHorse II Ltd.

              

due 06/15/17*,1,3,10

     450,000     4,500  
             
Total Preferred Stocks              

(Cost $7,500,570)

           7,615,404  
             
MUTUAL FUNDS† - 0.5%              

Guggenheim Limited Duration Fund -

              

Institutional Class4

     82,519     2,059,674  
             
Total Mutual Funds              

(Cost $2,065,364)

           2,059,674  
             
SHORT TERM INVESTMENTS† - 2.3%              

Federated U.S. Treasury Cash Reserve Fund

     8,786,526     8,786,526  
             
Total Short Term Investments              

(Cost $8,786,526)

           8,786,526  
             
               
      FACE        
      AMOUNT        
             
ASSET BACKED SECURITIES†† - 41.5%              

ACAs CLO Ltd. 2014-1AR

              

2.55% due 09/20/231,3

   $ 4,000,000     4,003,201  

MWAM CBO 2001-1 Ltd.

              

3.08% due 01/30/311,3

     2,116,982     1,969,640  

14.09% due 01/30/313

     1,630,728     1,773,091  

CKE Restaurant Holdings, Inc.2013-1A

              

4.47% due 03/20/433

     3,660,738     3,694,673  

Rockwall CDO II Ltd. 2007-1A

              

0.79% due 08/01/241,3

     2,100,000     1,872,150  

0.49% due 08/01/241,3

     1,740,241     1,665,584  

Cent CLO 16, LP 2014-16AR

              

2.74% due 08/01/241,3

     1,750,000     1,745,800  

3.74% due 08/01/241,3

     1,750,000     1,741,250  

Madison Park Funding VIII Ltd. 2014-8AR

              

3.03% due 04/22/221,3

     2,000,000     1,989,200  

2.43% due 04/22/221,3

     1,500,000     1,494,000  

Fortress Credit Opportunities V CLO Ltd.2014-5A

              

3.78% due 10/15/261,3

     1,750,000     1,716,400  

2.88% due 10/15/261,3

     1,500,000     1,484,250  

CIFC Funding 2007-I Ltd.

              

1.73% due 05/10/211,3

     3,250,000     3,091,400  

Copper River CLO Ltd. 2007-1A

              

due 01/20/211,3,10

     1,500,000     1,645,500  

0.63% due 01/20/211,3

     1,000,000     960,300  

1.03% due 01/20/211,3

     500,000     468,350  

GSAA Trust 2005-10

              

0.80% due 06/25/351

     3,312,000     3,062,119  

Rockwall CDO Ltd. 2006-1A

              

0.74% due 08/01/211,3

     2,900,000     2,761,960  

0.89% due 08/01/211,3

     200,000     184,100  

KKR Financial CLO 2007-1 Ltd.

              

2.48% due 05/15/211,3

     2,900,000     2,843,740  

RAIT CRE CDO I Ltd. 2006-1X

              

0.48% due 11/20/46

     3,125,362     2,808,450  

Castlelake Aircraft Securitization Trust 2014-1

              

5.25% due 02/15/29

     2,230,525     2,239,001  

7.50% due 02/15/29

     446,105     446,640  

N-Star Real Estate CDO IX Ltd.

              

0.47% due 02/01/417

     2,663,736     2,555,322  

Emerald Aviation Finance Ltd. 2013-1

              

4.65% due 10/15/383

     1,979,687     2,004,434  

6.35% due 10/15/383,5

     424,219     430,794  

CIT Mortgage Loan Trust 2007-1

              

1.60% due 10/25/371,3

     2,600,000     2,415,522  

CCR Incorporated MT100 Payment

              

Rights Master Trust 2010-CX

              

0.60% due 07/10/17†††,1

     1,383,713     1,346,629  

4.75% due 07/10/223

     950,000     934,453  

St. James River CLO Ltd. 2007-1A

              

2.53% due 06/11/211,3

     2,250,000     2,175,075  

Great Lakes CLO 2012-1 Ltd.

              

4.33% due 01/15/231,3

     1,250,000     1,260,750  

due 01/15/233,10

     1,000,000     858,500  

Telos CLO Ltd. 2013-3A

              

3.23% due 01/17/241,3

     2,000,000     1,968,000  

ALM VII R Ltd. 2013-7RA

              

2.83% due 04/24/241,3

     2,000,000     1,958,400  

TICP CLO I Ltd. 2014-1A

              

3.23% due 04/26/261,3

     2,000,000     1,954,600  

Greywolf CLO III Ltd. 2014-1A

              

3.08% due 04/22/261,3

     2,000,000     1,954,200  

Duane Street CLO IV Ltd. 2007-4A

              

2.48% due 11/14/211,3

     2,000,000     1,934,400  

Newstar Trust 2012-2A

              

4.48% due 01/20/231,3

     1,000,000     1,000,000  

3.48% due 01/20/231,3

     750,000     751,650  

Westchester CLO Ltd. 2007-1A

              

0.68% due 08/01/221,3

     1,850,000     1,697,560  

Race Point V CLO Ltd. 2014-5AR

              

3.08% due 12/15/221,3

     1,100,000     1,095,160  

3.98% due 12/15/221,3

     500,000     498,850  

Gramercy Park CLO Ltd. 2014-1AR

              

3.18% due 07/17/231,3

     1,600,000     1,591,840  

NewStar Arlington Senior Loan Program LLC 2014-1A

              

4.76% due 07/25/253

     700,000     695,520  

2.83% due 07/25/251,3

     500,000     495,800  

3.53% due 07/25/251,3

     400,000     389,760  

Halcyon Loan Advisors Funding 2012-2 Ltd.

              

3.08% due 12/20/241,3

     1,000,000     976,200  

4.73% due 12/20/241,3

     600,000     602,280  

 
102 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
TOTAL RETURN BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

UCFC Manufactured Housing Contract 1997-2

              

7.38% due 10/15/28

   $ 1,440,325   $ 1,569,527  

Gramercy Real Estate CDO 2007-1 Ltd.

              

0.51% due 08/15/561,3

     1,738,049     1,531,743  

Steele Creek CLO 2014-1 Ltd.

              

2.48% due 08/21/261,3

     1,300,000     1,273,220  

3.43% due 08/21/261,3

     250,000     244,325  

ALM XIV Ltd. 2014-14A

              

3.18% due 07/28/261,3

     750,000     738,225  

2.33% due 07/28/261,3

     500,000     490,900  

3.68% due 07/28/261,3

     300,000     283,140  

Miramax LLC 2014-1A

              

3.34% due 07/20/263

     1,500,000     1,495,272  

ACA CLO 2007-1 Ltd.

              

1.18% due 06/15/221,3

     1,575,000     1,487,273  

MCF CLO I LLC 2013-1A

              

3.78% due 04/20/231,3

     1,500,000     1,483,950  

Octagon Investment Partners XIX Ltd. 2014-1A

              

3.08% due 04/15/261,3

     1,500,000     1,466,400  

Turbine Engines Securitization Ltd. 2013-1A

              

5.13% due 12/13/483

     1,446,824     1,461,293  

OCP CLO 2014-6 Ltd.

              

2.31% due 07/17/261,3

     1,500,000     1,460,400  

ING Investment Management CLO IV Ltd. 2007-4A

              

2.43% due 06/14/221,3

     1,500,000     1,428,000  

NYLIM Flatiron CLO 2006-1 Ltd.

              

1.70% due 08/08/201,3

     1,500,000     1,424,550  

ARES XXVI CLO Ltd. 2013-1A

              

due 04/15/253,10

     1,850,000     1,396,195  

Willis Engine Securitization Trust II 2012-A

              

5.50% due 09/15/373,6

     1,372,519     1,375,950  

Structured Asset Investment Loan Trust 2005-2

              

0.89% due 03/25/351

     1,373,500     1,267,055  

Structured Asset Securities Corporation

              

Mortgage Loan Trust 2006-OPT1

              

0.41% due 04/25/361

     1,400,000     1,260,293  

N-Star REL CDO VIII Ltd. 2006-8A

              

0.51% due 02/01/411,3

     1,400,000     1,259,300  

Dryden XXIII Senior Loan Fund 2014-23RA

              

3.18% due 07/17/231,3

     1,250,000     1,243,500  

COA Summit CLO Limited 2014-1

              

3.04% due 04/20/231,3

     1,250,000     1,240,125  

GSAA Home Equity Trust 2006-18

              

6.00% due 11/25/365

     1,749,770     1,237,450  

T2 Income Fund CLO Ltd. 2007-1A

              

1.73% due 07/15/191,3

     1,250,000     1,220,000  

Garanti Diversified Payment Rights

              

Finance Co. 2007-A

              

0.42% due 07/09/171

     1,248,000     1,209,062  

Venture XIV CLO Ltd. 2013-14A

              

2.99% due 08/28/251,3

     1,250,000     1,208,875  

Babson CLO Limited 2014-I

              

due 07/20/253,10

     1,300,000     1,183,260  

Marathon CLO II Ltd. 2005-2A

              

2.03% due 12/20/191,3

     1,000,000     983,800  

due 12/20/193,10

     250,000     130,800  

Drug Royalty II Limited Partnership 2 2014-1

              

3.08% due 07/15/231,3

     1,078,957     1,085,894  

Salus CLO 2012-1 Ltd.

              

5.73% due 03/05/211,3

     750,000     776,475  

3.98% due 03/05/211,3

     300,000     299,340  

Apidos CDO III Ltd. 2006-3A

              

1.98% due 06/12/201,3

     1,100,000     1,066,670  

Telos CLO 2007-2 Ltd.

              

2.43% due 04/15/221,3

     1,100,000     1,049,290  

Centerline REIT, Inc. 2004-RR3

              

4.76% due 09/21/451,3

     1,028,608     1,042,432  

Fortress Credit Opportunities III CLO, LP 2014-3A

              

2.73% due 04/28/261,3

     650,000     638,235  

3.48% due 04/28/261,3

     400,000     397,280  

Highland Park CDO I Ltd. 2006-1A

              

0.56% due 11/25/511,3

     1,058,424     1,009,313  

Global Leveraged Capital Credit Opportunity

              

Fund 2006-1A

              

1.23% due 12/20/181,3

     1,036,000     1,001,294  

Ares XXIII CLO Ltd. 2014-1AR

              

3.43% due 04/19/231,3

     1,000,000     1,000,000  

Gallatin CLO VII 2014-1 Ltd.

              

3.06% due 07/15/231,3

     1,000,000     994,800  

Ivy Hill Middle Market Credit Fund VII Ltd.2013-7A

              

3.68% due 10/20/251,3

     1,000,000     991,700  

Flagship CLO VI 2007-1A

              

2.63% due 06/10/211,3

     1,000,000     968,900  

San Gabriel CLO Ltd. 2007-1A

              

2.48% due 09/10/211,3

     1,000,000     954,200  

Lime Street CLO Corp. 2007-1A

              

2.73% due 06/20/211,3

     1,000,000     945,600  

WhiteHorse IV Ltd. 2007-4A

              

1.68% due 01/17/201,3

     1,000,000     939,200  

Churchill Financial Cayman Ltd. 2007-1A

              

2.83% due 07/10/191,3

     1,000,000     937,700  

Icon Brand Holdings LLC 2013-1A

              

4.35% due 01/25/433

     921,542     917,487  

Keuka Park CLO Limited 2013-1

              

due 10/21/243,10

     1,000,000     855,000  

Finn Square CLO Ltd. 2012-1A

              

due 12/24/233,10

     1,000,000     842,000  

Acis CLO 2013-1 Ltd.

              

3.18% due 04/18/241,3

     800,000     784,240  

Golub Capital Partners CLO 10 Ltd. 2014-10AR

              

3.18% due 10/20/211,3

     750,000     746,250  

CIFC Funding 2012-I Ltd.

              

3.31% due 08/14/241,3

     750,000     746,175  

ARES XII CLO Ltd. 2007-12A

              

3.48% due 11/25/201,3

     750,000     744,675  

Carlyle Global Market Strategies CLO 2012-2 Ltd.

              

4.13% due 07/20/231,3

     750,000     744,150  

Central Park CLO Ltd. 2011-1A

              

3.43% due 07/23/221,3

     750,000     739,650  

GSAMP Trust 2005-HE6

              

0.59% due 11/25/351

     800,000     736,602  

Venture X CLO Ltd. 2013-12A

              

3.09% due 02/28/241,3

     750,000     735,225  

Grayson CLO Ltd. 2006-1A

              

0.65% due 11/01/211,3

     750,000     695,025  

Newstar Commercial Loan Funding 2013-1 LLC

              

4.78% due 09/20/231,3

     700,000     687,330  

GreenPoint Mortgage Funding Trust 2005-HE4

              

0.86% due 07/25/301

     700,000     655,313  

Saxon Asset Securities Trust 2005-4

              

0.59% due 11/25/371

     750,000     647,891  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 103

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
TOTAL RETURN BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Black Diamond CLO 2012-1 Ltd.

              

3.49% due 02/01/231,3

   $ 650,000   $ 645,255  

West Coast Funding Ltd. 2006-1A

              

0.38% due 11/02/411,3

     648,469     636,472  

Lehman XS Trust 2007-9

              

0.27% due 06/25/371

     704,281     635,540  

Blade Engine Securitization Ltd. 2006-1A

              

1.15% due 09/15/411

     825,522     619,142  

Anchorage Capital CLO 4 Ltd. 2014-4A

              

2.44% due 07/28/261,3

     600,000     586,500  

Babcock & Brown Air Funding I Ltd. 2007-1A

              

0.45% due 11/14/331,3

     687,878     584,697  

GSAA Home Equity Trust 2007-7

              

0.42% due 07/25/371

     688,645     584,219  

Ares XXV CLO Ltd. 2013-3A

              

due 01/17/243,10

     750,000     573,750  

New Century Home Equity Loan Trust 2005-1

              

0.87% due 03/25/351

     599,138     532,900  

GoldenTree Credit Opportunities 2012-1

              

Financing Ltd.

              

4.23% due 09/15/241,3

     500,000     501,150  

Ivy Hill Middle Market Credit Fund Ltd. 2011-3A

              

6.23% due 01/15/221,3

     250,000     251,050  

6.73% due 01/15/221,3

     250,000     250,000  

DIVCORE CLO Ltd. 2013-1A B

              

4.05% due 11/15/32

     500,000     500,300  

Apidos CDO IX 2012-9A

              

3.98% due 07/15/231,3

     500,000     500,000  

Cerberus Offshore Levered I, LP 2012-1A

              

6.23% due 11/30/181,3

     250,000     250,050  

4.98% due 11/30/181,3

     250,000     249,925  

Newstar Commercial Loan Funding 2014-1 LLC

              

3.92% due 04/20/251,3

     500,000     497,250  

KKR CLO Trust 2012-1A

              

3.53% due 12/15/241,3

     500,000     496,450  

Golub Capital Partners CLO 18 Ltd. 2014-18A

              

3.73% due 04/25/261,3

     500,000     496,350  

Garrison Funding 2013-2 Ltd.

              

3.63% due 09/25/231,3

     500,000     495,200  

OZLM Funding V Ltd. 2013-5A

              

3.23% due 01/17/261,3

     500,000     494,250  

CIFC Funding 2014 Ltd.

              

3.03% due 04/18/251,3

     500,000     486,550  

MC Funding Limited / MC Funding 2006-1 LLC

              

1.18% due 12/20/201,3

     500,000     482,250  

TCW Global Project Fund III Ltd. 2005-1A

              

0.88% due 09/01/17†††,1,3

     500,000     481,300  

ColumbusNova CLO Limited 2007-1A

              

1.58% due 05/16/191,3

     500,000     480,700  

AMMC CLO XIV Ltd. 2014-14A

              

3.15% due 07/27/261,3

     500,000     480,500  

Gleneagles CLO Ltd. 2005-1A

              

1.14% due 11/01/171,3

     500,000     479,700  

Golub Capital Partners Fundings Ltd. 2007-1A

              

0.98% due 03/15/221,3

     500,000     478,600  

ICE EM CLO 2007-1A

              

0.93% due 08/15/221,3

     500,000     475,950  

NewStar Commercial Loan Trust 2007-1

              

1.53% due 09/30/221,3

     500,000     472,850  

Westwood CDO I Ltd. 2007-1A

              

0.90% due 03/25/211,3

     500,000     464,050  

Golub Capital Partners CLO 17 Ltd. 2013-17A

              

4.06% due 10/25/251,3

     400,000     398,600  

Northwind Holdings LLC 2007-1A

              

1.01% due 12/01/371,3

     435,207     396,038  

ALM VII R-2 Ltd. 2013-7R2A

              

2.83% due 04/24/241,3

     400,000     392,720  

Acis CLO 2013-2 Ltd.

              

3.44% due 10/14/221,3

     375,000     375,188  

OFSI Fund Ltd. 2006-1A

              

1.08% due 09/20/191,3

     370,000     357,198  

TICC CLO 2012-1 LLC

              

4.98% due 08/25/231,3

     350,000     351,575  

Covenant Credit Partners CLO I Ltd.

              

3.15% due 07/20/261,3

     350,000     340,375  

Airplanes Pass Through Trust 2001-1A

              

0.70% due 03/15/191

     779,254     336,053  

Aerco Ltd. 2000-2A

              

0.61% due 07/15/251

     619,576     334,571  

Great Lakes CLO 2014-1 Ltd.

              

3.93% due 04/15/251,3

     250,000     248,625  

TICP CLO II Ltd. 2014-2A

              

3.23% due 07/20/261,3

     250,000     244,700  

Carlyle Global Market Strategies CLO 2012-3 Ltd.

              

due 10/04/243,10

     250,000     233,225  

Eastland CLO Ltd. 2007-1A

              

0.64% due 05/01/221,3

     250,000     232,925  

Drug Royalty Limited Partnership 1 2012-1

              

5.48% due 07/15/241,3

     145,128     149,855  

First Franklin Mortgage Loan Trust 2006-FF1

              

0.49% due 01/25/361

     150,000     131,884  

Atlas Air 1999-1 Class A-1 Pass Through Trust

              

7.20% due 01/02/197

     77,989     81,693  

Vega Containervessel plc 2006-1A

              

5.56% due 02/10/213

     82,494     81,157  

Raspro Trust 2005-1A

              

0.63% due 03/23/241,3

     71,080     69,836  

Structured Asset Receivables Trust Series 2005-1

              

0.73% due 01/21/151,3

     64,468     62,135  

BlackRock Senior Income Series Corp.

              

due 09/15/1610

     500,000     50  
             
Total Asset Backed Securities              

(Cost $159,231,177)

           160,617,020  
             
               
BONDS†† - 28.3%              
               
FINANCIAL - 17.0%              

EPR Properties

              

5.75% due 08/15/22

     2,680,000     2,934,169  

5.25% due 07/15/236

     2,250,000     2,365,542  

JPMorgan Chase & Co.

              

5.00%1,2

     3,350,000     3,265,579  

5.15%1,2

     2,125,000     2,024,063  

Teachers Insurance & Annuity

              

Association of America

              

4.90% due 09/15/443

     3,400,000     3,465,018  

4.38% due 09/15/541,3

     1,300,000     1,311,089  

Bank of America Corp.

              

5.13%1,2

     3,650,000     3,531,374  

6.25%1,2

     600,000     596,062  

 
104 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
 
TOTAL RETURN BOND FUND    

      FACE        
      AMOUNT     VALUE  
 
               

Fifth Third Bancorp

              

4.90%1,2

   $ 2,000,000   $ 1,957,200  

5.10%1,2

     1,840,000     1,734,200  

General Motors Financial Company, Inc.

              

2.63% due 07/10/176

     3,375,000     3,390,312  

Icahn Enterprises, LP / Icahn

              

Enterprises Finance Corp.

              

6.00% due 08/01/20

     3,100,000     3,185,250  

HSBC Holdings plc

              

5.63%1,2

     2,200,000     2,184,600  

6.38%1,2

     800,000     799,000  

Wintrust Financial Corp.

              

5.00% due 06/13/24

     2,700,000     2,803,310  

Assured Guaranty US Holdings, Inc.

              

5.00% due 07/01/246

     2,600,000     2,627,188  

Itau Unibanco Holding S.A./Cayman Island

              

5.13% due 05/13/233,6

     2,650,000     2,590,375  

Susquehanna Bancshares, Inc.

              

5.38% due 08/15/22

     2,300,000     2,389,054  

Nordea Bank AB

              

6.13%1,2,3

     1,300,000     1,274,000  

5.50%1,2,3

     1,000,000     982,500  

AmTrust Financial Services, Inc.

              

6.13% due 08/15/23

     2,000,000     2,081,260  

Customers Bank

              

6.13% due 06/26/291,3

     2,000,000     2,017,500  

Kennedy-Wilson, Inc.

              

8.75% due 04/01/19

     1,850,000     1,965,625  

Corporation Financiera de Desarrollo S.A.

              

5.25% due 07/15/291,3

     1,650,000     1,672,688  

ACC Group Housing LLC

              

6.35% due 07/15/54†††,3

     625,000     645,438  

3.50% due 07/15/18†††,3

     625,000     634,125  

Cadence Bank North America

              

6.25% due 06/28/291,11

     1,200,000     1,221,000  

Citigroup, Inc.

              

5.35%1,2

     750,000     701,250  

6.30%1,2

     375,000     370,350  

Pacific Northwest Communities LLC

              

5.91% due 06/15/503

     1,000,000     1,037,590  

Atlantic Marine Corporations Communities LLC

              

5.43% due 12/01/503

     1,071,003     1,032,801  

Wilton Re Finance LLC

              

5.88% due 03/30/331,3

     925,000     962,000  

Ironshore Holdings US, Inc.

              

8.50% due 05/15/203

     720,000     865,784  

Schahin II Finance Company SPV Ltd.

              

5.88% due 09/25/223,6

     809,400     766,906  

Royal Bank of Scotland Group plc

              

5.13% due 05/28/24

     700,000     687,793  

Skyway Concession Company LLC

              

0.61% due 06/30/261,3

     750,000     600,000  

Tri-Command Military Housing LLC

              

5.38% due 02/15/483

     565,714     504,159  

CIC Receivables Master Trust

              

4.89% due 10/07/21†††

     500,000     500,500  

QBE Capital Funding III Ltd.

              

7.25% due 05/24/411,3

     368,000     401,120  

Credit Suisse Group AG

              

6.25%1,2,3

     300,000     290,250  

Allstate Corp.

              

5.75% due 08/15/531

     250,000     266,250  

Cadence Financial Corp.

              

4.88% due 06/28/1911

     250,000     251,250  

Icahn Enterprises Limited Partnership /

              

Icahn Enterprises Finance Corp.

              

3.50% due 03/15/17

     200,000     198,000  

Jackson National Life Insurance Co.

              

8.15% due 03/15/273

     125,000     161,328  

National Life Insurance Co.

              

10.50% due 09/15/393

     100,000     151,953  

MetLife Capital Trust IV

              

7.88% due 12/15/373

     115,000     147,200  

Scottrade Financial Services, Inc.

              

6.13% due 07/11/213

     125,000     130,015  

Prosight Global Inc.

              

7.50% due 11/26/20†††,7

     100,000     102,520  

LCP Dakota Fund

              

10.00% due 08/17/157

     28,800     28,800  
             
Total Financial           65,805,340  
             
CONSUMER, CYCLICAL - 2.8%              

United Airlines 2014-2 Class B Pass

              

Through Trust

              

4.63% due 09/03/22

     2,875,000     2,824,687  

HP Communities LLC

              

5.12% due 03/15/223

     1,590,866     1,668,038  

5.62% due 09/15/323

     1,000,000     1,000,840  

Suburban Propane Partners Limited

              

Partnership/Suburban Energy Finance Corp.

              

7.38% due 08/01/21

     1,618,000     1,715,080  

Northern Group Housing LLC

              

6.80% due 08/15/533

     1,200,000     1,344,180  

GRD Holdings III Corp.

              

10.75% due 06/01/193

     825,000     909,563  

QVC, Inc.

              

7.38% due 10/15/203

     650,000     692,449  

Continental Airlines 2012-2 Class B Pass

              

Through Trust

              

5.50% due 10/29/20

     285,330     301,024  

Continental Airlines 2012-1 Class B Pass

              

Through Trust

              

6.25% due 04/11/20

     269,594     287,118  
             
Total Consumer, Cyclical           10,742,979  
             
INDUSTRIAL - 2.2%              

Princess Juliana International Airport

              

Operating Company N.V.

              

5.50% due 12/20/273

     2,993,111     2,993,110  

Quality Distribution LLC / QD Capital Corp.

              

9.88% due 11/01/18

     2,500,000     2,625,000  

Dynagas LNG Partners Limited Partnership /

              

Dynagas Finance, Inc.

              

6.25% due 10/30/19

     1,000,000     1,000,000  

Chicago Bridge & Iron Co.

              

5.15% due 12/27/22†††,7

     750,000     771,900  

Xefin Lux SCA

              

3.91% due 06/01/191,3

   EUR 450,000     564,099  

SBM Baleia Azul Sarl

              

5.50% due 09/15/27†††,7

     459,700     466,550  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 105

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
TOTAL RETURN BOND FUND    

      FACE      
      AMOUNT     VALUE
 
             
Marquette Transportation Company LLC /            

Marquette Transportation Finance Corp.

            

10.88% due 01/15/17

   $ 120,000   $ 125,700
             
Total Industrial           8,546,359
             
BASIC MATERIALS - 2.1%            

Yamana Gold, Inc.

            

4.95% due 07/15/24

     3,750,000     3,733,001

AngloGold Ashanti Holdings plc

            

5.13% due 08/01/22

     2,225,000     2,146,593

Newcrest Finance Pty Ltd.

            

4.20% due 10/01/223

     850,000     780,440

4.45% due 11/15/213,6

     625,000     600,695

TPC Group, Inc.

            

8.75% due 12/15/203

     745,000     791,563
             
Total Basic Materials           8,052,292
             
ENERGY - 1.6%            

Regency Energy Partners, LP /

            

Regency Energy Finance Corp.

            

8.38% due 06/01/19

     2,610,000     2,766,599

California Resources Corp.

            

5.00% due 01/15/20

     2,000,000     2,030,000

Crestwood Midstream Partners, LP /

            

Crestwood Midstream Finance Corp.

            

7.75% due 04/01/19

     925,000     968,938

Odebrecht Drilling Norbe VIII/IX Ltd.

            

6.35% due 06/30/213

     196,875     202,584

Bill Barrett Corp.

            

7.63% due 10/01/19

     125,000     129,063
             
Total Energy           6,097,184
             
DIVERSIFIED - 1.0%            

Opal Acquisition, Inc.

            

8.88% due 12/15/213

     2,000,000     2,065,000

Leucadia National Corp.

            

5.50% due 10/18/23

     1,500,000     1,567,547

Harbinger Group, Inc.

            

7.88% due 07/15/19

     200,000     213,000
             
Total Diversified           3,845,547
             
GOVERNMENT - 0.6%            

U.S. Treasury Bonds

            

0.00% due 05/15/449

     5,225,000     1,944,123

El Salvador Government International Bond

            

6.38% due 01/18/273,6

     300,000     300,000

Government of the Cayman Islands

            

5.95% due 11/24/193

     125,000     143,750

Commonwealth of the Bahamas

            

6.95% due 11/20/293

     110,000     123,750
             
Total Government           2,511,623
             
OTHER - 0.4%            

Northwoods Capital Ltd.

            

1.78% due 10/22/21

     1,500,000     1,477,200
             
CONSUMER, NON-CYCLICAL - 0.3%            

Bumble Bee Holdings, Inc.

            

9.00% due 12/15/173

     924,000     967,890
             
MATERIALS - 0.2%            

Reynolds Group Issuer Incorporated /

            

Reynolds Group Issuer LLC /

            

Reynolds Group Issuer Lu

            

7.13% due 04/15/19

     800,000     829,000
             
COMMUNICATIONS - 0.1%            

Avaya, Inc.

            

7.00% due 04/01/193

     550,000     533,500
             
Total Bonds            

(Cost $109,216,732)

           109,408,914
             
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.0%            

Luminent Mortgage Trust 2006-2

            

0.35% due 02/25/461

     6,646,916     4,927,885

LSTAR Securities Investment Trust 2014-1

            

3.25% due 09/01/211,11

     4,400,000     4,400,000
American Home Mortgage Investment            

Trust 2006-1

            

0.35% due 03/25/461

     4,663,549     3,958,355

American Home Mortgage Assets Trust 2007-1

            

0.82% due 02/25/471

     4,967,084     3,132,790

Hana Small Business Lending Loan Trust 2014-2014

            

3.06% due 01/25/401,3

     2,647,547     2,589,301

CSMC Series 2014-ICE

            

2.30% due 04/15/271,3

     2,500,000     2,503,968

Alternative Loan Trust 2003-18CB

            

5.25% due 09/25/33

     2,029,300     2,108,912

WaMu Mortgage Pass-Through Certificates

            

Series 2006-AR11 Trust

            

1.04% due 09/25/461

     2,725,170     2,086,118

CSMC Series 2014-6R

            

0.33% due 09/27/361,3

     1,519,011     1,440,952

BBCMS Trust 2013-TYSN

            

3.71% due 09/05/323

     1,500,000     1,430,904

HarborView Mortgage Loan Trust 2006-12

            

0.34% due 01/19/381

     1,558,495     1,330,304

Washington Mutual Mortgage Pass-Through

            

Certificates WMALT Series 2006-8 Trust

            

4.90% due 10/25/36

     885,589     675,801

5.76% due 10/25/36

     649,247     461,507

Washington Mutual Mortgage Pass-Through

            

Certificates WMALT Series 2006-AR9 Trust

            

0.96% due 11/25/461

     1,480,217     1,049,863

Resource Capital Corp.

            

2.65% due 04/15/32

     1,000,000     1,000,000

Chase Mortgage Finance Trust Series 2006-S3

            

6.00% due 11/25/36

     1,121,756     962,190

Wells Fargo Alternative Loan 2007-PA3 Trust

            

6.25% due 07/25/37

     986,443     899,124

Sequoia Mortgage Trust 2013-5

            

2.50% due 05/25/431,3

     883,723     824,658

GreenPoint Mortgage Funding Trust

            

Series 2007-AR1

            

0.23% due 02/25/471

     628,738     582,209

Residential Asset Securitization Trust 2006-A12

            

6.25% due 11/25/36

     736,081     555,514

Morgan Stanley Re-REMIC Trust 2010-R5

            

0.54% due 06/26/361,3

     671,157     499,448

 
106 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (continued)   September 30 , 2014
TOTAL RETURN BOND FUND    

      FACE      
      AMOUNT     VALUE
 
             

Structured Asset Mortgage Investments II

            

Trust 2006-AR1

            

0.38% due 02/25/361

   $ 563,331   $ 482,139

Nomura Resecuritization Trust 2012-1R

            

0.59% due 08/27/471,3

     517,230     478,438

Alliance Bancorp Trust 2007-OA1

            

0.39% due 07/25/371

     425,029     293,643
             
Total Collateralized Mortgage Obligations            

(cost $38,667,194)

           38,674,023
             
MUNICIPAL BONDS†† - 7.7%            
ILLINOIS - 2.3%            

State of Illinois General Obligation Unlimited

            

5.65% due 12/01/38

     5,350,000     5,564,962

6.63% due 02/01/35

     500,000     546,880

County of Cook Illinois

            

General Obligation Unlimited

            

6.23% due 11/15/34

     1,900,000     2,143,979

City of Chicago Illinois

            

General Obligation Unlimited

            

6.31% due 01/01/44

     300,000     306,093

5.00% due 01/01/27

     200,000     212,574

0.00% due 01/01/309

     310,000     149,535
             
Total Illinois           8,924,023
             
PUERTO RICO - 1.7%            

Puerto Rico Highways & Transportation

            

Authority Revenue Bonds

            

5.25% due 07/01/35

     1,250,000     1,242,200

4.95% due 07/01/26

     850,000     847,136

5.50% due 07/01/28

     800,000     838,544

5.00% due 07/01/29

     765,000     761,925

Commonwealth of Puerto Rico

            

General Obligation Unlimited

            

5.00% due 07/01/31

     1,500,000     1,499,880

5.13% due 07/01/30

     1,035,000     1,035,021

Puerto Rico Municipal Finance

            

Agency General Obligation Unlimited

            

5.00% due 08/01/27

     550,000     536,740
             
Total Puerto Rico           6,761,446
             
CALIFORNIA - 1.2%            

Cypress School District

            

General Obligation Unlimited

            

0.00% due 08/01/409

     9,145,000     2,897,501

Stockton Unified School District

            

General Obligation Unlimited

            

0.00% due 08/01/369

     1,950,000     790,433

0.00% due 08/01/359

     1,265,000     538,814

Inland Valley Development

            

Agency Tax Allocation

            

5.50% due 03/01/33

     400,000     413,624

County of Sacramento

            

California Revenue Bonds

            

7.25% due 08/01/25

     180,000     203,089
             
Total California           4,843,461
             
MICHIGAN - 1.2%            

City of Detroit Michigan

            

General Obligation Unlimited

            

3.50% due 10/07/161

     4,000,000     4,000,000

Detroit City School District

            

General Obligation Unlimited

            

7.75% due 05/01/39

     500,000     625,155

City of Detroit Michigan Water Supply

            

System Revenue Revenue Bonds

            

5.00% due 07/01/30

     50,000     50,020
             
Total Michigan           4,675,175
             
FLORIDA - 0.6%            

County of Miami-Dade Florida Revenue Bonds

            

0.00% due 10/01/42

     10,000,000     2,435,199
             
ALABAMA - 0.7%            

County of Jefferson Alabama

            

Sewer Revenue Revenue Bonds

            

0.00% due 10/01/369

     2,350,000     664,674

0.00% due 10/01/349

     1,800,000     585,108

0.00% due 10/01/359

     1,375,000     416,928

0.00% due 10/01/319

     725,000     296,300

0.00% due 10/01/329

     720,000     271,922
             
Total Alabama           2,234,932
             
Total Municipal Bonds            

(Cost $28,862,846)

           29,874,236
             
MORTGAGE BACKED SECURITIES†† - 5.4%            

Hilton USA Trust 2013-HLT

            

5.61% due 11/05/181,3

     3,000,000     3,046,512

4.41% due 11/05/303

     1,750,000     1,784,153

COMM 2014-KYO Mortgage Trust

            

2.50% due 06/11/271,3

     3,000,000     3,000,990

JP Morgan Chase Commercial Mortgage

            

Securities Trust 2014-FL5

            

2.25% due 07/15/311,3

     3,000,000     3,000,000

Boca Hotel Portfolio Trust 2013-BOCA

            

3.20% due 08/15/261,3

     1,700,000     1,701,346

BB-UBS Trust 2012-SHOW

            

4.16% due 11/05/361,3

     1,500,000     1,412,583

SRERS Funding Ltd. 2011-RS

            

0.40% due 05/09/461,3

     1,403,232     1,336,578

Capmark Military Housing Trust 2007-AETC

            

5.75% due 02/10/523

     1,123,488     1,133,937

Structured Asset Securities Corporation

            

Mortgage Loan Trust 2006-BC6

            

0.32% due 01/25/371

     1,250,000     1,040,799

GMAC Commercial Mortgage Asset

            

Corp. 2003-PRES

            

6.24% due 10/10/41†††,3

     966,737     947,112

T2 Income Fund CLO Ltd. 2007-1X

            

1.73% due 07/15/19

     925,000     902,800

Motel 6 Trust 2012-MTL6

            

3.78% due 10/05/253

     750,000     750,623

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 107

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
TOTAL RETURN BOND FUND    

      FACE      
      AMOUNT     VALUE
 
             

LSTAR Commercial Mortgage Trust 2014-2

          

5.30% due 01/20/411,3

   $ 500,000   $ 499,588

BAMLL-DB Trust 2012-OSI

          

5.81% due 04/13/293

     200,000     212,091
             
Total Mortgage Backed Securities            

(Cost $20,082,023)

           20,769,112
             
SENIOR FLOATING RATE INTERESTS††,1,8 - 5.3%          
CONSUMER, CYCLICAL - 1.0%            

Burger King Corp.

          

4.50% due 09/24/21

     1,500,000     1,488,329

ServiceMaster Co.

          

4.25% due 07/01/21

     700,000     688,737

Neiman Marcus Group, Inc.

          

4.25% due 10/25/20

     597,000     585,973

Fleetpride Corp.

          

5.25% due 11/19/19

     440,629     435,672

1-800 Contacts, Inc.

          

4.25% due 01/29/21

     298,500     294,023

Compucom Systems, Inc.

          

4.25% due 05/07/20

     300,000     287,250

Capital Automotive LP

          

6.00% due 04/30/20

     140,000     141,400

Navistar, Inc.

          

5.75% due 08/17/17

     62,500     62,578

Container Store, Inc.

          

4.25% due 04/06/19

     35,706     34,992
             
Total Consumer, Cyclical           4,018,954
             
TECHNOLOGY - 0.9%            

Avago Technologies Ltd.

          

3.75% due 05/06/21

     2,144,625     2,123,458

EIG Investors Corp.

          

5.00% due 11/09/19

     638,674     636,279

Evergreen Skill

          

5.75% due 04/28/21

     350,000     343,147

Deltek, Inc.

          

4.50% due 10/10/18

     216,891     215,156

Aspect Software, Inc.

          

7.25% due 05/07/16

     16,320     16,274
             
Total Technology           3,334,314
             
CONSUMER, NON-CYCLICAL - 0.8%            

Hanesbrands, Inc.

          

3.50% due 07/29/21

   EUR 1,300,000     1,649,124

Albertson’s (Safeway) Holdings LLC

          

5.50% due 08/25/21

     900,000     895,122

Grocery Outlet, Inc.

          

6.50% due 12/17/18

     295,091     294,171

Arctic Glacier Holdings, Inc.

          

5.00% due 05/10/19

     121,472     119,650

Performance Food Group

          

6.25% due 11/14/19

     99,246     98,874
             
Total Consumer, Non-cyclical           3,056,941
             
INDUSTRIAL - 0.7%              

Rise Ltd.

              

4.74% due 02/12/39

     1,156,250     1,172,206  

Brickman Group Holdings, Inc.

              

4.00% due 12/18/20

     498,747     487,316  

AABS Ltd.

              

4.87% due 01/15/38

     447,917     455,173  

Sabre, Inc.

              

4.00% due 02/19/19

     371,707     366,366  

CPM Acquisition Corp.

              

6.25% due 08/29/17

     169,736     169,312  

10.25% due 03/01/18

     70,000     70,700  

Thermasys Corp.

              

5.25% due 05/03/19

     96,875     96,310  
             
Total Industrial           2,817,383  
             
COMMUNICATIONS - 0.7%              

Proquest LLC

              

5.25% due 09/24/21

     1,000,000     997,080  

Avaya, Inc.

              

7.75% due 10/26/17

     976,429     929,590  

Interactive Data Corp.

              

4.75% due 05/02/21

     400,000     397,624  

Light Tower Fiber LLC

              

4.00% due 04/13/20

     395,000     387,677  
             
Total Communications           2,711,971  
             
FINANCIAL - 0.8%              

Corporate Capital Trust

              

4.00% due 05/20/19

     995,000     995,000  

HSBC Holdings

              

due 03/30/2012

     850,000     824,500  

Nuveen Investments, Inc.

              

4.16% due 05/13/17

     750,000     747,720  

National Financial Partners Corp.

              

4.50% due 07/01/20

     396,001     392,041  

American Stock Transfer & Trust

              

5.75% due 06/26/20

     241,624     239,913  

First Data Corp.

              

3.65% due 03/23/18

     20,000     19,594  
             
Total Financial           3,218,768  
             
BASIC MATERIALS - 0.4%              

Fortescue Metals Group Ltd.

              

3.75% due 06/30/19

     1,392,965     1,362,278  
             
Total Senior Floating Rate Interests              

(Cost $20,687,631)

           20,520,609  
             
Total Investments - 103.0%              

(Cost $395,100,063)

         $ 398,325,518  
             
Other Assets & Liabilities, net - (3.0)%           (11,744,842 )
             
Total Net Assets - 100.0%         $ 386,580,676  
             


 
108 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


SCHEDULE OF INVESTMENTS (concluded)   September 30 , 2014
TOTAL RETURN BOND FUND    

CENTRALLY CLEARED INTEREST RATE SWAP††

Counterparty   Floating
Rate		   Floating Rate Index   Fixed Rate     Maturity Date   Notional Amount   Market Value     Unrealized
Appreciation/
Depreciation 		 
 
Merrill Lynch   Pay   3-Month USD-LIBOR   3.89 %   09/09/43 $ 2,750,000 $ 395,175   $ 395,175  
Merrill Lynch   Pay   3-Month USD-LIBOR   3.68 %   08/29/43   2,000,000   209,200     209,200  
Merrill Lynch   Pay   3-Month USD-LIBOR   3.65 %   09/26/43   900,000   86,310     86,310  
Merrill Lynch   Pay   3-Month USD-LIBOR   1.70 %   08/29/18   8,200,000   29,520     29,520  
Merrill Lynch   Pay   3-Month USD-LIBOR   1.59 %   09/26/18   12,650,000   (34,155 )   (34,155 )
                                 
                              $ 686,050  
                                 
                                   

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS ††

                    Value at   Net Unrealized
Counterparty   Contracts to Sell   Currency   Settlement Date   Settlement Value   September 30, 2014   Appreciation
 
BNY Mellon   460,000   EUR   10/07/14 $ 604,878 $ 581,069 $ 23,809
                           
                      $ 23,809
                           
                         

*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 4.
††   Value determined based on Level 2 inputs, unless otherwise noted — See Note 4.
†††   Value determined based on Level 3 inputs — See Note 4.
1   Variable rate security. Rate indicated is rate effective at September 30, 2014.
2   Perpetual maturity.
3  
Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $210,279,623 (cost $209,285,287), or 54.4% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4   Affiliated issuer.
5   Security is a step up/step down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity. Rate indicated is rate effective at September 30, 2014.
6   Security or a portion thereof is held as collateral for reverse repurchase agreements — See Note 13.
7   Illiquid security.
8   The face amount is denominated in U.S. Dollars unless otherwise noted.
9   Zero coupon rate security.
10   Residual interest.
11   Security is a 144A or Section 4(a)(2) security. These securities are considered illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or section 4(a)(2) securities is $5,872,250 (cost $5,850,000), or 1.5% of total net assets — See Note 16.
12   Security with no rate was unsettled at September 30, 2014.
    plc—Public Limited Company
REIT—Real Estate Investment Trust

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 109

TOTAL RETURN BOND FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:        
Investments in unaffiliated issuers, at value        

(cost $393,034,699)

   $ 396,265,844  
Investments in affiliated issuers, at value        

(cost $2,065,364)

     2,059,674  
       
Total investments        

(cost $395,100,063)

     398,325,518  
Cash     7,755,775  
Unrealized appreciation on swap agreements     720,205  
Segregated cash with broker     680,047  
Prepaid expenses     35,523  
Unrealized appreciation on forward foreign currency exchange contracts     23,809  
Receivables:        

Fund shares sold

     10,046,179  

Interest

     2,408,561  

Securities sold

     919,720  

Dividends

     50,941  
       
Total assets     420,966,278  
       
         
LIABILITIES:        
Reverse Repurchase Agreements     13,936,733  
Segregated cash from broker     649,811  
Unrealized depreciation on swap agreements     34,155  
Payable for:        

Securities purchased

     18,733,837  

Fund shares redeemed

     645,153  

Distributions to shareholders

     170,185  

Management fees

     76,397  

Distribution and service fees

     38,000  

Fund accounting/administration fees

     27,637  

Transfer agent/maintenance fees

     9,942  

Trustees’ fees*

     650  

Miscellaneous

     63,102  
       
Total liabilities     34,385,602  
       
NET ASSETS   $ 386,580,676  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 384,416,001  
Distributions in excess of net investment income     (2,009,658 )
Accumulated net realized gain on investments     204,426  
Net unrealized appreciation on investments     3,969,907  
       
Net assets   $ 386,580,676  
       
A-CLASS:        
Net assets   $ 90,805,309  
Capital shares outstanding     3,370,748  
Net asset value per share     $26.94  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $28.28  
       
C-CLASS:        
Net assets   $ 25,107,478  
Capital shares outstanding     932,101  
Net asset value per share     $26.94  
       
INSTITUTIONAL CLASS:        
Net assets   $ 270,667,889  
Capital shares outstanding     10,037,187  
Net asset value per share     $26.97  
       

STATEMENT OF OPERATIONS
 
September 30, 2014

INVESTMENT INCOME:        
Interest   $ 10,105,810  
Dividends from securities of unaffiliated issuers     554,991  
Dividends from securities of affiliated issuers     71,160  
       

Total investment income

     10,731,961  
       
         
EXPENSES:        
Management fees     1,142,031  
Transfer agent/maintenance fees:        

A-Class

     127,738  

C-Class

     19,372  

Institutional Class

     46,892  
Distribution and service fees:        

A-Class

     201,823  

C-Class

     175,171  
Fund accounting/administration fees     216,983  
Interest expense     139,414  
Trustees’ fees*     19,368  
Line of credit expense     19,233  
Custodian fees     8,693  
Tax expense     4  
Miscellaneous     235,722  
       

Total expenses

     2,352,444  
Less:        
Expenses waived by Adviser     (475,341 )
Expenses waived by Transfer Agent        

A-Class

     (35,045 )

C-Class

     (3,921 )

Institutional Class

     (46,895 )
       
Total expenses waived     (561,202 )
       
Net expenses     1,791,242  
       
Net investment income     8,940,719  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     1,306,874  

Investments in affiliated issuers

     (5,804 )

Swap agreements

     571,419  

Foreign currency

     2,256  

Forward foreign currency exchange contracts

     22,111  

Options purchased

     (309,380 )

Options written

     69,860  
       
Net realized gain     1,657,336  
       
Net change in unrealized appreciation (depreciation) on:        

Investments in unaffiliated issuers

     5,875,280  

Investments in affiliated issuers

     (5,690 )

Swap agreements

     417,439  

Foreign currency

     101,237  

Forward foreign currency exchange contracts

     23,809  
       
Net change in unrealized appreciation (depreciation)     6,412,075  
       
Net realized and unrealized gain     8,069,411  
       
Net increase in net assets resulting
   from operations		   $ 17,010,130  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
110  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

TOTAL RETURN BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
    Year Ended     Year Ended  
  September 30,   September 30,  
    2014     2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 8,940,719     $ 7,630,397  
Net realized gain on investments     1,657,336       (827,535 )
Net change in unrealized appreciation (depreciation) on investments     6,412,075       (4,499,916 )
 
Net increase in net assets resulting from operations     17,010,130       2,302,946  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (4,018,032 )     (4,198,859 )

C-Class

     (745,825 )     (480,541 )

Institutional Class

     (6,681,315 )     (3,074,263 )
Net realized gains                

A-Class

     —       (123,764 )

C-Class

     —       (14,771 )

Institutional Class

     —       (95,407 )
 
Total distributions to shareholders     (11,445,172 )     (7,987,605 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     73,424,986       137,427,154  

C-Class

     12,451,028       16,018,870  

Institutional Class

     248,033,503       85,915,365  
Distributions reinvested                

A-Class

     3,570,349       3,973,854  

C-Class

     648,333       466,640  

Institutional Class

     5,534,525       2,862,381  
Cost of shares redeemed                

A-Class

     (62,746,577 )     (93,839,214 )

C-Class

     (4,094,381 )     (6,970,535 )

Institutional Class

     (64,105,887 )     (53,732,302  
 
Net increase from capital share transactions     212,715,879       92,122,213  
 
Net increase in net assets     218,280,837       86,437,554  
                 
NET ASSETS:                

Beginning of year

     168,299,839       81,862,285  
 

End of year

   $ 386,580,676     $ 168,299,839  
 
Distributions in excess of net investment income at end of year   $ (2,009,658 )   $ (130,502 )
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     2,741,493       5,090,896  

C-Class

     463,711       592,730  

Institutional Class

     9,217,148       3,206,663  
Shares issued from reinvestment of distributions                

A-Class

     133,810       148,154  

C-Class

     24,313       17,425  

Institutional Class

     206,692       106,608  
Shares redeemed                

A-Class

     (2,345,333 )     (3,555,975 )

C-Class

     (154,292 )     (261,112 )

Institutional Class

     (2,377,106 )     (2,002,250 )
 
Net increase in shares     7,910,436       3,343,139  
 

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS SEMI-ANNUAL REPORT  |  111

TOTAL RETURN BOND FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Period Ended  
    September 30,     September 30,     September 30,  
A-Class   2014     2013     2012 a
 
Per Share Data                              
Net asset value, beginning of period       $26.16         $26.51         $25.00  
 
Income (loss) from investment operations:                              
Net investment income (loss)b       1.01         1.20         1.08  
Net gain (loss) on investments (realized and unrealized)       1.13         (.28 )       1.35  
       
Total from investment operations       2.14         .92         2.43  
 
Less distributions from:                              
Net investment income       (1.36 )       (1.23 )       (.92 )
Net realized gains       —         (.04 )       —  
       
Total distributions       (1.36 )       (1.27 )       (.92 )
 
Net asset value, end of period       $26.94         $26.16         $26.51  
       
                               
 
Total Returne       8.34%         3.53%         9.78%  
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)       $90,805         $74,328         $30,689  
 
Ratios to average net assets:                              
Net investment income (loss)       3.80%         4.47%         5.10%  
Total expensesc       1.19%         1.27%         1.51%  
Net expensesd,f       0.94%         0.98%         0.85%  
 
Portfolio turnover rate       52%         94%         69%  
                               
      Year Ended       Year Ended       Period Ended  
      September 30,       September 30,       September 30,  
C-Class     2014       2013       2012 a
 
Per Share Data                              
Net asset value, beginning of period       $26.16         $26.50         $25.00  
 
Income (loss) from investment operations:                              
Net investment income (loss)b       .82         .99         .94  
Net gain (loss) on investments (realized and unrealized)       1.12         (.27 )       1.32  
       
Total from investment operations       1.94         .72         2.26  
 
Less distributions from:                              
Net investment income       (1.16 )       (1.02 )       (.76 )
Net realized gains       —         (.04 )       —  
       
Total distributions       (1.16 )       (1.06 )       (.76 )
 
Net asset value, end of period       $26.94         $26.16         $26.50  
       
                               
 
Total Returne       7.58%         2.77%         9.09%  
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)       $25,107         $15,654         $6,607  
 
Ratios to average net assets:                              
Net investment income (loss)       3.10%         3.70%         4.38%  
Total expensesc       1.90%         2.07%         2.26%  
Net expensesd,f       1.66%         1.77%         1.63%  
 
Portfolio turnover rate       52%         94%         69%  

 
112  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

TOTAL RETURN BOND FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended       Year Ended       Period Ended  
      September 30,       September 30,       September 30,  
Institutional Class     2014       2013       2012 a
 
Per Share Data                              
Net asset value, beginning of period       $26.19         $26.54         $25.00  
 
Income (loss) from investment operations:                              
Net investment income (loss)b       1.09         1.28         1.06  
Net gain (loss) on investments (realized and unrealized)       1.14         (.27 )       1.44  
       
Total from investment operations       2.23         1.01         2.50  
 
Less distributions from:                              
Net investment income       (1.45 )       (1.32 )       (.96 )
Net realized gains       —         (.04 )       —  
       
Total distributions       (1.45 )       (1.36 )       (.96 )
 
Net asset value, end of period       $26.97         $26.19         $26.54  
       
                               
 
Total Returne       8.74%         3.88%         10.09%  
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)       $270,668         $78,318         $44,566  
 
Ratios to average net assets:                              
Net investment income (loss)       4.09%         4.78%         4.91%  
Total expensesc       0.81%         0.89%         0.99%  
Net expensesd,f       0.57%         0.64%         0.52%  
 
Portfolio turnover rate       52%         94%         69%  

a Since commencement of operations: November 30, 2011. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c Does not include expenses of the underlying funds in which the Fund invests.
d Net expense information reflects the expense ratios after expense waivers.
e Total return does not reflect the impact of any applicable sales charges and has not been annualized.
f Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the operating expense ratios for the periods would be:

      09/30/14   09/30/13   09/30/12
   
  A-Class   0.86 %   0.86 %   0.82 %
  C-Class   1.58 %   1.64 %   1.59 %
  Institutional Class   0.50 %   0.52 %   0.50 %

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  113

NOTES TO FINANCIAL STATEMENTS
 

1. Organization and Significant Accounting Policies

Organization

Guggenheim Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.

The Trust offers a combination of four separate classes of shares, A-Class shares, B-Class shares, C-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%, except for Limited Duration Fund which will not exceed 2.25%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”), if shares are redeemed within 12 months of purchase. B-Class shares were offered without a front-end sales charge, but were subject to a CDSC of up to 5% for five years and convert to A-Class shares after eight years. Effective January 4, 2010, subscriptions for B-Class shares are no longer accepted. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a CDSC.

As of January 1, 2012, A-Class, C-Class and Institutional Class shares of High Yield Fund are subject to a 2% redemption fee when shares are redeemed or exchanged within 90 days of purchase.

At September 30, 2014, the Trust consisted of eighteen Funds. This report covers the Floating Rate Strategies Fund, High Yield Fund, Investment Grade Bond Fund, Limited Duration Fund, Macro Opportunities Fund, Municipal Income Fund and Total Return Bond Fund (the “Funds”).

The Funds were previously series (the “Predecessor Funds”) of Security Income Fund, a different registered open-end investment company, which was organized as a Kansas corporation. In January 2014, at a special meeting of shareholders, the shareholders of the Predecessor Funds approved the reorganization of the Predecessor Funds with and into the Funds, corresponding “shell” series of the Trust. The Funds succeeded to the accounting and performance history of the Predecessor Funds. Any such historical information provided for the Funds that relate to periods prior to January 28, 2014, therefore, is that of the Predecessor Funds.

Guggenheim Investments (“GI”) provides advisory services, and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.

Guggenheim Partners Investment Management (“GPIM”), an affiliate of GI, serves as investment sub-adviser (the “Sub-Adviser”) to the Municipal Income Fund and is responsible for the day-to-day management of the Fund’s portfolio.

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.

The NAV of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.

A. The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.

Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales

 
114  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

NOTES TO FINANCIAL STATEMENTS (continued)
 

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 a given day, the security is valued at the closing bid price on that day.

Open-end investment companies (“Mutual Funds”) are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds (“ETFs”) and closed-end investment companies (“CEFs”) are valued at the last quoted sales price.

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.

Typically loans are valued using information provided by an independent third party pricing service which uses broker quotes in a non-active market.

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.

Premiums received from options written are entered in a 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).

The value of OTC swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s value is then adjusted to include dividends accrued, and financing charges and/or interest associated with the swap agreements.

The value of interest rate swap agreements entered into by a Fund are accounted for using the unrealized gain or loss on the agreements that is determined using the spread priced off the previous day’s CME price.

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 Trustees 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 (including restricted securities) are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value.” Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).

B. Senior loans in which the Funds invest generally pay interest rates which are periodically adjusted by reference to a base short-term, floating rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the London Inter-Bank Offered Rate (LIBOR), (ii) the prime rate offered by one or more major United States banks, or (iii) the bank’s certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. The interest rate indicated is the rate in effect at September 30, 2014.

 
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NOTES TO FINANCIAL STATEMENTS (continued)
 

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 Fund 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 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. Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.

When the Fund writes (sells) an option, an amount equal to the premium received is entered in that 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 a written option expires, or if the 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).

F. 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.

G. Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses.

H. Forward foreign currency exchange contracts are valued daily based on the applicable exchange rate of the underlying currency. The change in value of the contract is recorded as unrealized appreciation or depreciation until the forward foreign currency contract is closed. When the forward foreign currency contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time the contract was opened and the value at the time it was closed.

I. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis.

J. The Funds declare dividends from investment income daily. Each Fund pays its shareholders from its net investment income monthly and distributes any net capital gains that it has realized, at least annually.

 
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NOTES TO FINANCIAL STATEMENTS (continued)
 

Distributions to shareholders are recorded on the ex-dividend date. Dividends are reinvested in additional shares unless shareholders request payment in cash. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes.

K. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.

L. The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate.

M. Under the fee arrangement with the custodian, the Funds may earn credits based on overnight custody balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statements of Operations are before the reduction in expense from the related earnings credits, if any. For the year ended September 30, 2014, there were no earnings credits received.

N. Under the Funds’ organizational documents, their Trustees and Officers 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, the Funds utilize a variety of derivative instruments. 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.

An option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security (put option) or the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security (call option) at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid. The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a 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 may be an imperfect correlation between the movement in prices of options and the underlying securities and 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.

A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund utilizing OTC swaps bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. For Funds utilizing interest rate swaps, the exchange bears the risk of loss. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.

A forward foreign currency exchange contract is an agreement between two parties to exchange two designated currencies at a specific time in the future. The contracts can be used to hedge or manage exposure to foreign currency risks with portfolio investments or to gain exposure to foreign currencies.

In conjunction with the use of derivative instruments, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to each Fund.

The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.

3. Fees and Other Transactions with Affiliates

Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:

    Management Fees
Fund   (as a % of Net Assets)
 
Floating Rate Strategies Fund   0.65 %
High Yield Fund   0.60 %
Investment Grade Bond Fund   0.50 %
Limited Duration Fund   0.45 %
Macro Opportunities Fund   0.89 %
Municipal Income Fund   0.50 %
Total Return Bond Fund   0.50 %

 
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NOTES TO FINANCIAL STATEMENTS (continued)
 

RFS provides transfer agent services to the Fund for fees calculated at the rates below, which are assessed to the applicable class of the Fund. For these services, RFS receives the following:

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

† Not subject to Funds during first twelve months of operations.

RFS 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, RFS receives the following:

    Fund Accounting/
    Administrative Fees
Fund   (as a % of Net Assets)
 
Floating Rate Strategies Fund   0.095 %
High Yield Fund   0.095 %
Investment Grade Bond Fund   0.095 %
Limited Duration Fund   0.095 %
Macro Opportunities Fund   0.095 %
Municipal Income Fund   0.095 %
Total Return Bond Fund   0.095 %
       
Minimum annual charge per Fund   $25,000  
Certain out-of-pocket charges   Varies  

RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.

The investment advisory contracts for the following Funds provide that the total expenses be limited to a percentage of average net assets for each class of shares, 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. The limits are listed below:

            Effective     Contract  
      Limit     Date     End Date  
 
                         
Floating Rate Strategies Fund — A-Class     1.02 %     11/30/12       02/01/15  
Floating Rate Strategies Fund — C-Class     1.77 %     11/30/12       02/01/15  
Floating Rate Strategies Fund — Institutional Class     0.78 %     11/30/12       02/01/15  
High Yield Fund — A-Class     1.16 %     11/30/12       02/01/15  
High Yield Fund — B-Class     1.91 %     11/30/12       02/01/15  
High Yield Fund — C-Class     1.91 %     11/30/12       02/01/15  
High Yield Fund — Institutional Class     0.91 %     11/30/12       02/01/15  
Investment Grade Bond Fund — A-Class     1.00 %     11/30/12       02/01/15  
Investment Grade Bond Fund — B-Class     1.75 %     11/30/12       02/01/15  
Investment Grade Bond Fund — C-Class     1.75 %     11/30/12       02/01/15  
Investment Grade Bond Fund — Institutional Class*     0.75 %     11/30/12       02/01/15  
Limited Duration Fund —A-Class**     0.80 %     12/01/13       02/01/15  
Limited Duration Fund — C-Class**     1.55 %     12/01/13       02/01/15  
Limited Duration Fund — Institutional Class**     0.55 %     12/01/13       02/01/15  
Macro Opportunities Fund — A-Class     1.36 %     11/30/12       02/01/15  
Macro Opportunities Fund — C-Class     2.11 %     11/30/12       02/01/15  
Macro Opportunities Fund — Institutional Class     0.95 %     11/30/12       02/01/15  
Municipal Income Fund — A-Class     0.80 %     11/30/12       02/01/15  
Municipal Income Fund — C-Class     1.55 %     11/30/12       02/01/15  
Municipal Income Fund — Institutional Class     0.55 %     11/30/12       02/01/15  
Total Return Bond Fund — A-Class     0.90 %     11/30/12       02/01/15  
Total Return Bond Fund — C-Class     1.65 %     11/30/12       02/01/15  
Total Return Bond Fund — Institutional Class     0.50 %     11/30/12       02/01/15  

* Since the commencement of operations: January 29, 2013
** Since the commencement of operations: December 16, 2013

 
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NOTES TO FINANCIAL STATEMENTS (continued)
 

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 September 30, 2014, the amount of fees waived or expenses reimbursed that are subject to recoupment are presented in the following table:

Fund   Expires 2015   Expires 2016   Expires 2017   Fund Total
 
Floating Rate Strategies Fund   $127,768   $430,026   $1,206,044   $1,763,838
High Yield Fund   205,368   207,619   81,112   494,099
Investment Grade Bond Fund   165,867   234,110   183,531   583,508
Limited Duration Fund   —   —   142,224   142,224
Macro Opportunities Fund   161,466   961,870   1,567,567   2,690,903
Municipal Income Fund   192,257   236,488   242,274   671,019
Total Return Bond Fund   154,714   462,339   550,932   1,167,985

For the year ended September 30, 2014, no amounts were recouped by GI.

If a Fund invests in an affiliated fund, the investing Fund’s Adviser will determine whether to waive fees at the investing fund level. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI.

The Funds have adopted Distribution Plans related to the offering of A-Class, B-Class and C-Class shares pursuant to Rule 12b-1 under the 1940 Act. The plans provide for payments at an annual rate of 0.25% of the average daily net assets of each Fund’s A-Class shares and 1.00% of the average daily net assets of each Fund’s B-Class and C-Class shares. Effective December 1, 2006, B-Class shares of the High Yield Fund ceased charging 12b-1 fees in accordance with the FINRA sales cap regulations. These fees may be reinstated at any time.

For the year ended September 30, 2014, GFD retained sales charges of $344,207 relating to sales of A-Class shares of the Trust.

Certain trustees and officers of the Trust are also officers of GI, RFS and GFD.

4. Fair Value Measurement

In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

 
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NOTES TO FINANCIAL STATEMENTS (continued)
 

The following table summarizes the inputs used to value the Funds’ net assets at September 30, 2014:

    Level 1     Level 1     Level 2     Level 2     Level 3      
    Investments     Other Financial     Investments     Other Financial     Investments      
    In Securities     Instruments*     In Securities     Instruments*     In Securities   Total
 
Assets                                                      
Floating Rate Strategies Fund     $ 31,397,489       $ —       $ 1,228,401,119       $ 4,097,714       $ 32,030,543   $ 1,295,926,865
High Yield Fund       8,719,900         —         128,864,261         472,307         3,549,244     141,605,712
Investment Grade Bond Fund       2,770,887         —         124,990,515         559,310         4,871,076     133,191,788
Limited Duration Fund       4,506,780         —         93,403,678         —         888,202     98,798,660
Macro Opportunities Fund       182,275,764         —         1,353,192,568         3,757,961         34,301,222     1,573,527,515
Municipal Income Fund       2,443,260         —         48,270,223         —         —     50,713,483
Total Return Bond Fund       18,449,366         —         373,980,078         744,014         5,896,074     399,069,532
 
Liabilities                                                      
Floating Rate Strategies Fund     $ —       $ —       $ —       $ —       $ —   $ —
High Yield Fund       —         —         —         —         —     —
Investment Grade Bond Fund       —         —         —         3,645         —     3,645
Macro Opportunities Fund       1,416         —         —         9,592,958         —     9,594,374
Total Return Bond Fund       —         —         —         34,155         —     34,155

* Other financial instruments may include forward foreign currency contracts and/or swaps, which are reported as unrealized gain/loss at period end.

Independent pricing services are used to value a majority of the Funds’ investments. When values are not available from a pricing service, they may be computed by the Funds’ investment adviser or an affiliate. In any event, values may be determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information and analysis. A significant portion of the Funds’ assets and liabilities are categorized as Level 2 or Level 3, as indicated in this report.

Indicative quotes from broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may be also used to value the Funds’ assets and liabilities, i.e. prices provided by a broker-dealer or other market participant who has not committed to trade at that price. Although indicative quotes are typically received from established market participants, the Funds may not have the transparency to view the underlying inputs which support the market quotations. Significant changes in an indicative quote would generally result in significant changes in the fair value of the security.

Certain fixed income securities are valued by obtaining a monthly indicative quote from a broker-dealer, adjusted for fluctuations in criteria such as credit spreads and interest rates. The Funds’ fair valuation guidelines were recently revised to transition such monthly indicative quoted securities from Level 2 to Level 3.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

 
120  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

The following is a summary of significant unobservable inputs used in the fair valuation of assets and liabilities categorized within Level 3 of the fair value hierarchy:

            Ending Balance at            
Fund     Category and Subcategory     09/30/14     Valuation Technique     Unobservable Inputs
 
      Investments, at value                  
Floating Rate Strategies Fund     Senior Floating Rate Interests     $27,188,014     Monthly Model Priced     Purchase Price
      Asset-Backed Securities     2,113,450     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Corporate Bonds     1,666,080     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
            1,063,000     Monthly Model Priced     Purchase Price
                   
      Total Corporate Bonds     2,729,080            
                   
                         
High Yield Fund     Senior Floating Rate Interests     1,762,119     Monthly Model Priced     Purchase Price
      Corporate Bonds     1,216,225     Monthly Model Priced     Purchase Price
            570,900     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
                   
      Total Corporate Bonds     1,787,125            
                   
                         
Investment Grade Bond Fund     Corporate Bonds     2,255,460     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Preferred Stock     2,142,060     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Mortgage-Backed Securities     473,556     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
                         
Limited Duration Fund     Asset-Backed Securities     888,202     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
                         
Macro Opportunities Fund     Bonds     14,144,559     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
            1,566,000     Monthly Model Priced     Purchase Price
                   
      Total Bonds     15,710,559            
                   
      Asset-Backed Securities     10,038,356     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Senior Floating Rate Interests     8,552,307     Monthly Model Priced     Purchase Price
                         
Total Return Bond Fund     Bonds     3,121,033     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Asset-Backed Securities     1,827,929     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      
      Mortgage-Backed Securities     947,112     Option Adjusted Spread off the     Indicative Quote
                  month end broker mark over the      
                  3 month LIBOR      

Any remaining Level 3 securities held by the Funds and excluded from the tables above, were not considered material to the Funds.

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 recognized transfers between the levels as of the beginning of the period. As of September 30, 2014, the Funds had transfers in/out of Level 3 due to changes in securities valuation method. See the tables below for changes to and from Level 2 and Level 3. There were no other securities that transferred between levels.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  121

NOTES TO FINANCIAL STATEMENTS (continued)
 

Summary of Fair Value Level 3 Activity

Following is a reconciliation of Level 3 assets and liabilities for which significant unobservable inputs were used to determine fair value for the year ended September 30, 2014:

LEVEL 3 – Fair value measurement using significant unobservable inputs

    Senior Floating       Asset-Backed       Corporate        
    Rate Interests       Securities       Bonds     Total  
 
Floating Rate Strategies Fund                              
Assets:                              
Beginning Balance   $ —     $ 10,532,530     $ —   $ 10,532,530  
Purchases     26,510,283       —       2,559,379     29,069,662  
Sales, maturities and paydowns     (103,125 )     —       —     (103,125 )
Total realized gains or losses included in earnings     —       —       —     —  
Total change in unrealized gains or losses included in earnings     (506,144 )     22,918       169,700     (313,526 )
Transfers in Level 3     1,287,000       2,090,532       —     3,377,532  
Transfers out of Level 3     —       (10,532,530 )     —     (10,532,530 )
 
Ending Balance   $ 27,188,014     $ 2,113,450     $ 2,729,079   $ 32,030,543  
 

    Senior Floating       Corporate                
      Rate Interests       Bonds     Warrants       Total  
 
High Yield Fund                              
Assets:                              
Beginning Balance   $ —     $ —   $ 3     $ 3  
Purchases     1,780,750       1,750,603     —       3,531,353  
Sales, maturities and paydowns     (20,625 )     —     —       (20,625 )
Total realized gains or losses included in earnings     —       —     —       —  
Total change in unrealized gains or losses included in earnings     1,994       36,522     —       38,516  
Transfers in Level 3     —       —     —       —  
Transfers out of Level 3     —       —     (3 )     (3 )
 
Ending Balance   $ 1,762,119     $ 1,787,125   $ —     $ 3,549,244  
 

    Asset-Backed     Mortgaged-Backed       Corporate       Preferred        
      Securities       Securities       Bonds       Stocks     Total  
 
Investment Grade Bond Fund                                      
Assets:                                      
Beginning Balance   $ 382,749     $ —     $ —     $ —   $ 382,749  
Purchases     —       463,398       1,000,000       —     1,463,398  
Sales, maturities and paydowns     —       (3,088 )     (23,650 )     —     (26,738 )
Total realized gains or losses included in earnings     —       —       —       —     —  
Total change in unrealized gains or losses included in earnings     —       13,246       151,009       68,314     232,569  
Transfers in Level 3     —       —       1,128,101       2,073,746     3,201,847  
Transfers out of Level 3     (382,749 )     —       —       —     (382,749 )
 
Ending Balance   $ —     $ 473,556     $ 2,255,460     $ 2,142,060   $ 4,871,076  
 

    Asset-Backed          
      Securities       Total  
 
Limited Duration Fund                
Assets:                
Beginning Balance   $ —     $ —  
Purchases     990,212       990,212  
Sales, maturities and paydowns     (110,285 )     (110,285 )
Total realized gains or losses included in earnings     —       —  
Total change in unrealized gains or losses included in earnings     8,275       8,275  
Transfers in Level 3     —       —  
Transfers out of Level 3     —       —  
 
Ending Balance   $ 888,202     $ 888,202  
 

 
122 | THE GUGGENHEIM FUNDS ANNUAL REPORT    


NOTES TO FINANCIAL STATEMENTS (continued)
 

    Senior Floating     Asset-Backed                    
    Rate Interests       Securities         Bonds       Total  
 
Macro Opportunities Fund                                  
Assets:                                  
Beginning Balance   $ —     $ 24,277,702       $ —     $ 24,277,702  
Purchases     8,510,000       11,625,236         10,129,042       30,264,278  
Sales, maturities and paydowns     (1,538,938 )     (1,003,236 )       (52,030 )     (2,594,203 )
Total realized gains or losses included in earnings     —       —         —       —  
Total change in unrealized gains or losses included in earnings     195,245       88,323         536,925       820,493  
Transfers in Level 3     1,386,000       1,942,833         2,481,822       5,810,655  
Transfers out of Level 3     —       (24,277,702 )       —       (24,277,702 )
 
Ending Balance   $ 8,552,307     $ 12,653,156       $ 13,095,759     $ 34,301,222  
 

      Mortgage-Backed       Asset-Backed                      
        Securities         Securities         Bonds         Total  
 
Total Return Bond                                        
Assets:                                        
Beginning Balance   $ —       $ 2,590,363       $ —     $ 2,590,363  
Purchases       926,796         1,501,289         1,850,000         4,278,086  
Sales, maturities and paydowns       (6,175 )       (167,206 )       (23,650 )       (197,031 )
Total realized gains or losses included in earnings       —         —         —         —  
Total change in unrealized gains or losses included in earnings       26,491         22,341         166,581         215,413  
Transfers in Level 3       —         471,505         1,128,101         1,599,606  
Transfers out of Level 3       —         (2,590,363 )       —         (2,590,363 )
 
Ending Balance   $ 947,112     $ 1,827,929     $ 3,121,032     $ 5,896,074  
 

5. 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 Fund’s financial position and results of operations.

The Funds utilized derivatives for the following purposes:

Fund   Index Exposure   Hedge   Duration  
 
Floating Rate Strategies Fund   —   x   —  
High Yield Fund   —   x   —  
Investment Grade Bond Fund   —   x   x  
Macro Opportunities Fund   x   x   x  
Total Return Bond Fund   —   x   x  

The following table represents the notional amount of derivative instruments outstanding as an approximate percentage of the Funds’ net assets on a quarterly basis.

    Approximate percentage of Fund’s
net assets on a quarterly basis		  
Fund   Long   Short  
 
Floating Rate Strategies Fund   5%   —  
High Yield Fund   5%   —  
Investment Grade Bond Fund   20%   —  
Macro Opportunities Fund   10%   15%  
Total Return Bond Fund   15%   —  

The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of September 30, 2014:

Derivative Investment Type   Asset Derivatives   Liability Derivatives
 
Equity/Currency/Interest Rate/Commodity contracts   Unrealized appreciation on swap agreements   Unrealized depreciation on swap agreements
    Unrealized appreciation on forward foreign   Options written, at value
   

currency exchange contracts

    
    Investments in unaffiliated issuers, at value    

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 123

NOTES TO FINANCIAL STATEMENTS (continued)
 

The following table sets forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at September 30, 2014:

Asset Derivative Investments Value
 
                      Forward     Options   Options     Options     Options    
                      Foreign   Purchased/ Purchased/   Purchased/   Purchased/    
      Swaps     Swaps     Swaps   Currency     Written   Written     Written     Written    
      Equity     Currency   Interest Rate   Exchange   Currency Commodity     Equity   Interest Rate      
Fund   Contracts     Contracts     Contracts   Contracts     Contracts   Contracts     Contracts     Contracts   Total
 
Floating Rate Strategies Fund   $ —   $ —   $ — $ 4,097,714   $ — $ —   $ —   $ — $ 4,097,714
High Yield Fund     —     —     —   472,307     —   —     —     —   472,307
Investment Grade Bond Fund     —     —     559,310   —     —   —     —     —   559,310
Macro Opportunities Fund     —     605,756     1,010,190   2,142,015     —   69,680     —     —   3,827,641
Total Return Bond Fund     —     —     720,205   23,809     —   —     —     —   744,014
 

Liability Derivative Investments Value
 
                        Forward     Options     Options     Options     Options      
                        Foreign   Purchased/   Purchased/   Purchased/   Purchased/      
      Swaps     Swaps     Swaps     Currency     Written     Written     Written     Written      
      Equity   Currency   Interest Rate     Exchange     Currency   Commodity     Equity   Interest Rate      
Fund   Contracts   Contracts     Contracts     Contracts     Contracts     Contracts     Contracts     Contracts     Total
 
Investment Grade Bond Fund   $ —   $ —   $ 3,645   $ —   $ —   $ —   $ —   $ —   $ 3,645
Macro Opportunities Fund     6,009,738     —     3,583,220     —     —     1,416     —     —     9,594,374
Total Return Bond Fund     —     —     34,155     —     —     —     —     —     34,155
 

The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended September 30, 2014:

Derivative Investment Type   Location of Gain (Loss) on Derivatives
 
     
Equity/Currency/Interest Rate/Commodity contracts   Net realized gain (loss) on forward foreign currency exchange contracts
    Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts
    Net realized gain (loss) on options purchased
    Net change in unrealized appreciation (depreciation) on options purchased
    Net realized gain (loss) on options written
    Net change in unrealized appreciation (depreciation) on options written
    Net realized gain (loss) on swap agreements
    Net change in unrealized appreciation (depreciation) on swap agreements

The following is a summary of the Funds’ realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statements of Operations categorized by primary risk exposure for the year ended September 30, 2014:

Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations
 
                    Forward     Options   Options     Options     Options    
                    Foreign     Purchased/   Purchased/     Purchased/     Purchased/    
      Swaps   Swaps     Swaps   Currency     Written   Written     Written     Written    
      Equity   Currency   Interest Rate   Exchange     Currency   Commodity     Equity   Interest Rate    
Fund     Contracts   Contracts     Contracts   Contracts     Contracts   Contracts     Contracts     Contracts   Total
 
Floating Rate Strategies Fund   $ — $ —   $ — $ 3,875,634   $ — $ —   $ —   $ —   $3,875,634
High Yield Fund     —   —     —   308,186     —   —     —     —   308,186
Investment Grade Bond Fund     —   —     460,552   —     —   —     —     (108,048)   352,504
Macro Opportunities Fund     3,669,502   1,428,400     (2,389,057)   3,489,884     (1,740,000)   —     (805,569)     (2,163,996)   1,489,164
Total Return Bond Fund     —   —     571,419   22,111     —   —     —     (239,520)   354,010
 

Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations
 
                        Forward     Options     Options     Options     Options      
                        Foreign     Purchased/     Purchased/     Purchased/     Purchased/      
      Swaps     Swaps     Swaps     Currency     Written     Written     Written     Written      
      Equity     Currency   Interest Rate     Exchange     Currency     Commodity     Equity   Interest Rate      
Fund     Contracts     Contracts     Contracts     Contracts     Contracts     Contracts     Contracts     Contracts     Total
 
Floating Rate Strategies Fund   $ —   $ —   $ —   $ 4,097,714   $ —   $ —   $ —   $ —   $ 4,097,714
High Yield Fund     —     —     —     472,307     —     —     —     —     472,307
Investment Grade Bond Fund     —     —     245,395     —     —     —     —     —     245,395
Macro Opportunities Fund     (6,010,888)     605,756     (1,094,266)     2,142,015     —     (2,354,843)     —     —     (6,712,226)
Total Return Bond Fund     —     —     417,439     23,809     —     —     —     —     441,248
                                                       

 
124 | THE GUGGENHEIM FUNDS ANNUAL REPORT    


NOTES TO FINANCIAL STATEMENTS (continued)
 

6. Offsetting

In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.

In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.

For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.

The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP.

                    Gross Amounts Not Offset    
                    In the Statements of    
                    Asset and Liabilities    
                         
                Net Amount of            
            Gross Amounts Offset   Assets Presented       Cash    
        Gross Amounts of   in the Statements of   on the Statements of   Financial   Collateral   Net
Fund   Instrument   Recognized Assets1   Assets and Liabilities   Assets and Liabilities   Instruments   Pledged2   Amount
 
Macro Opportunities Fund   Swap agreements   $          605,756   $           —   $           605,756   $           605,756   $           —   $           —

                    Gross Amounts Not Offset    
                    In the Statements of    
                    Asset and Liabilities    
                         
                Net Amount of            
            Gross Amounts Offset   Assets Presented       Cash    
        Gross Amounts of   in the Statements of   on the Statements of   Financial   Collateral   Net
Fund   Instrument   Recognized Liabilities1   Assets and Liabilities   Assets and Liabilities   Instruments   Pledged2   Amount
 
Macro Opportunities Fund   Swap agreements   $           6,230,139   $           —   $           6,230,139   $           605,756   $           —   $5,624,383

1   Exchange-traded futures and centrally cleared swap agreements are excluded from these reported amounts.
2   Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as segregated cash with broker on the Statements of Assets and Liabilities.

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.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 125

NOTES TO FINANCIAL STATEMENTS (continued)
 


Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

The RIC Modernization Act of 2010 was signed into law on December 22, 2010, and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.

One of the more prominent changes addresses capital loss carryforwards. The 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.

The tax character of distributions paid during the year ended September 30, 2014 was as follows:

      Tax-Exempt     Ordinary     Long-Term     Return of     Total  
Fund     Income     Income     Capital Gain     Capital     Distributions  
 
Floating Rate Strategies Fund   $ –   $ 57,106,379   $ 1,009,990   $ –   $ 58,116,369  
High Yield Fund     –     8,569,995     –     –     8,569,995  
Investment Grade Bond Fund     –     4,698,966     –     –     4,698,966  
Limited Duration Fund     –     1,087,449     1,009     –     1,088,458  
Macro Opportunities Fund     –     53,119,555     –     932,899     54,052,454  
Municipal Income Fund     1,597,669     32,486     –     –     1,630,155  
Total Return Bond Fund     –     11,445,172     –     –     11,445,172  

The tax character of distributions paid during the year ended September 30, 2013 was as follows:

    Tax-Exempt   Ordinary   Long-Term     Total  
Fund   Income   Income   Capital Gain   Distributions  
 
Floating Rate Strategies Fund   $ –   $ 23,244,176   $ –   $ 23,244,176  
High Yield Fund     –     8,137,614     1,126,860     9,264,474  
Investment Grade Bond Fund     –     4,185,005     –     4,185,005  
Limited Duration Fund*     –     –     –     –  
Macro Opportunities Fund     –     35,803,375     88,895     35,892,270  
Municipal Income Fund     2,227,580     14,970     –     2,242,550  
Total Return Bond Fund     –     7,753,663     233,942     7,987,605  

* The Fund commenced operations on December 16, 2013

Note: For federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.

The tax character of distributable earnings/(accumulated losses) at September 30, 2014 was as follows:

    Undistributed   Undistributed   Undistributed   Accumulated     Net Unrealized       Other       Total  
    Tax-Exempt   Ordinary   Long-Term   Capital and     Appreciation/     Temporary     Accumulated  
Fund     Income     Income   Capital Gain   Other Losses*     (Depreciation)**     Differences     Earnings/(Deficit)  
 
Floating Rate Strategies Fund   $ –   $ 7,976,757   $ 774,857   $ –     $ (10,712,590 )   $ (1,547,576 )   $ (3,508,552 )
High Yield Fund     –     1,007,829     2,170,457     –       (881,451 )     (135,987 )     2,160,848  
Investment Grade Bond Fund     –     116,136     –     (27,133,232 )     (4,201,301 )     (30,923 )     (31,249,320 )
Limited Duration Fund     –     131,363     –     –       (260,661 )     (10,292 )     (139,590 )
Macro Opportunities Fund     –     –     –     (20,431,181 )     (6,188,376 )     (834,101 )     (27,453,658 )
Municipal Income Fund     52,277     –     –     (28,409,026 )     2,217,152       (52,277 )     (26,191,874 )
Total Return Bond Fund     –     129,267     25,393     –       2,180,200       (170,185 )     2,164,675  

* The Fund had net capital loss carryovers as identified elsewhere in the Notes to the Financial Statements.
** Any differences between book-basis and tax-basis unrealized appreciation (depreciation) are attributable primarily to the tax deferral of wash sale losses, the marking-to-market of certain investments for tax purposes and bond premium/discount accretion.

 
126  |  THE GUGGENHEIM ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

For the year ended September 30, 2014 the capital loss carryovers utilized or expired and the accumulated net realized loss on sales of investments for federal income tax purposes which are available to offset future taxable gains are shown in the table below:

      Capital Loss                                                    
      Carryovers       Expires in     Expires in     Expires in       Expires in       Expires in       Unlimited     Capital Loss  
                                                             
Fund     Utilized       2014     2015     2016       2017       2018       Short-Term       Long-Term       Carryforward  
 
Floating Rate Strategies Fund   $ –     $ –   $ –   $ –     $ –     $ –     $ –     $ –     $ –  
High Yield Fund     –       –     –     –       –       –       –       –       –  
Investment Grade Bond Fund*     (519,236 )     –     –     (7,675,128 )     (17,929,397 )     (1,528,707 )     –       –       (27,133,232 )
Limited Duration Fund     –       –     –     –       –       –       –       –       –  
Macro Opportunities Fund*     –       –     –     –       –       –       (12,330,278 )     (8,100,903 )     (20,431,181 )
Municipal Income Fund     (291,160 )     –     –     –       (28,409,026 )             –       –       (28,409,026 )
Total Return Bond Fund     –       –     –     –       –       –       –       –       –  

* Subject to limitations pursuant to Section 382 of the Internal Revenue Code.

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 losses deferred due to wash sales, paydown reclasses, utilization of earnings and profits on shareholder redemptions, foreign currency gains and losses, and the “mark-to-market” of certain passive foreign investment companies (PFICs) or Section 1256 contracts 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 Net  
        Net Investment   Realized  
Fund Paid-In Capital Income   Gain/(Loss)  
 
Floating Rate Strategies Fund   $ –   $ 4,391,538     $ (4,391,538 )
High Yield Fund     671,434     509,986       (1,181,420 )
Investment Grade Bond Fund     –     661,115       (661,115 )
Limited Duration Fund     –     112,474       (112,474 )
Macro Opportunities Fund     1     (544,053 )     544,052  
Municipal Income Fund     –     –       –  
Total Return Bond Fund     –     625,297       (625,297 )

At September 30, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:

          Tax   Tax     Net  
    Tax   Unrealized   Unrealized     Unrealized  
Fund     Cost     Gain     Loss     Gain/(Loss)  
 
Floating Rate Strategies Fund   $ 1,302,718,816   $ 10,159,253   $ (21,048,918 )   $ (10,889,665 )
High Yield Fund     141,983,396     2,265,123     (3,115,114 )     (849,991 )
Investment Grade Bond Fund     136,864,942     2,293,127     (6,525,591 )     (4,232,464 )
Limited Duration Fund     99,059,321     270,503     (531,164 )     (260,661 )
Macro Opportunities Fund     1,576,547,239     27,812,964     (34,590,649 )     (6,777,685 )
Municipal Income Fund     48,496,331     2,280,706     (63,554 )     2,217,152  
Total Return Bond Fund     396,179,911     6,794,422     (4,648,815 )     2,145,607  

8. Securities Transactions

For the year ended September 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:

Fund   Purchases   Sales  
 
Floating Rate Strategies Fund   $ 953,413,530   $ 680,865,728  
High Yield Fund     178,397,502     129,882,136  
Investment Grade Bond Fund     84,645,018     65,974,000  
Limited Duration Fund     103,891,456     18,389,082  
Macro Opportunities Fund     1,161,923,663     614,504,100  
Municipal Income Fund     85,598,108     94,668,240  
Total Return Bond Fund     319,795,192     117,645,101  

 
THE GUGGENHEIM ANNUAL REPORT  |  127

NOTES TO FINANCIAL STATEMENTS (continued)
 

9. Options Written

Information as to options written by the Funds during the year ended September 30, 2014, and options outstanding at period end is provided below:

Written Call Options

  Investment Grade Bond Fund      Macro Opportunities Fund         Total Return Bond Fund
   
  Number of   Premium   Number of     Premium     Number of     Premium  
    contracts     amount   contracts     amount     contracts     amount  
 
Balance at September 30, 2013   –     $ –     354     $ 225,834       –     $ –  
Options Written   2,251       31,514     43,842       1,015,824       4,990       69,860  
Options terminated in closing purchase transactions   –       –     –       –       –       –  
Options expired   (2,251 )     (31,514 )   (39,720 )     (652,854 )     (4,990 )     (69,860 )
Options exercised   –       –     (4,122 )     (362,970 )     –       –  
 
Balance at September 30, 2014   –     $ –     354     $ 225,834       –     $ –  
 

Written Put Options

    Macro Opportunities Fund
     
    Number of     Premium  
    contracts     amount  
 
Balance at September 30, 2013   1,922     $ 284,376  
Options Written   –       –  
Options terminated in closing purchase transactions   –       –  
Options expired   (1,922 )     (284,376 )
Options exercised   –       –  
 
Balance at September 30, 2014   –     $ –  
 

10. Line of Credit

The Funds secured a committed, $275,000,000 line of credit from Citibank, N.A., good through October 10, 2014, at which time the line of credit may be renewed. This line of credit is reserved for emergency or temporary purposes. Fees related to borrowings, if any, vary under this arrangement between the greater of Citibank’s “base rate”, LIBOR plus 1.0%, and the Fed Funds rate, plus 0.50%. The Funds did not have any borrowings under this agreement as of and for the year ended September 30, 2014. The Funds also pay a commitment fee at an annualized rate of 0.08% of the average daily amount of the Funds’ unused commitment amount.

11. Loan Commitments

Pursuant to the terms of certain loan agreements, certain Funds held unfunded loan commitments as of September 30, 2014. The Funds are obligated to fund these loan commitments at the borrower’s discretion.

The unfunded loan commitments as of September 30, 2014 were as follows:

Borrowers by Fund   Expiration Date     Amount  
 
Floating Rate Strategies Fund            

Signode Industrial Group US, Inc.

   5/1/19   $ 11,400,000  

Advantage Sales & Marketing, Inc.

   7/23/21     8,137,097  

IntraWest Holdings S.à r.l.

   12/10/18     6,900,000  

Ziggo BV

   1/15/22     6,629,700  

CareCore National LLC

   6/10/15     5,150,000  

Banca Civica (UK) - Chambertin

   8/12/20     3,800,000  

McGraw-Hill Global Education Holdings LLC

   3/22/18     3,500,000  

National Financial Partners

   7/1/18     3,000,000  

Ceva Logistics Holdings BV (Dutch)

   3/19/19     3,000,000  

Wencor Group

   6/19/19     2,850,000  

WR Grace & Co.

   2/3/21     2,426,593  

Blue Coat Systems, Inc.

   2/15/17     1,500,000  

Intertrust Group

   2/15/19     1,475,000  

Hoffmaster Group, Inc.

   5/9/19     1,250,000  

American Stock Transfer & Trust

   6/11/18     800,000  

York Risk Services

   10/1/21     697,561  

Kronos, Inc.

   10/26/17     500,000  

Expert Global Solutions

   4/2/17     335,488  

SI Organization

   11/23/19     303,738  
         
        $ 63,655,177  

 
128  |  THE GUGGENHEIM ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

Borrowers by Fund     Expiration Date     Amount  
 
               
High Yield Fund              

Signode Industrial Group US, Inc.

     5/1/19   $ 1,800,000  

Phillips-Medsize Corp.

     6/13/19     1,100,000  

Advantage Sales & Marketing, Inc.

     7/21/19     1,100,000  

McGraw-Hill Global Education Holdings LLC

     3/22/18     1,000,000  

Hillman Group, Inc.

     6/13/19     1,000,000  

Wencor Group

     6/19/19     950,000  

CareCore National LLC

     6/10/15     700,000  

Learning Care Group (US), Inc.

     5/5/21     500,000  

SI Organization

     11/23/19     93,458  

York Risk Services

     10/1/21     73,171  

Service King

     9/17/21     50,633  
             
          $ 8,367,262  
               
Investment Grade Bond Fund              

CareCore National LLC

     6/10/15   $ 200,000  
               
Macro Opportunities Fund              

CareCore National LLC

     6/10/15   $ 4,750,000  

Signode Industrial Group US, Inc.

     5/1/19     3,400,000  

McGraw-Hill Global Education Holdings LLC

     3/22/18     2,000,000  

Advantage Sales & Marketing, Inc.

     7/23/21     1,641,935  

Phillips-Medsize Corp.

     6/13/19     1,100,000  

National Financial Partners

     7/1/18     1,000,000  

Ceva Logistics Holdings BV (Dutch)

     3/19/19     1,000,000  

Hillman Group, Inc.

     6/13/19     1,000,000  

IntraWest Holdings S.à r.l.

     12/10/18     750,000  

Wencor Group

     6/19/19     500,000  

Learning Care Group (US), Inc.

     5/5/21     500,000  

American Stock Transfer & Trust

     6/11/18     400,000  

Hoffmaster Group, Inc.

     5/9/19     357,143  

York Risk Services

     10/1/21     170,732  

SI Organization

     11/23/19     140,187  
             
          $ 18,709,997  
               
Total Return Bond Fund              

CareCore National LLC

     6/10/15   $ 600,000  

12. 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.

    Counterparty and                    
Fund   Terms of Agreement   Face Value   Repurchase Price   Collateral   Par Value   Fair Value
 
                         
Limited Duration                        

Bond Fund

   Jefferies & Company, Inc.           OFSI Fund Ltd        
   

2.15%-2.65%

          

5.71%

        
   

Due 10/08/14 -10/30/14

   $3,488,000   $3,494,858  

03/20/25

   $2,460,000   $2,089,635
                California Statewide Communities        
               

Development Authority

        
               

7.25%

        
               

10/01/38

   2,980,000   1,791,725
                Puerto Rico Commonwealth        
               

Government Development Bank

        
               

5.50%

        
               

08/01/20

   1,398,000   1,020,540
                Puerto Rico Commonwealth        
               

5.50%

        
               

07/01/18

   450,000   422,649
                Suntrust Adjustable Rate        
               

Mortgage Loan Trust

        
               

2.67%

        
               

02/25/37

   1,110,657   282,867

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  129


NOTES TO FINANCIAL STATEMENTS (continued)
 

In the event of counterparty default, the Funds have the right to collect the collateral to offset losses incurred. There is potential loss to the Funds in the event the Funds are delayed or prevented from exercising their rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Funds seek to assert their rights. The Funds’ investment adviser, acting under the supervision of the Board of Trustees, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Funds enter into repurchase agreements to evaluate potential risks.

13. Reverse Repurchase Agreements

Each of the Funds may enter into reverse repurchase agreements. Under a reverse repurchase agreement, a Fund sells securities and agrees to repurchase them at a particular price at a future date. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision.

For the year ended September 30, 2014, the following Funds entered into reverse repurchase agreements:

    Number of Days     Balance at   Average balance   Average interest
Fund   outstanding September 30, 2014   outstanding   rate
 
Floating Rate Strategies Fund   304   $ –   $ 2,008,521   2.09 %
High Yield Fund   319     7,642,161     12,676,514   0.90 %
Investment Grade Bond Fund   365     4,449,397     6,074,134   0.55 %
Limited Duration Fund   140     7,534,716     4,407,165   0.71 %
Macro Opportunities Fund   365     42,234,309     79,509,291   0.95 %
Total Return Bond Fund   365     13,936,733     14,108,250   0.99 %

14. 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 September 30, 2014 in which the portfolio company is an “affiliated person” are as follows:

      Value                 Value       Shares Investment Realized Gain Capital Gain
Affiliated issuers by Fund 09/30/2013 Additions   Reductions   09/30/2014     09/30/2014   Income   (Loss)   Distributions
 
Investment Grade Bond Fund                                                  

Guggenheim Limited Duration Fund -

                                                  

Institutional Class

   $ –   $ 3,007,306   $ (3,006,903)   $ –       –   $ 7,305   $ (403)   $ –
                                                   
Limited Duration Fund                                                  

Guggenheim BulletShares 2017 High

                                                  

Yield Corporate Bond ETF

   $ –   $ 1,425,873   $ (1,431,221)   $ –       –   $ 23,007   $ 5,348   $ –

Guggenheim BulletShares 2016 High

                               –                  

Yield Corporate Bond ETF

     –     1,220,663     (1,223,783)     –             20,215     3,120     374

Guggenheim BulletShares 2015 High

                                                  

Yield Corporate Bond ETF

     –     1,218,471     (1,211,333)     –       –     18,783     (7,138)     1,906

Guggenheim BulletShares 2014 High

                                                  

Yield Corporate Bond ETF

     –     294,910     (291,969)     –       –     818     (2,941)     1,163
     
    $ –   $ 4,159,917   $ (4,158,306)   $ –       –   $ 62,823   $ (1,611)   $ 3,443
Macro Opportunities Fund                                                  

Guggenheim Limited Duration Fund –

                                                  

Institutional Class

   $ –   $ 45,588,876   $ –   $ 45,498,128       1,822,842   $ 588,704   $ –   $ –

Guggenheim Risk Managed Real

                                                  

Estate Fund – Institutional Class

     –     10,043,639     –     10,843,512       401,612     26,426     –     –
     
    $ –   $ 55,632,515   $ –   $ 56,341,640       2,224,454   $ 615,130   $ –   $ –
Total Return Bond Fund                                                  

Guggenheim Limited Duration Fund –

                                                  

Institutional Class

   $ –   $ 5,071,168   $ 3,000,000   $ 2,059,674       82,519   $ 71,160   $ (5,804)   $ –

15. Fund Merger

On January 18, 2013, the Macro Opportunities Fund acquired all of the net assets of Flexible Strategies Fund, a separate series of the Rydex Series Funds, in exchange for shares of the Macro Opportunities Fund, pursuant to an agreement and plan of reorganization approved by the Board of Trustees and approved by the shareholders of the Flexible Strategies Fund. The primary reason for the transaction was to combine a smaller fund into a larger fund with a similar


 
130  |  THE GUGGENHEIM ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (concluded)
 

investment objective. The acquisition was accomplished through a combination of a tax-free exchange of the outstanding shares of the Flexible Strategies Fund (360,213 A-Class, 185,597 H-Class, 282,801 C-Class and 94,826 Institutional Class) valued at $21,680,088 ($8,501,033 A-Class, $4,380,093 H-Class, $6,546,846 C-Class, and $2,252,116 Institutional Class) for respective shares of the Macro Opportunities Fund (470,457 A-Class*, 239,285 C-Class, and 82,164 Institutional Class). For financial reporting purposes, the net assets received and shares issued by Macro Opportunities Fund were recorded at fair value; however, the Flexible Strategies Fund’s cost of the investments were carried forward to align ongoing reporting of Macro Opportunities Fund realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

Flexible Strategies Fund’s net assets on January 18, 2013 were $21,680,088 including $414,395 of unrealized appreciation. Flexible Strategies Fund’s net assets were primarily comprised of investments with a fair value of $21,674,911. The aggregate net assets of Macro Opportunities Fund immediately before and after the acquisition were $407,464,601 and $429,144,689, respectively.

The financial statements reflect the operations of the Macro Opportunities Fund for the period prior to the acquisition and the combined fund for the period subsequent to the fund merger. Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Flexible Strategies Fund that have been included in the combined fund’s Statement of Operations since the acquisition was completed. Assuming the acquisition had been completed on October 1, 2012, Macro Opportunities Fund pro-forma net investment income, net realized and unrealized loss on investments and net increase in net assets from operations for the period October 1, 2012 to September 30, 2013 would have been $34,155,336, $(30,390,985) and $3,764,351, respectively. Guggenheim Investments and its affiliates bore all of the expenses related to the reorganization.

*Includes 159,974 A-Class shares received in exchange for H-Class shares of Flexible Strategies Fund.

16. Restricted Securities

The securities below are considered illiquid and restricted under guidelines established by the Board of Trustees:

Fund   Restricted Securities   Acquisition Date   Cost   Value  
 
Floating Rate Strategies Fund   LSTAR Securities Investment Trust 2014-1              
   

3.25% due 09/01/21

   9/25/14   $6,500,000   $6,500,000  
                   
                   
High Yield Fund   Pacific Premier Bancorp, Inc.              
   

5.75% due 09/03/24

   8/25/14   1,250,000   1,256,250  
                   
Investment Grade Bond Fund   LSTAR Securities Investment Trust 2014-1              
   

3.25% due 09/01/21

   9/25/14   1,400,000   1,400,000  
    Cadence Bank North America              
   

6.25% due 06/28/29

   6/6/14   200,000   203,500  
    Cadence Financial Corp.              
   

4.88% due 06/28/19

   6/6/14   150,000   150,750  
               
            1,750,000   1,754,250  
                   
                   
Limited Duration Fund   LSTAR Securities Investment Trust 2014-1              
   

3.25% due 09/01/21

   9/25/14   2,000,000   2,000,000  
    Cadence Financial Corp.              
   

4.88% due 06/28/19

   6/6/14   500,000   502,500  
               
            2,500,000   2,502,500  
                   
Macro Opportunities Fund   LSTAR Securities Investment Trust 2014-1              
   

3.25% due 09/01/21

   9/25/14   17,400,000   17,400,000  
    Cadence Financial Corp.              
   

4.88% due 06/28/19

   6/6/14   4,000,000   4,020,000  
               
            21,400,000   21,420,000  
                   
Total Return Bond Fund   LSTAR Securities Investment Trust 2014-1              
   

3.25% due 09/01/21

   9/25/14   4,400,000   4,400,000  
    Cadence Bank North America              
   

6.25% due 06/28/29

   6/6/14   1,200,000   1,221,000  
    Cadence Financial Corp.              
   

4.88% due 06/28/19

   6/6/14   250,000   251,250  
               
            5,850,000   5,872,250  

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  131


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

The Board of Trustees and Shareholders
of Guggenheim Funds Trust

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Guggenheim Floating Rate Strategies Fund, Guggenheim High Yield Fund, Guggenheim Investment Grade Bond Fund, Guggenheim Limited Duration Fund, Guggenheim Macro Opportunities Fund, Guggenheim Municipal Income Fund and Guggenheim Total Return Bond Fund (seven of the series constituting the Guggenheim Funds Trust) (the “Funds”) as of September 30, 2014, and the related statements of operations, statements of changes in net assets, and the financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian, agent banks, transfer agents 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.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds (seven of the series constituting the Guggenheim Funds Trust) at September 30, 2014, and the results of their operations, the changes in their net assets, and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles.

McLean, Virginia
November 25, 2014

 
132  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


OTHER INFORMATION (Unaudited)
 

Tax Information

This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.

Of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:

Fund   % Qualifying
 
       
Floating Rate Strategies Fund   0.11 %
High Yield Fund   1.57 %
Investment Grade Bond Fund   2.88 %
Limited Duration Fund   6.71 %
Macro Opportunities Fund   4.16 %
Municipal Income Fund   0.00 %
Total Return Bond Fund   2.53 %

Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:

Fund   % Qualifying
 
       
Floating Rate Strategies Fund   0.11 %
High Yield Fund   1.57 %
Investment Grade Bond Fund   2.88 %
Limited Duration Fund   6.71 %
Macro Opportunities Fund   4.16 %
Municipal Income Fund   0.00 %
Total Return Bond Fund   2.53 %

Additionally, of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following funds had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:

Fund   % Qualifying   % STCG Qualifying
 
             
Floating Rate Strategies Fund   69.18 %   100.00 %
High Yield Fund   70.61 %   0.00 %
Investment Grade Bond Fund   45.65 %   0.00 %
Limited Duration Fund   29.88 %   100.00 %
Macro Opportunities Fund   52.98 %   0.00 %
Municipal Income Fund   0.00 %   0.00 %
Total Return Bond Fund   39.82 %   0.00 %

Municipal Income Fund designates $1,597,669 as tax-exempt interest income according to IRC Section 852(b)(5)(A).

With respect to the taxable year ended September 30, 2014, the Funds hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year.

          LT Capital Gain
    LT Capital Gain     Using Proceeds from
Fund   Dividends   Shareholder Redemptions
 
               
Floating Rate Strategies Fund     $1,009,990     $       —  
High Yield Fund     —     671,435  
Limited Duration Fund     1,099     —  

In January 2015, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by you in the calendar year 2014.

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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.

 
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OTHER INFORMATION (Unaudited) (continued)
 

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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules Information

The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800- SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.

Office Locations
 
The offices of Guggenheim Investments can be found in the following locations:
 
330 Madison Avenue
 
10th Floor
 
New York, NY 10017
 
(Headquarters)
 
 
Four Irvington Centre
 
805 King Farm Boulevard
 
Suite 600
 
Rockville, MD 20850
 
 
9401 Indian Creek Parkway
 
40 Corporate Woods
 
Suite 850
 
Overland Park, KS 66210

Distributor change

Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds was consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD serves as the Funds’ distributor.

GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.

The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.

Guggenheim Funds Trust

Guggenheim Funds Trust (the “Trust”), which was organized as a Delaware statutory trust on November 8, 2013, is registered with the Securities and Exchange Commission (“SEC”) as an investment company. The Trust is an open-end management investment company that, upon the demand of the investor, must redeem its shares and pay the investor the next calculated NAV. The Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”), Guggenheim Large Cap Value Fund (“Large Cap Value Fund”), Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”), Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional Fund”), Guggenheim Small Cap Value Fund (“Small Cap Value Fund”), Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core Fund”), Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth Fund”) and Guggenheim World Equity Income Fund (“World Equity Income Fund”) (collectively, the “Funds”) were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund (the “Predecessor Corporations”), different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at special meetings of shareholders, the shareholders of each Predecessor Fund approved the reorganization of each Predecessor Fund with and into a corresponding “shell” series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any such historical information provided for a series of the Trust that relates to periods prior to January 28, 2014, therefore, is that of the corresponding Predecessor Fund.

 
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OTHER INFORMATION (Unaudited) (continued)
 

Effective January 28, 2014, the Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”), Guggenheim High Yield Fund (“High Yield Fund”), Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”), Guggenheim Limited Duration Fund (“Limited Duration Fund”), Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”), Guggenheim Municipal Income Fund (“Municipal Income Fund”), and Guggenheim Total Return Bond Fund (“Total Return Bond Fund”), which were series of Security Income Fund, a Kansas corporation, reorganized with and into corresponding series of Guggenheim Funds Trust, a Delaware Statutory Trust (each, a “Reorganization”). Upon completion of each Reorganization, the respective share classes of each Fund assumed the performance, financial and other historical information of those of the corresponding predecessor fund.

At a meeting of shareholders held on January 8, 2014, shareholders of the Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”) approved the reorganization of the Fund from a Kansas corporation to a Delaware statutory trust. After the close of business on September 23, 2014, the Fund, which is a series of Security Equity Fund, a Kansas corporation, will reorganize with and into a corresponding “shell” fund (the “New Fund”), which is a series of Guggenheim Funds Trust, a Delaware statutory trust. Upon completion of the Reorganization, shareholders of the Fund will own shares of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the New Fund will assume the performance, financial and other historical information of that of the Fund. Once the Reorganization is completed, the Fund will no longer be offered as a series of Security Equity Fund.

Report of the Guggenheim Funds Trust Contracts Review Committee

Guggenheim Funds Trust (the “Trust”) was organized as a Delaware statutory trust on November 8, 2013, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Effective January 28, 2014, the Trust is the successor of all of the existing and active series of Security Equity Fund (except for Guggenheim Alpha Opportunity Fund),1 Security Large Cap Value Fund, Security Mid Cap Growth Fund and Security Income Fund, each, a Kansas corporation (collectively, the “Corporations”), following the reorganization of each series of the Corporations with and into a corresponding “shell” series of the Trust (the “Reorganizations”). The Reorganizations, which were approved by the Boards of Directors of the Corporations (collectively, the “Board of Directors” or the “Predecessor Board” and the members of the Board of Directors individually, “Directors”), including the Directors who are not “interested persons,” as defined by the 1940 Act, of the Corporations (the “Independent Directors”), and by shareholders, were intended to, among other things, take advantage of various benefits available to registered investment companies organized as Delaware statutory trusts, including, but not limited to, Delaware’s comprehensive body of law related to investment companies which may reduce legal uncertainty and risk.

The Trust includes the following series (the “New Series”), each of which assumed the accounting and performance histories of the corresponding predecessor fund (a “Predecessor Fund” and collectively, the “Predecessor Funds”):

  •   Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”)2   •   Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”)
               
  •   Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”)   •   Guggenheim High Yield Fund (“High Yield Fund”)
               
  •   Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”)   •   Guggenheim Large Cap Value Fund (“Large Cap Value Fund”)
               
  •   Guggenheim Limited Duration Fund (“Limited Duration Fund”)   •   Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”)
               
  •   Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional”)   •   Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”)
               
  •   Guggenheim Municipal Income Fund (“Municipal Income Fund”)   •   Guggenheim Small Cap Value Fund (“Small Cap Value Fund”)
               
  •   Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth”)   •   Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core”)
               
  •   Guggenheim Total Return Bond Fund (“Total Return Bond Fund”)   •   Guggenheim World Equity Income Fund (“World Equity Income Fund”)

With the exception of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund, Security Investors, LLC, also known as Guggenheim Investments (“Security Investors”) and an indirect subsidiary of Guggenheim Partners, LLC, a global diversified financial services firm (“Guggenheim Partners”), serves as investment manager to each series of the Trust. (Guggenheim Partners, Security Investors, Guggenheim Partners Investment Management, LLC (“GPIM”) and their affiliates may be referred to herein collectively as “Guggenheim.”) In this connection, the Trust and Security Investors have entered into four separate investment management agreements which group the New Series of the Trust to

1 At a meeting of shareholders held on January 8, 2014, shareholders of Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”), a series of Security Equity Fund, approved the reorganization of Alpha Opportunity Fund to a corresponding new series of the Trust (the “Alpha Opportunity Fund Reorganization”). Due to certain outstanding transactions with Lehman Brothers International Europe (“LBIE”) and its administrator, the Alpha Opportunity Fund Reorganization was delayed pending the resolution of the LBIE matter. Alpha Opportunity Fund was reorganized into the Trust on September 24, 2014.
2 Because the Alpha Opportunity Fund was not reorganized into the Trust until September 2014, at the time of the Board’s review of the investment advisory agreements Alpha Opportunity Fund was a series of the Security Equity Fund.

 
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correspond with the Predecessor Funds that were series of a common Corporation: (i) Mid Cap Value Fund, Mid Cap Value Institutional, Small Cap Value Fund, StylePlus—Large Core Fund, World Equity Income Fund and Alpha Opportunity Fund3, the corresponding Predecessor Funds of which were series of a common Corporation, Security Equity Fund; (ii) Large Cap Value Fund, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Large Cap Value Fund; (iii) StylePlus—Mid Growth, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Mid Cap Growth Fund; and (iv) Investment Grade Bond Fund, High Yield Fund and Municipal Income Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund. (The New Series identified in (i) through (iv) above are collectively referred to herein as the “SI-Advised Funds.”) Under the terms of the applicable investment management agreement between the Trust and Security Investors, Security Investors also is responsible for overseeing the activities of GPIM, an indirect subsidiary of Guggenheim Partners, with respect to its service as investment sub-adviser to Municipal Income Fund, pursuant to an investment sub-advisory agreement between Security Investors and GPIM (the “Sub-Advisory Agreement”).

GPIM serves as investment adviser with respect to each of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund (collectively, the “GPIM-Advised Funds” and together with the SI-Advised Funds, the “Funds” and individually, a “Fund”). In this connection, the Trust and GPIM have entered into three separate investment advisory agreements which group the GPIM-Advised Funds as follows: (i) Enhanced World Equity Fund, the corresponding Predecessor Fund of which was a series of Security Equity Fund; (ii) Floating Rate Strategies Fund, Macro Opportunities Fund and Total Return Bond Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund; and (iii) Limited Duration Fund, the corresponding Predecessor Fund of which was a series of Security Income Fund. (The investment management agreements pertaining to the SI-Advised Funds and the investment advisory agreements pertaining to the GPIM-Advised Funds are referred to herein together as the “Advisory Agreements” and, together with the Sub-Advisory Agreement, as the “Agreements.” In addition, unless the context indicates otherwise, GPIM, with respect to its service as investment adviser to the GPIM-Advised Funds, and Security Investors as to the SI-Advised Funds, are each referred to herein as the “Adviser” and together, the “Advisers.”) Under the supervision of the Board of Trustees of the Trust (the “Board” and the members of the Board individually, the “Trustees”), the Advisers regularly provide (or, as applicable, oversee the provision of) investment research, advice and supervision, a continuous investment program and direct the purchase and sale of securities and other investments for each Fund’s portfolio.

At a meeting held on November 11, 2013, in connection with other actions taken to pursue the Reorganizations, the Predecessor Board, including the Independent Directors, appointed each of the then-current investment manager/adviser for the Predecessor Funds to serve in such capacity to the corresponding New Series of the Trust (i.e., Security Investors and GPIM with respect to the SI-Advised Funds and the GPIM-Advised Funds, respectively). The Predecessor Board, including the Independent Directors, also approved for the Trust, on behalf of the New Series, the investment advisory and investment management agreements then in effect with respect to the Predecessor Funds (i.e., the Advisory Agreements and the Sub-Advisory Agreement). The sole initial shareholder of the New Series subsequently approved the Advisory Agreements and the Sub-Advisory Agreement, which are identical to the agreements then in place with respect to each of the Predecessor Funds in all material respects, except for the name of the signatory and the applicable state law, and became effective January 27, 2014.

At meetings held in person on April 17, 2014 (the “April Meeting”) and on May 12, 2014, (the “May Meeting”), the members of the Contracts Review Committee of the Board (the “Committee”), consisting solely of the Trustees who are not “interested persons,” as defined by the 1940 Act, of the Trust (the “Independent Trustees”), met separately from Guggenheim to consider the renewal of the Advisory Agreements and the Sub-Advisory Agreement in connection with the Committee’s annual contract review schedule.4 As part of its review process, the Committee was represented by independent legal counsel to the Independent Trustees (“Independent Legal Counsel”). Independent Legal Counsel reviewed and discussed with the Committee various key aspects of the Trustees’ legal responsibilities relating to the proposed renewal of the Agreements and other principal contracts. In this connection, Independent Legal Counsel advised the Committee of: (i) the responsibilities of board members under applicable law; (ii) the standards for determining what constitutes an excessive fee as delineated by the courts and the factors the Trustees should consider in determining whether to approve the fee arrangements; and (iii) the disclosure requirements

3 At the time of the Board’s review of the investment advisory agreements, Security Investors served as investment manager to Alpha Opportunity Fund pursuant to an investment management agreement with Security Equity Fund. The investment management agreement with Security Investors transferred to the Trust upon the Alpha Opportunity Fund Reorganization.
4 Since the corresponding Predecessor Fund of Enhanced World Equity Fund was subject to an investment management agreement approved by the Board of Directors of Security Equity Fund for an initial term of two years at an in-person meeting of the Board held on February 13, 2013, and because the Fund has a limited operating history, it was not included in the contract renewal process conducted in April and May 2014 (the “2014 Contract Renewal Process”). Similarly, Limited Duration Fund was not included in the 2014 Contract Renewal Process because the corresponding Predecessor Fund of Limited Duration Fund was subject to an investment management agreement approved by the Board of Directors of Security Income Fund for an initial term of two years at an in-person meeting of the Board held on November 11, 2013. Another recently launched series of the Trust, the Guggenheim Risk Managed Real Estate Fund (the “Risk Managed Real Estate Fund”) also was excluded from the 2014 Contract Renewal Process because the investment advisory agreement between GPIM and the Trust, on behalf of the Risk Managed Real Estate Fund, was approved by the Board of Trustees of the Trust for an initial term of two years at an in-person meeting of the Board held on February 12, 2014. Accordingly, references herein to the “Funds” should be understood as referring to all series of the Trust, except Enhanced World Equity Fund, Limited Duration Fund and Risk Managed Real Estate Fund. In addition, references to the “Funds” should be understood as including Alpha Opportunity Fund. Since the Alpha Opportunity Fund Reorganization was not effected as of the April Meeting or May Meeting, the individuals who serve as the Independent Trustees, in their capacity as the Independent Directors of Security Equity Fund, considered the renewal of the Investment Management Agreement between Security Investors and Security Equity Fund, with respect to Alpha Opportunity Fund. Accordingly, all references hereafter to the steps taken by the “Independent Trustees” and the “Committee,” including the materials reviewed and factors considered, also refer to such parties in their corresponding capacities with respect to Alpha Opportunity Fund. Likewise, all action taken with respect to the Trust’s Advisory Agreements includes the Investment Management Agreement regarding Alpha Opportunity Fund.

 
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pertaining to these approvals, as required by the Securities and Exchange Commission. The Committee took into account various materials received from Guggenheim and Independent Legal Counsel. Recognizing that the evaluation process with respect to the services provided by each of the Advisers is an ongoing one, the Committee also considered the variety of written materials, reports and oral presentations it received (and received by the full Board) throughout the year regarding performance and operating results of the Funds (which, as noted, reflects the accounting and performance histories of the Predecessor Funds).

In connection with the contract review process, FUSE Research Network LLC (“FUSE”), an independent, third party research provider, was engaged to prepare advisory contract renewal reports designed specifically to help boards of directors/trustees fulfill their advisory contract renewal responsibilities. The objective of the reports is to present the subject funds’ relative position regarding fees, expenses and total return performance, with peer group and universe comparisons. Guggenheim prepared a comprehensive presentation in response to a formal request for information sent by Independent Legal Counsel on behalf of the Committee. In addition, Guggenheim made a detailed presentation at the April Meeting, which addressed areas identified for discussion by the Committee Chair and Vice Chair and Independent Legal Counsel. Throughout the process, the Committee asked questions of management and requested certain additional information which Guggenheim provided following the April Meeting (collectively with the foregoing reports and materials, the “Contract Materials”).

Among other things, Guggenheim provided: (i) organizational charts and presentations, staffing reports and biographies of those key personnel of each Adviser providing services to the Funds; (ii) descriptions of various functions performed by Guggenheim for the Funds, such as portfolio trading practices, brokerage matters, trade allocation and best execution; (iii) information regarding each Adviser’s compliance and regulatory history, including its Form ADV; and (iv) information concerning the parent company and overall Guggenheim organization and strategic plans and goals, all to assist the Committee in assessing the nature, extent and quality of services provided by each of Security Investors and GPIM, respectively. In addition, Guggenheim’s response included information comparing the investment performance, advisory fees and total expenses of the Funds to other funds (including such information presented in the FUSE reports as well as supplemental information prepared by Guggenheim), charts showing revenues for Guggenheim by product line and each Fund, including a break-out of various expenses, a description of the expense allocation methodology and information about the profitability of the Funds to Guggenheim Investments (the investment management business of Guggenheim Partners), financial information for Guggenheim Investments (unaudited), and information about Guggenheim’s compliance and risk management programs.

Following an analysis and discussion of the factors identified below and in the exercise of its business judgment, the Committee concluded that it was in the best interests of the Funds to recommend that the Board approve the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.

Advisory Agreements

Nature, Extent and Quality of Services Provided by each Adviser: With respect to the nature, extent and quality of services currently provided by each Adviser, the Committee considered the information provided by Guggenheim concerning the education, experience, professional affiliations, area of responsibility and duties of all key personnel performing services for the Funds, including those personnel providing compliance oversight. In this connection, the Committee considered Guggenheim’s resources and related efforts to retain, attract and motivate capable personnel to serve the Funds and noted Guggenheim’s report on recent additions and departures in personnel who work on matters relating to the Funds or are significant to the operations of each Adviser. The Committee noted that on a regular basis the Board receives and reviews information from the Trust’s Chief Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. In addition, the Committee took into account the various compliance and risk management initiatives undertaken by Guggenheim, including, among other things, the hiring of a new Chief Risk Officer, Portfolio Management, responsible for implementing various initiatives related to the risks associated with the investment process, the organization’s risk management infrastructure and critical activities. The Committee also considered Guggenheim’s other initiatives intended to achieve greater enhancements and efficiencies in the organization’s ability to provide services to all of the registered investment companies for which Security Investors, GPIM or another Guggenheim affiliate serves as investment adviser/manager (including the Funds), such as efforts to streamline and simplify the organizational structure of Guggenheim’s advisory business, as reflected by the internal restructuring that consolidated the investment advisers, broker/dealers and other entities that comprise “Guggenheim Investments” under a new, single holding company, Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”). In this regard, the Committee considered that although the restructuring neither impacted the services rendered on a day-to-day basis to the Funds nor changed the ultimate ownership of the various Guggenheim entities involved, which, through GPIMH, continue to be indirect subsidiaries of Guggenheim Capital, LLC, Guggenheim stated that the restructuring will allow the financial statements of the various entities to be consolidated and audited, thus providing a clearer view of Guggenheim Investments’ business within the broader Guggenheim organization. Moreover, in connection with the Committee’s evaluation of the overall package of services provided by each Adviser, the Committee considered each Adviser’s administrative capabilities, including its role in monitoring and coordinating compliance responsibilities with the fund administrator, transfer agent, distributor, custodian and other service providers to the Funds.

 
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With respect to Guggenheim’s resources and the ability of each Adviser to carry out its responsibilities under the applicable Advisory Agreement, the Chief Financial Officer of Guggenheim Investments reviewed with the Committee certain unaudited financial information concerning GPIMH. (The Committee received the audited financial statements of GPIMH once available following the May Meeting.)

The Committee also considered the acceptability of the terms of each Advisory Agreement (including the scope of services required to be performed by each Adviser). Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of each Adviser’s quality of performance of its duties through Board meetings, discussions, and reports throughout the year, the Committee concluded that each Adviser and its personnel were qualified to serve the Funds in such capacity and may reasonably be expected to continue to provide a high quality of services under each Advisory Agreement with respect to the Funds.

Investment Performance: The Committee received for each Fund investment returns for the five-year, three-year, one-year and three-month periods ended December 31, 2013, as applicable. In addition, the Committee received a comparison of each Fund’s performance to the performance of a benchmark, a peer group of similar funds and a broader universe of funds identified by FUSE, in each case for the same periods and, with respect to performance universe rankings for each Fund as to the returns of Class A shares, also for the ten-year period ended December 31, 2013, as applicable. The Committee received from FUSE representatives and considered a description of the methodology employed by FUSE for identifying each Fund’s peer group and universe for performance and expense comparisons.

In seeking to evaluate Fund performance over a full market cycle, the Committee generally focused its attention first on five- and three-year performance rankings as compared to the relevant universe of funds, but also considered more recent performance periods, including the one-year period and, as deemed appropriate, the three-month period, for certain Funds such as for those Funds that were recently launched or had undergone recent changes in the composition of the portfolio management team and/or the investment strategies employed. In this connection, the Committee made the following observations:

  •   Alpha Opportunity Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 1st percentile for both periods. In light of the resignation of Mainstream Investment Advisors, LLC, effective, September 30, 2013, as the Fund’s sub-adviser for the domestic long/short sub-portfolio of the Fund, the Committee also considered more recent performance periods, including the one-year period and the three-month period.5 In this connection, the Committee noted that Security Investors assumed investment management responsibility for the domestic long/short sub-portfolio as of September 30, 2013. The Committee observed that the Fund’s Class A shares outperformed the performance universe median for the one-year and three-month periods ended December 31, 2013, ranking in the 5th and 13th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund’s performance for the periods ended December 31, 2013 was comparable to the Fund’s benchmark, the S&P 500 Index, for the one- and three-year periods and better than the Fund’s benchmark for the five-year period, and lagged the benchmark for the three-month period. The Committee also considered the circumstances affecting the management of the Fund as a result of the Fund’s prime broker, Lehman Brothers International Europe (“LBIE”), being placed into administration on September 15, 2008. 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 such short sales. Until such time as the liability for short sales was settled and all restrictions were removed by LBIE and Lehman Brothers, Inc. (“LBI”), the Fund could not sell such restricted long positions and/or utilize the restricted cash balances to achieve the Fund’s investment objectives and/or meet Fund redemptions or other Fund obligations. In evaluating the services provided by the Adviser and the performance of the Fund, the Committee also considered Guggenheim’s efforts to resolve the issues with LBIE and LBI and to seek the release of the collateral by LBIE and LBI in conjunction with the potential settlement of LBIE’s claim. In addition, the Committee took into account information received from Guggenheim regarding the minimum assets required to manage the Fund’s assets consistent with the Fund’s investment objectives and the undertaking made by Guggenheim to assure adequate liquidity to meet Fund redemptions.
       
  •   Floating Rate Strategies Fund: The returns of the Class A shares exceeded the median of its performance universe in both the one-year and three-month periods, ranking in the 19th and 32nd percentile, respectively. The Fund, which commenced operations on November 30, 2011, also outperformed its benchmark, the Credit Suisse Leveraged Loan Index for the one-year and three-month periods, according to information provided by Guggenheim.

5   Prior to September 30, 2013, Mainstream Investment Advisers, LLC (“Mainstream”) acted as sub-adviser to Alpha Opportunity Fund. Pursuant to an investment sub-advisory agreement, Mainstream furnished investment advisory services, supervised and arranged for the purchase and sale of securities on behalf of a portion of the assets of Alpha Opportunity Fund and provided for the compilation and maintenance of records pertaining to such investment advisory services, subject to the supervision of Security Investors and the Board of Directors of Security Equity Fund. Effective September 30, 2013, Mainstream resigned as sub-adviser to Alpha Opportunity Fund and Security Investors assumed all advisory obligations and responsibilities.

 
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  •   High Yield Fund: While the returns of the Class A shares underperformed the median of its performance universe for the three-year period and ranked in the third quartile (72nd percentile), returns for the five-year period exceeded the performance universe median and ranked in the first quartile (4th percentile) and recent performance for the one-year period also ranked in the first quartile (3rd percentile). The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Corporate High Yield Index, for the five-year and one-year periods, but lagged the benchmark for the three-year period and that the current portfolio management team for the Fund began management in August 2012 and, since that time period, performance has ranked in the first quartile and has outperformed its benchmark. In light of the foregoing, the Committee focused, in particular, on the Fund’s recent performance, including the one-year and three-month periods ended December 31, 2013, and, with respect to the latter, noted that the FUSE report ranked the Fund in the first quartile (1st percentile).
       
  •   Investment Grade Bond Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 46th and 8th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, for the five-year and three-year periods and that the current portfolio manager began management in August 2012 and, since that time, performance has been in the 1st quartile. The Committee considered that the FUSE report listed the Fund’s performance for the one-year and three-month periods in the 1st percentile and 4th percentile, respectively.
       
  •   Large Cap Value Fund: The returns of the Class A shares exceeded the median of the performance universe for the five-year period, but underperformed the median for the three-year and one-year periods and ranked in the 49th percentile, 79th percentile and 55th percentile for the five-, three- and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (18th percentile) for the year-to-date. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as part of its assessment of Fund performance and took into account the additional performance metrics provided by Guggenheim, including information that, as of December 31, 2013, the Fund ranked in the 25th percentile of its peer group since inception (July 1, 2005) based on gross returns.
       
  •   Macro Opportunities Fund: The returns of the Fund’s Class A shares ranked in the 13th and 1st percentile of its performance universe for the one-year and three-month periods, respectively, and outperformed the performance universe median for each of these periods. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index, for the one-year and three-month periods ended December 31, 2013.
       
  •   Mid Cap Value Fund: The returns of the Class A shares underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 83rd, 67th and 79th percentile for the five-year, three-year and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (13th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as a part of its assessment of Fund performance and, in this regard, noted that the FUSE report listed the Fund’s performance for the ten-year period ended December 31, 2013 in the 1st quartile (11th percentile) and that, according to Guggenheim, the Fund outperformed its benchmark over the same period and since inception.

 
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OTHER INFORMATION (Unaudited) (continued)
 

  •   Mid Cap Value Institutional: The Fund’s returns underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 69th, 80th and 83rd percentile for the five-year, three-year and one-year periods, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this connection, the Committee considered the presentation provided by the Fund’s portfolio management team at the April Meeting, as requested by the Committee. The Committee also took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap stocks.
       
  •   Municipal Income Fund: The Committee considered that Security Investors does not directly manage the investment portfolio but has delegated such duties to GPIM. Based on the information provided and the review of the Fund’s investment performance, the Committee concluded that Security Investors had appropriately reviewed and monitored GPIM’s investment performance as Sub-Adviser to the Fund.
       
  •   Small Cap Value Fund: The returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year and three-year periods, ranking in the 6th and 45th percentile, respectively. The Committee also considered information provided by Guggenheim stating that the Fund’s performance exceeded its benchmark, the Russell 2000 Value Index, for the five-year and three-year periods ended December 31, 2013. The Committee also noted supplemental information provided by the Fund’s portfolio management team indicating that since inception (August 1, 2008), the Fund has ranked in the 1st percentile of its peer group based on gross returns.
       
  •   StylePlus —Large Core: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 78th and 93rd percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for the period from May 1, 2013 through December 31, 2013 was 16.86%, as compared to the 17.43% return of the Fund’s benchmark, the S&P 500 Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (25th percentile). Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date.
       
  •   StylePlus —Mid Growth: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 70th and 78th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for period from May 1, 2013 through December 31, 2013 was 19.88%, as compared to the 19.97% return of the Fund’s benchmark, the Russell Mid Cap Growth Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 40th percentile. Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (22nd percentile) for the year-to-date.
       
  •   Total Return Bond Fund: The returns of the Fund’s Class A shares ranked in the 1st quartile (the 3rd and 4th percentile, respectively) of its performance universe for the one-year and three-month periods, respectively. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, as well as the Fund’s peer group average, for the one-year and three-month periods ended December 31, 2013.

 
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OTHER INFORMATION (Unaudited) (continued)
 

  •   World Equity Income Fund: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 96th and 95th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team in August 2013. Thus, the Committee took into account that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (12th percentile) for the year-to-date and outperformed its benchmark, the MSCI World Index, over the same period.

After reviewing the foregoing and related factors, the Committee concluded, within the context of its overall conclusions regarding the Advisory Agreements, that: (i) each Fund’s performance was acceptable; or (ii) it was satisfied with Guggenheim’s responses and efforts relating to investment performance.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Investment Manager from its Relationship with the Funds: The Committee compared each Fund’s contractual advisory fee and total net expense ratio to the applicable peer group and compared each Fund’s total net expense ratio to its universe of funds for the various classes. The Committee also reviewed the median advisory fees and expense ratios, including expense ratio components (e.g., transfer agency fees, administration fees, other operating expenses, distribution fees and fee waivers/reimbursements) of the peer group of funds. In addition, the Committee considered each Fund’s advisory fee as compared to the advisory fee charged by the applicable Adviser to another fund with a similar investment objective and strategies, as applicable, noting that, in certain instances, the Adviser charges a lower advisory fee to other clients for which it provides comparable services. In this regard, the Committee considered Guggenheim’s explanation that lower fees are charged in certain instances due to numerous factors, including the scope of contract, types of investors, applicable regulation and legal structures, tax status, and for historical pricing reasons.

In further considering the comparative fee and expense data presented in the Contract Materials and addressed by Guggenheim, the Committee made the following observations:

  •   Alpha Opportunity Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (39th percentile) and the asset weighted total net expense ratio is in the third quartile (72nd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Floating Rate Strategies Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (64th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (36th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   High Yield Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (41st percentile) and the asset weighted total net expense ratio is in the third quartile (63rd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Investment Grade Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is at the 51st percentile of its peer group and the asset weighted total net expense ratio is in the fourth quartile (88th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Large Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund and the asset weighted total net expense ratio are each below the peer group median (at the 30th and 19th percentile, respectively). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Macro Opportunities Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (89th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (65th percentile). The Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility. In this connection, the Committee noted that the Fund’s performance has been relatively strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Mid Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (85th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (72nd percentile). Although higher than median, the contractual advisory fee and the total net expense ratio for each class of shares was within a competitive range of the median of the peer group. For example,

 
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OTHER INFORMATION (Unaudited) (continued)
 

      the Class A contractual advisory fee of 0.79% is 2 basis points above the peer group median and the total net expense ratio of 1.39% is 9 basis points above the peer group median.
       
  •   Mid Cap Value Institutional Fund: The contractual advisory fee percentile rank is in the first quartile (17th percentile) of its peer group and the total net expense ratio is in the third quartile (67th percentile) of its peer group.
       
  •   Municipal Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (8th percentile) of its peer group and the asset weighted total net expense ratio is in the 55th percentile. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Small Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (77th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (43rd percentile). The Committee also considered that the Fund’s long-term performance has been strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   StylePlus—Large Core: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (67th percentile) of its peer group and the asset weighted total net expense ratio is in the fourth quartile (92nd percentile). Although the total net expense ratio for each class is higher than its peer group median, the contractual advisory fee (0.75%), at four to five basis above the peer group median for each class, was deemed to be within a reasonable range.
       
  •   StylePlus—Mid Growth: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (23rd percentile) and the asset weighted total net expense ratio is in the fourth quartile (93rd percentile) of its peer group. The Committee noted Guggenheim’s statement that the fund’s total net expense ratio is slightly higher but comparable to its peer group average.
       
  •   Total Return Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (63rd percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (28th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   World Equity Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the peer group median (45th percentile) and the Fund’s asset weighted total net expense ratio is in the fourth quartile (88th percentile) of its peer group.

With respect to the costs of services provided and profits realized by Guggenheim from its relationship with the Funds, the Committee reviewed a profit and loss statement for each Fund setting forth the revenues received from gross advisory fees, the expenses incurred in providing services to the Funds, the pre-tax operating margin and profitability rate and each Fund’s average assets for the twelve months ended December 31, 2012 and December 31, 2013, and information with respect to Guggenheim’s allocation methodologies used in preparing the profitability data.

The Committee considered other benefits available to each Adviser because of its relationship with the Funds and noted that Security Investors and GPIM may be deemed to benefit from arrangements whereby an affiliate, Rydex Fund Services, LLC, receives fees for: (i) performing certain administrative functions and bookkeeping, accounting and pricing functions for the Funds pursuant to a Fund Accounting and Administration Agreement; and (ii) acting as transfer agent for the Funds and performing all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications, and acting as the dividend disbursing agent pursuant to a Transfer Agency Agreement. The Committee reviewed the compensation arrangements for the provision of the foregoing services. The Committee also noted Guggenheim’s statement that it may benefit from marketing synergies arising from offering a broad spectrum of products, including the Funds. Based on all of the information provided and its review, the Committee determined that Guggenheim’s profitability from its relationship with the Funds was not unreasonable.

Economies of Scale to be Realized: The Committee received and considered information regarding whether there have been economies of scale with respect to the management of the Funds as Fund assets grow, whether the Funds has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. In this connection, the Committee considered management’s view that Guggenheim continues to add system resources as required to develop its infrastructure in response to the growth in the firm’s assets and there is an opportunity to optimize economies of scale across the firm’s array of products and product lines. Therefore, although Guggenheim may be realizing economies of scale and efficiencies due to its growth, it is concurrently realizing new costs and expenses associated with investment in its infrastructure.

 
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OTHER INFORMATION (Unaudited) (continued)
 

In addition, the Committee considered the size of the Funds and the competitiveness of and/or other determinations made regarding the current advisory fee for each Fund. The Committee also took into account Guggenheim’s statement that generally the Funds’ assets are not sufficiently large to warrant breakpoints, with only four Funds—Floating Rate Strategies Fund, Macro Opportunities Fund, Mid Cap Value Fund and Mid Cap Value Institutional Fund—having assets in excess of $500 million as of March 13, 2014. With respect to the four Funds noted, the Committee noted that none of the Funds had levels of profitability that were outliers and made the following observations:

  •   Floating Rate Strategies Fund: The Adviser has entered into an expense limitation agreement with respect to the Fund. In addition, the Fund’s asset weighted total net expense ratio is below the peer group median (36th percentile).
       
  •   Macro Opportunities Fund: The Fund is relatively new and the Adviser has entered into an expense limitation agreement with respect to the Fund. Although the contractual advisory fee is in the fourth quartile of its peer group, the total net expense ratio is competitive with the peer group median. In addition, as noted, the Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility.
       
  •   Mid Cap Value Fund: The Fund’s contractual advisory fee is in line with the peer group median and the total net expense ratio is competitive with the peer group median.
       
  •   Mid Cap Value Institutional Fund: The Fund’s contractual advisory fee ranks in the first quartile (17th percentile) of its peer group and the total net expense ratio is competitive with the peer group median.

The Committee determined that the advisory fee structure for the Funds was reasonable.

Sub-Advisory Agreement
Nature, Extent and Quality of Services Provided by the Sub-Adviser: With respect to the nature, extent and quality of services provided by GPIM (referred to in this discussion as the “Sub-Adviser”), the Committee considered the qualifications, experience and skills of the Sub-Adviser’s portfolio management and other key personnel and information from the Sub-Adviser describing the scope of its services to Municipal Income Fund. The Committee also considered the information provided by the Sub-Adviser concerning the Sub-Adviser’s investment practices and techniques, risk management processes, compliance policies and procedures, brokerage allocation, best execution and trade allocation, among other things. With respect to Guggenheim’s resources and the Sub-Adviser’s ability to carry out its responsibilities under the Sub-Advisory Agreement, the Committee recalled the review of certain unaudited financial information concerning GPIMH by the Chief Financial Officer of Guggenheim Investments.

The Committee also considered the acceptability of the terms of the Sub-Advisory Agreement. Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of the Sub-Adviser’s quality of performance of its duties through Board meetings, discussions and reports throughout the year, the Committee concluded that the Sub-Adviser and its personnel were qualified to serve Municipal Income Fund in such capacity and may reasonably be expected to continue to provide a high quality of services under the Sub-Advisory Agreement.

Investment Performance: The Committee considered that the returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year period and underperformed the median for the three-year period and ranked in the 1st percentile and 82nd percentile, respectively. The Committee took into account information provided by Guggenheim stating that the Fund’s performance for the periods ended December 31, 2013 outperformed the Fund’s benchmark, the Barclays Capital U.S. Municipal Long Bond Index, for the one-year and three-month periods, lagged the benchmark for the three-year period and outperformed the benchmark for the five-year period. In light of the foregoing, the Committee also noted that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (9th percentile). In addition, the Committee considered Guggenheim’s statement that the Fund was converted from a closed-end fund in January 2012 and since the conversion has outperformed its benchmark.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Sub-Adviser from its Relationship with the Fund: The Committee reviewed the level of sub-advisory fees payable to GPIM, noting that the fees would be paid by Security Investors and do not impact the fees paid by the Fund. The Committee also compared the sub-advisory fee paid by the Adviser to the Sub-Adviser to the fees charged by the Sub-Adviser to other clients including other registered investment companies.

 
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OTHER INFORMATION (Unaudited) (concluded)
 

Economies of Scale to be Realized: The Committee recognized that, because the Sub-Adviser’s fees would be paid by the Adviser and not the Fund, the analysis of economies of scale was more appropriate in the context of the Committee’s consideration of the applicable Advisory Agreement, which was separately considered. (See “Advisory Agreements - Economies of Scale to be Realized” above.)

Overall Conclusions
Based on the foregoing, the Committee determined that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other benefits received and that the continuation of the Agreements is in the best interests of each Fund. In reaching this conclusion, no single factor was determinative and each Committee member, in the exercise of his business judgment, may attribute different weights to different factors. At the May Meeting, the Committee, constituting all of the Independent Trustees, recommended the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.







 
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
 

        Term of Office       Number of
Portfolios in		    
Name, Address*
and Year of Birth		   Position(s) Held
with the Trust		   and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years		   Fund Complex
Overseen		   Other Directorships
Held by Trustees
                     
INDEPENDENT TRUSTEES                    
 
Randall C. Barnes
(1951)		   Trustee    Since 2014   Current: Private Investor (2001-present).

Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990).		   92   Current: Trustee, Purpose, Inc.
(2014-present).
 
Donald A. Chubb, Jr.
(1946)		   Trustee and Vice Chairman of the Board   Since 1994   Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc.(1997-present).   88   None.
 
Jerry B. Farley
(1946)		   Trustee and Vice Chairman of the Audit Committee   Since 2005   Current: President, Washburn University(1997-present).   88   Current: Westar Energy, Inc. (2004-present); CoreFirst Bank & Trust(2000-present).
 
Roman Friedrich III
(1946)		   Trustee and Chairman of the Contracts Review Committee   Since 2014   Current: Founder and President, Roman Friedrich & Company (1998-present).   88   Current: Zincore Metals, Inc. (2009-present).
            Former: Senior Managing Director, MLV & Co. LLC (2010-2011).       Former: Mercator Minerals Ltd. (2013-2014); First. Americas Gold Corp.(2012-2014); Blue Sky Uranium Corp. (2011-2012);Axiom Gold and Silver Corp. (2011-2012);Stratagold Corp.(2003-2009); GFM Resources Ltd. (2005-2010).
 
Robert B. Karn III
(1942)		   Trustee and Chairman of the Audit Committee   Since 2014   Current: Consultant (1998-present).

Former: Arthur Andersen (1965-1997) and Managing Partner, Financial and Economic Consulting, St. Louis office (1987-1997).		   88   Current: Peabody Energy Company (2003-present);GP Natural Resource Partners, LLC (2002-present).
 
Ronald A. Nyberg
(1953)		   Trustee and Chairman of the Nominating and Governance Committee   Since 2014   Current: Partner, Nyberg & Cassioppi, LLC(2000-present).

Former: Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999).		   94   Current: Edward-Elmhurst Healthcare System(2012-present).
 
Maynard F. Oliverius
(1943)		   Trustee and Vice Chairman of the Contracts Review Committee   Since 1998   Retired.

Former: President and CEO, Stormont-Vail HealthCare (1996-2012).		   88   None.
 
Ronald E. Toupin, Jr.
(1958)		   Trustee and Chairman of the Board   Since 2014   Current: Portfolio Consultant (2010-present).   91   Former: Bennett Group of Funds (2011-2013).
            Former: Vice President, Manager and Portfolio Manager, Nuveen Asset Management(1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999);Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999).        
INTERESTED TRUSTEE                    
 
Donald C. Cacciapaglia***   
(1951)		 President, Chief Executive Officer and Trustee   Since 2012   Current: President and CEO, certain other funds in the Fund Complex (2012-present); Vice Chairman, Guggenheim Investments(2010-present).

Former: Chairman and CEO, Channel Capital Group, Inc. (2002-2010).		   220   Current: Delaware Life(2013-present); Guggenheim Life and Annuity Company(2011-present); Paragon Life Insurance Company of Indiana(2011-present).
                     

*   The business address of each Trustee is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850
**   Each Trustee serves an indefinite term, until his successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.
***   This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  145

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)
 

Name, Address*
and Year of Birth		     Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years
               
OFFICERS              
               
Joseph M. Arruda
(1966)		     Assistant Treasurer   Since 2010   Current: Assistant Treasurer, certain other funds in the Fund Complex (2006-present); Vice President, Security Investors, LLC (2010-present); CFO and Manager, Guggenheim Specialized Products, LLC (2009-present).

Former: Vice President, Security Global Investors, LLC (2010-2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010).
 
William H. Belden, III
(1965)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (2006-present); Managing Director, Guggenheim Funds Investment Advisors, LLC (2005-present).

Former: Vice President of Management, Northern Trust Global Investments (1999-2005).
 
Mark J. Furjanic
(1959)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2005-present); Assistant Treasurer, certain other funds in the Fund Complex (2008-present).

Former: Senior Manager, Ernst & Young LLP (1999-2005).
 
James Howley
(1972)		     Assistant Treasurer   Since 2014   Current: Director, Guggenheim Investments (2004-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2006-present).

Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004).
 
Amy J. Lee
(1961)		     Vice President and
Chief Legal Officer		   Since 1987
(Secretary) Since 2007
(Vice President)		   Current: Chief Legal Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).

Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012).
 
Mark E. Mathiasen
(1978)		     Secretary   Since 2014   Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
 
Michael P. Megaris
(1984)		     Assistant Secretary   Since 2014   Current: Assistant Secretary, certain other funds in the Fund Complex (April 2014-present); Associate, Guggenheim Investments (2012-present).

Former: J.D., University of Kansas School of Law (2009-2012).
 
Elisabeth Miller
(1968)		     Chief Compliance Officer   Since 2012   Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Vice President, Guggenheim Funds Distributors, LLC (March 2014-present).

Former: CCO, Guggenheim Distributors, LLC (2009-March 2014); Senior Manager, Security Investors, LLC(2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009).
 
Alison Santay
(1974)		     AML Officer   Since 2013   Current: AML Officer, certain other funds in the Fund Complex (2010-present); Director and AML Officer, Rydex Fund Services, LLC (2010-present); AML Officer, Security Investors, LLC (2010-present); Director, Shareholder Risk and Compliance, Rydex Fund Services, LLC (2004-present).

Former: AML Officer, Guggenheim Distributors, LLC (2013-March 2014).
 
Kimberly Scott
(1974)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2012-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2012-present).

Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009).
 
Bryan Stone
(1979)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (April 2014-present); Director, Guggenheim Investments (2013-present).

Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
 
John L. Sullivan
(1955)		     Chief Financial Officer and Treasurer   Since 2014   Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex(2010-present); Senior Managing Director, Guggenheim Investments (2010-present).

Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex(2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
               

* The business address of each officer is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
** Each officer serves an indefinite term, until his or her successor is duly elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation

 
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GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)
 

Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).

Our Commitment to You

When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.

The Information We Collect About You

In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).

How We Handle Your Personal Information

As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.

Opt Out Provisions

We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.

How We Protect Privacy Online

Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.

How We Safeguard Your Personal Information

We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  147

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded)
 

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.









 
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9.30.2014

Guggenheim Funds Annual Report

Guggenheim Funds Trust - Equity
 
Guggenheim Alpha Opportunity Fund
 
Guggenheim Enhanced World Equity Fund
 
Guggenheim Large Cap Value Fund
 
Guggenheim Risk Managed Real Estate Fund
 
Guggenheim Small Cap Value Fund
 
Guggenheim StylePlus—Large Core Fund
 
Guggenheim StylePlus—Mid Growth Fund
 
Guggenheim World Equity Income Fund

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If you have questions about the Guggenheim Investments eDelivery service, contact one of our Shareholder Service Representatives at 800.820.0888.

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This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.

Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604


TABLE OF CONTENTS    
 
     
DEAR SHAREHOLDER   2
     
ECONOMIC AND MARKET OVERVIEW   4
     
ABOUT SHAREHOLDERS’ FUND EXPENSES   6
     
ALPHA OPPORTUNITY FUND   10
     
ENHANCED WORLD EQUITY FUND   18
     
LARGE CAP VALUE FUND   26
     
RISK MANAGED REAL ESTATE FUND   36
     
SMALL CAP VALUE FUND   46
     
STYLEPLUS—LARGE CORE FUND   56
     
STYLEPLUS—MID GROWTH FUND   68
     
WORLD EQUITY INCOME FUND   80
     
NOTES TO FINANCIAL STATEMENTS   90
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   105
     
OTHER INFORMATION   106
     
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS   118
     
GUGGENHEIM INVESTMENTS PRIVACY POLICIES   120

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  1

September 30, 2014
 

Dear Shareholder:

Security Investors, LLC and Guggenheim Partners Investment Management (the “Investment Advisers”) are pleased to present the annual shareholder report for one or more of our Funds (the “Funds”) for the year ended September 30, 2014. The Investment Advisers are part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.

Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds 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
October 31, 2014

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.

Alpha Opportunity Fund may not be suitable for all investors. • Value stocks are subject to the risk that the intrinsic value of the stock 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.

Enhanced World Equity Fund may not be suitable for all investors. • Investments in securities in general are subject to market risks that may cause their prices to fluctuate over time. • The Fund’s investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). 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 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 investments in other investment vehicles subject the fund to those risks and expenses affecting the investment vehicle. • The Fund’s investment in fixed income securities will change in value in response to interest rate changes and 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 bank loans and asset-backed securities, including mortgage backed, which involve special types of risks. • The Fund may invest in restricted securities which may involve financial and liquidity risk. • The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile and riskier than if it had not been leveraged. • You may have a gain or loss when you sell your shares. • See the prospectus for more information on these and other risks.

Large Cap Value Fund may not be suitable for all investors. • An investment in the Fund will fluctuate and is subject to investment risks, which means an investor could lose money. • The intrinsic value of the underlying stocks may never be realized, or the stock may decline in value. The Fund is subject to risk that large-capitalization stocks may under perform other segments of the equity market or the equity markets as a whole.

Risk Managed Real Estate Fund may not be suitable for all investors. • Investments in securities in general are subject to market risks that may cause their prices to fluctuate over time • Investing involves risk, including the possible loss of principal. • There are no assurances that any fund will achieve its objective and/or strategy. • The Fund’s investments in real estate securities subject the Fund to the same risks as direct investments in real estate, which is particularly sensitive to economic downturns. • The Fund’s use of derivatives such as futures, options and swap agreements may expose the fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. • When market conditions are deemed appropriate, the Fund will leverage to the full extent permitted by its investment policies and restrictions and applicable law. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of the Fund’s portfolio. • The more the Fund invests in leveraged instruments, the more the leverage will

 
2  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

September 30, 2014
 

magnify any gains or losses on those investments. • The Fund’s use of short selling involves increased risk and costs. The Fund risks paying more for a security than it received from its sale. • 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 foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets securities are generally subject to an even greater level of risks). • 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. • Investing in sector funds is more volatile than investing in broadly diversified funds, as there is a greater risk due to the concentration of the funds’ holdings in issuers of the same or similar offerings. • This Fund is considered non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single security could cause greater fluctuations in the value of fund shares than would occur in a more diversified fund. • Short selling involves increased risks and costs. You risk paying more for a security than you received from its sale. This strategy may not be suitable for all investors. • The Fund is subject to active trading risks that may increase volatility and impact its ability to achieve its investment objective. • You may have a gain or loss when you sell you shares. • It is important to note that the Fund is no guaranteed by the U.S. government. • Please read the prospectus for more detailed information regarding these and other risks.

Small Cap Value Fund may not be suitable for all investors. • An investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. • The intrinsic value of the underlying stocks may never be realized, or the stock may decline in value. • Investments in small-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies.

StylePlus—Large Core Fund may not be suitable for all investors. • Investments in large capitalization stocks may underperform other segments of the equity market or the equity market as a whole. • Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing companies. Value stocks are subject to the risk that the intrinsic value of the stock may never be realized by the market or that the price goes down. • 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’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. • 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 may invest in fixed income securities whose 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. A The Fund’s exposure to high yield securities may subject the Fund to greater volatility. • The Fund may invest in bank loans and asset-backed securities, including mortgage backed, which involve special types of risks. • The Fund may invest in restricted securities which 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. A Please read the prospectus for more detailed information regarding these and other risks.

StylePlus—Mid Growth Fund may not be suitable for all investors. • Investments in mid-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies. • Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions regarding the growth potential of the issuing companies. • 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’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. • 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 may invest in fixed income securities whose 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 bank loans and asset-backed securities, including mortgage backed, which involve special types of risks. • The Fund may invest in restricted securities which 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. Please read the prospectus for more detailed information regarding these and other risks.

World Equity Income Fund may not be suitable for all investors. •Investments in securities in general are subject to market risks that may cause their prices to fluctuate over time. •The Fund’s investments in foreign securities carry additional risks when compared to U.S. securities, due to the impact of diplomatic, political or economic developments in the country in question (investments in emerging markets are generally subject to an even greater level of risks). 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 investments in derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including illiquidity of the derivatives, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, lack of availability and counterparty risk. •The Fund’s use of leverage, through instruments such as derivatives, may cause the fund to be more volatile than if it had not been leveraged. •The Fund’s investments in other investment vehicles subject the Fund to those risks and expenses affecting the investment vehicle. •The Fund may 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 pre-denominate capitalization range may underperform other segments of the equity market or the equity market as a whole. A Please read the prospectus for more detailed information regarding these and other risks.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  3

ECONOMIC AND MARKET OVERVIEW (Unaudited) September 30, 2014
 

Despite market volatility rising in October, for the year ended September 30, data on everything from hiring to housing conveys that the U.S. economy is firing on all cylinders. Overcoming a first-quarter weather-related soft patch, second-quarter GDP was revised upward to 4.6%, led by business investment. Durable goods orders surged over the summer and consumer confidence was at multi-year highs, despite a lower reading for the last part of the period. With tailwinds for economic growth gathering, we could see a strong third quarter GDP reading.

September’s addition of 248,000 non-farm payroll jobs was, on the surface, at least a strong figure and certainly not something to be discounted. However, investor optimism about the report, which also showed the unemployment rate falling to 5.9%—its lowest level since 2008—masked the fact that average hourly earnings were unchanged. Economic data late in the period included disappointing factory orders, poor construction spending, and weaker-than-expected ISM manufacturing data. The most recent decline in the U.S. Conference Board Consumer Confidence Index was worrisome.

The U.S. economy is certainly doing well enough to suggest higher interest rates ahead. With quantitative easing ending in the U.S. in October 2014 and the Fed preparing investors for a higher federal funds rate, the stage is set for U.S. interest rates to move higher. However, our view is that, despite a strengthening U.S. economy, the greater risk is that interest rates head lower in the near term.

Following the “taper tantrum” last year, before rates were able to reach historical norms, the average rate on a 30-year mortgage spiked almost a full percentage point in two months—the sharpest rise since the late 1990s—resulting in an abrupt housing slowdown, which slowed the U.S. economy materially.

In addition, U.S. Treasury yields are still materially higher than those in any other developed market. The spread between 10-year U.S. Treasuries and comparable German bunds reached 157 basis points in September, its widest level since 1999, and the spread between 10-year Treasuries and 10-year Japanese government bonds was recently 189 basis points. With developments in the Middle East increasingly troubling and turbulence continuing elsewhere from Ukraine to Hong Kong, the relative price value of U.S. government bonds versus other safe haven investments should continue to be a factor keeping U.S. interest rates low.

International economic data remain weak. Euro zone economic confidence is falling as the entire region continues to battle below-target inflation. At the start of September, the European Central Bank cut interest rates and signaled their intent to launch a program to purchase asset-backed securities and covered bonds to stimulate the dismal economy. In Japan, retail sales fell month-over-month in August, while industrial production falters.

Economic data around the world confirms our view that central banks are likely to renew efforts to force liquidity into the global financial system, which in turn further supports our positive outlook for risk assets. However, positive returns are unlikely without volatility. While markets continue to rally, gains are becoming more grudging. The upward momentum in U.S. stocks has deteriorated meaningfully while credit spreads, specifically high-yield spreads, have widened significantly over the past number of weeks. While the bull market trend remains intact, as the appreciation in risk assets continues it becomes more likely that this ageing advance will, at some point, experience a correction.

For the year ended September 30, 2014, the return of the Standard & Poor’s 500® Index* (“S&P 500”) was 19.73%. The Barclays U.S. Aggregate Bond Index* returned 3.96% for the year, while the Barclays U.S. Corporate High Yield Index* returned 7.20%. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* returned 0.05%. The MSCI World Index* returned 12.22%, while the Morgan Stanley Capital International (“MSCI”) Emerging Markets Index* returned 4.30%.

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 (Unaudited) (concluded) September 30, 2014
 

*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.

BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.

Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Barclays U.S. Corporate High Yield Index covers the universe of dollar denominated, fixed rate, non-investment grade debt, taxable corporate debt.

FTSE NAREIT Equity REITs Index is one of the FTSE NAREIT US Real Estate Index Series that contains all Equity REITs not designated as Timber REITs or Infrastructure REITs. FTSE NAREIT US Real Estate Index Series is designed to present investors with a comprehensive family of REIT performance indexes that spans the commercial real estate space across the US economy. The index series provides investors with exposure to all investment and property sectors. In addition, the more narrowly focused property sector and sub-sector indexes provide the facility to concentrate commercial real estate exposure in more selected markets. The National Association of Real Estate Investment Trusts (NAREIT) is the trade association for REITs and publicly traded real estate companies with an interest in the US property and investment markets.

MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 45 country indices comprising 24 developed and 21 emerging market country indices.

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 World Index is calculated with net dividends reinvested. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

Russell 1000® Value Index is 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 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 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.

S&P 500® Index is a market-weighted stock market index comprised of the stocks of 500 U.S. corporations; the index is owned and maintained by Standard & Poor’s.

 
  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 March 31, 2014 and ending September 30, 2014.

The following tables illustrate a Fund’s costs in two ways:

Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”

Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.

 
6  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (continued)  
 

    Expense
Ratio1		     Fund
Return		     Beginning
Account Value
March 31, 2014		     Ending
Account Value
September 30, 2014		     Expenses
Paid During
Period2		  
 
Table 1. Based on actual Fund return3                                        
Alpha Opportunity Fund                                        

A-Class

     1.79 %     2.39 %     $1,000.00       $1,023.90       $9.08  

C-Class

     2.52 %     2.01 %     1,000.00       1,020.10       12.76  

Institutional Class

     1.54 %     2.49 %     1,000.00       1,024.90       7.82  
Enhanced World Equity Fund                                        

A-Class

     1.26 %     0.90 %     1,000.00       1,009.00       6.35  

C-Class

     2.01 %     0.64 %     1,000.00       1,006.40       10.11  

Institutional Class

     1.01 %     1.02 %     1,000.00       1,010.20       5.09  
Large Cap Value Fund                                        

A-Class

     1.16 %     3.47 %     1,000.00       1,034.70       5.92  

B-Class4

     0.91 %     3.62 %     1,000.00       1,036.20       4.65  

C-Class

     1.91 %     3.10 %     1,000.00       1,031.00       9.72  

Institutional Class

     0.91 %     3.61 %     1,000.00       1,036.10       4.64  
Risk Managed Real Estate Fund                                        

A-Class

     1.53 %     7.49 %     1,000.00       1,074.90       7.96  

C-Class

     2.23 %     7.00 %     1,000.00       1,070.00       11.57  

Institutional Class

     1.31 %     7.57 %     1,000.00       1,075.70       6.82  
Small Cap Value Fund                                        

A-Class

     1.33 %     (8.59 %)     1,000.00       914.10       6.38  

C-Class

     2.08 %     (8.96 %)     1,000.00       910.40       9.96  

Institutional Class

     1.08 %     (8.53 %)     1,000.00       914.70       5.18  
StylePlus—Large Core Fund                                        

A-Class

     1.35 %     6.74 %     1,000.00       1,067.40       7.00  

B-Class

     2.57 %     6.12 %     1,000.00       1,061.20       13.28  

C-Class

     2.28 %     6.26 %     1,000.00       1,062.60       11.79  

Institutional Class

     1.24 %     6.78 %     1,000.00       1,067.80       6.43  
StylePlus—Mid Growth Fund                                        

A-Class

     1.53 %     3.67 %     1,000.00       1,036.70       7.81  

B-Class

     2.88 %     2.96 %     1,000.00       1,029.60       14.65  

C-Class

     2.40 %     3.22 %     1,000.00       1,032.20       12.23  

Institutional Class

     1.58 %     3.63 %     1,000.00       1,036.30       8.07  
World Equity Income Fund                                        

A-Class

     1.48 %     2.77 %     1,000.00       1,027.70       7.52  

B-Class4

     1.23 %     2.93 %     1,000.00       1,029.30       6.26  

C-Class

     2.23 %     2.36 %     1,000.00       1,023.60       11.31  

Institutional Class

     1.23 %     2.89 %     1,000.00       1,028.90       6.26  

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  7

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)  
 

    Expense
Ratio1		     Fund
Return		     Beginning
Account Value
March 31, 2014		     Ending
Account Value
September 30, 2014		     Expenses
Paid During
Period2		  
 
Table 2. Based on hypothetical 5% return (before expenses)                                        
Alpha Opportunity Fund                                        

A-Class

     1.79 %     5.00 %     $1,000.00       $1,016.09       $9.05  

C-Class

     2.52 %     5.00 %     1,000.00       1,012.43       12.71  

Institutional Class

     1.54 %     5.00 %     1,000.00       1,017.35       7.79  
Enhanced World Equity Fund                                        

A-Class

     1.26 %     5.00 %     1,000.00       1,018.75       6.38  

C-Class

     2.01 %     5.00 %     1,000.00       1,014.99       10.15  

Institutional Class

     1.01 %     5.00 %     1,000.00       1,020.00       5.11  
Large Cap Value Fund                                        

A-Class

     1.16 %     5.00 %     1,000.00       1,019.25       5.87  

B-Class4

     0.91 %     5.00 %     1,000.00       1,020.51       4.61  

C-Class

     1.91 %     5.00 %     1,000.00       1,015.49       9.65  

Institutional Class

     0.91 %     5.00 %     1,000.00       1,020.51       4.61  
Risk Managed Real Estate Fund                                        

A-Class

     1.53 %     5.00 %     1,000.00       1,017.40       7.74  

C-Class

     2.23 %     5.00 %     1,000.00       1,013.89       11.26  

Institutional Class

     1.31 %     5.00 %     1,000.00       1,018.50       6.63  
Small Cap Value Fund                                        

A-Class

     1.33 %     5.00 %     1,000.00       1,018.40       6.73  

C-Class

     2.08 %     5.00 %     1,000.00       1,014.64       10.50  

Institutional Class

     1.08 %     5.00 %     1,000.00       1,019.65       5.47  
StylePlus—Large Core Fund                                        

A-Class

     1.35 %     5.00 %     1,000.00       1,018.30       6.83  

B-Class

     2.57 %     5.00 %     1,000.00       1,012.18       12.96  

C-Class

     2.28 %     5.00 %     1,000.00       1,013.64       11.51  

Institutional Class

     1.24 %     5.00 %     1,000.00       1,018.85       6.28  
StylePlus—Mid Growth Fund                                        

A-Class

     1.53 %     5.00 %     1,000.00       1,017.40       7.74  

B-Class

     2.88 %     5.00 %     1,000.00       1,010.63       14.52  

C-Class

     2.40 %     5.00 %     1,000.00       1,013.04       12.11  

Institutional Class

     1.58 %     5.00 %     1,000.00       1,017.15       7.99  
World Equity Income Fund                                        

A-Class

     1.48 %     5.00 %     1,000.00       1,017.65       7.49  

B-Class4

     1.23 %     5.00 %     1,000.00       1,018.90       6.23  

C-Class

     2.23 %     5.00 %     1,000.00       1,013.89       11.26  

Institutional Class

     1.23 %     5.00 %     1,000.00       1,018.90       6.23  

1 This ratio represents annualized net expenses, which may include short dividend and interest expenses. Excluding these expenses, the operating expense ratio of the Risk Managed Real Estate Fund would be 1.30%, 2.05% and 1.10% for the A-Class, C-Class and Institutional Class, respectively.
2 Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
3 Actual cumulative return at net asset value for the period March 31, 2014 to September 30, 2014.
4 B-Class shares did not charge 12b-1 fees during the period.

 
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  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  9

MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

Dear Shareholder:

Guggenheim Alpha Opportunity Fund (the “Fund”) is managed by a team of seasoned professionals, including Michael P. Byrum, CFA, Portfolio Manager; Michael Dellapa, CFA, CAIA, Portfolio Manager; and Ryan Harder, CFA, Portfolio Manager. In the following paragraphs, the team discusses changes to the Fund and performance for the fiscal year ended September 30, 2014.

For the one year period ended September 30, 2014, the Guggenheim Alpha Opportunity Fund returned 11.04%1, compared with the 19.73% return of its benchmark, the S&P 500 Index.

Over the past 12 months, the Fund experienced two major changes. First was the implementation of a new principal investment strategy effective October 1, 2013, by which 75% of the Fund is managed according to a Domestic Long/Short strategy and 25% to an Indexed strategy. A Global Long/Short strategy, which had been part of the Fund prior to October 1, 2013, was discontinued and not implemented during the period. The second major change was resolution of the issues related with the bankruptcy of Lehman Brothers, Inc.

As noted in the Fund’s prior shareholder reports, the Fund had been subject to proceedings associated with the bankruptcy filing of Lehman Brothers, Inc., in 2008, which prevented the Fund from pursuing its intended investment program. Specifically, the Fund was trying to resolve certain outstanding short sale transactions with Lehman Brothers International Europe (LBIE) and its administrator. The matter was resolved in June 2014 and collateral was released.

Performance Review

From the beginning of the period through June, the Fund was managed to an equity beta consistent with the 75/25 allocation. Beginning in June, the Fund began implementing fully its investment strategy.

The 75/25 allocation had a net beta of 70% (result of blending the 60% equity beta of the long/short strategy and the 100% equity beta of the long-only strategy). Thus, the Fund would not have been expected to match the benchmark.

Indeed, in the nine months between September 30, 2013 and June 30, 2014, the S&P 500 had a strong return of 18.4%. The deleveraging associated with running a long/short portfolio resulted in a drag of 5.5% relative to a long-only benchmark—the expected return of a portfolio with a net 70% equity beta would have been 12.9%, and the Fund actually performed slightly better than that for the nine months due to outperformance of the value-oriented stock basket in the frozen Lehman account.

During June, the domestic long/short model was implemented. The model struggled in the third calendar quarter, as several strong trends reversed, the most damaging of which were in the Technology, Materials, and Energy sectors. This was the main contributor to Fund underperformance against the Index for the last three months of the period and the period as a whole.

Until further notice, the Fund is not accepting subscriptions for shares from either new or existing shareholders (except subscriptions through automatic dividend reinvestments). However, shareholders may sell (or “redeem”) shares at any time (please see “Purchase and Redemption of Shares” in the Fund’s prospectus for more information).

Redomiciliation

At a meeting of shareholders held on January 8, 2014, shareholders of the Fund approved the reorganization of the Fund from a series of a Kansas corporation to a series of a Delaware statutory trust (the “Reorganization”). The Reorganization was delayed pending the resolution of the LBIE matter discussed above. In light of the resolution of that matter, the Series reorganized with and into a corresponding “shell” series (“New Fund”) of Guggenheim Funds Trust in September 2014.

Upon completion of the Reorganization, shareholders of the Fund own shares of the corresponding class of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the respective share classes of the New Fund assumed the performance, financial and other historical information of those of the Fund. The procedure for redeeming shares remains unchanged.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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.

 
10  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

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  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  11

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

ALPHA OPPORTUNITY FUND

OBJECTIVE:    Seeks long-term growth of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*

Inception Dates:    
 
A-Class   July 7, 2003
C-Class   July 7, 2003
Institutional Class   November 7, 2008

This Fund invests principally in derivative instruments such as swap agreements and futures contracts.

Average Annual Returns*
Periods Ended September 30, 2014
    1 Year   5 Year     10 Year
 
A-Class Shares     11.04 %     15.98 %     9.37 %
 
A-Class Shares with sales charge†     5.77 %     14.62 %     8.72 %
 
C-Class Shares     10.24 %     15.10 %     8.52 %
 
C-Class Shares with CDSC§     9.24 %     15.10 %     8.52 %
 
S&P 500 Index     19.73 %     15.70 %     8.11 %
                         
                    Since Inception
    1 Year   5 Year   (11/07/08)
 
Institutional Class Shares     11.29 %     16.40 %     16.86 %
 
S&P 500 Index     19.73 %     15.70 %     16.09 %
 

     
*   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.
†   Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
§   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
     

 
12  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

SCHEDULE OF INVESTMENTS   September 30, 2014
ALPHA OPPORTUNITY FUND    

      FACE        
      AMOUNT     VALUE  
 
               
REPURCHASE AGREEMENT††,1 -99.9%              

State Street

              

issued 09/30/14 at 0.00%

              

due 10/01/14

   $ 10,736,308   $ 10,736,308  
     
Total Repurchase Agreement              

(Cost $10,736,308)

           10,736,308  
     
Total Investments -99.9%              

(Cost $10,736,308)

         $ 10,736,308  
     
Other Assets & Liabilities, net - 0.1%           14,943  
     
Total Net Assets - 100.0%         $ 10,751,251  
 
               
            UNREALIZED  
      CONTRACTS     LOSS  
 
EQUITY FUTURES CONTRACTS PURCHASED†              
December 2014 S&P 500 Index              

Mini Futures Contracts

              

(Aggregate Value of

              

Contracts $2,652,413)

     27   $ (32,652 )
     

            UNREALIZED  
      UNITS     GAIN (LOSS)  
 
OTC EQUITY INDEX SWAP AGREEMENTS††              
Goldman Sachs International              

October 2014 Goldman Sachs Multi-Hedge

              

Strategies Short Index Swap,

              

Terminating 10/15/142

              

(Notional Value $2,551,824)

     20,845   $ 94,008  
     
Goldman Sachs International              

October 2014 Goldman Sachs Multi-Hedge

              

Strategies Long Index Swap,

              

Terminating 10/15/143

              

(Notional Value $6,749,515)

     54,959   $ (224,208 )
     

Sector Diversification      
 
Goldman Sachs Multi-Hedge Strategies Short Index Swap
 
Sector   % of Index  
 
Financials   25.8 %
Industrials   19.8 %
Consumer Discretionary   15.0 %
Materials   10.0 %
Energy   9.2 %
Consumer Staples   7.9 %
Information Technology   5.8 %
Telecommunication Services   3.1 %
Health Care   1.9 %
Utilities   1.5 %
 
Total   100.0 %
 

Goldman Sachs Multi-Hedge Strategies Long Index Swap      
 
Sector   % of Index  
 
Information Technology   20.0 %
Health Care   17.4 %
Industrials   15.4 %
Consumer Discretionary   11.8 %
Financials   10.6 %
Consumer Staples   10.3 %
Materials   7.0 %
Utilities   3.0 %
Telecommunication Services   2.4 %
Energy   2.1 %
 
Total   100.0 %
 

†  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.
2  Customized basket of 138 exchange-traded equity securities.
3  Customized basket of 191 exchange-traded equity securities.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  13

ALPHA OPPORTUNITY FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Repurchase agreements, at value        

(cost $10,736,308)

   $ 10,736,308  
Segregated cash with broker     124,200  
Unrealized appreciation on swap agreements     94,008  
Prepaid expenses     8,031  
Receivables:        

Investment adviser

     17,325  

Other assets

     31,046  
       
Total assets     11,010,918  
       
         
LIABILITIES:        
Unrealized depreciation on swap agreements     224,208  
Payable for:        

Management fees

     11,241  

Variation margin

     6,413  

Transfer agent/maintenance fees

     3,475  

Distribution and service fees

     2,605  

Fund accounting/administration fees

     2,055  

Fund shares redeemed

     1,333  

Swap settlement

     255  

Trustees’ fees*

     202  

Miscellaneous

     7,880  
       
Total liabilities     259,667  
       
NET ASSETS   $ 10,751,251  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 16,528,227  
Undistributed net investment income     —  
Accumulated net realized loss on investments     (5,614,124 )
Net unrealized depreciation on investments     (162,852 )
       
Net assets   $ 10,751,251  
       
A-CLASS:        
Net assets   $ 7,989,498  
Capital shares outstanding     443,642  
Net asset value per share     $18.01  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $18.91  
       
C-CLASS:        
Net assets   $ 1,116,801  
Capital shares outstanding     68,729  
Net asset value per share     $16.25  
       
INSTITUTIONAL CLASS:        
Net assets   $ 1,644,952  
Capital shares outstanding     65,451  
Net asset value per share     $25.13  
       


STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Dividends (net of foreign withholding        

tax of $113)

   $ 156,414  
Interest     1,204  
       

Total investment income

     157,618  
       
         
EXPENSES:        
Management fees     140,253  
Transfer agent/maintenance fees:        

A-Class

     19,903  

B-Class

     2,066  

C-Class

     4,502  

Institutional Class

     2,663  
Distribution and service fees:        

A-Class

     19,980  

B-Class

     3,872  

C-Class

     11,859  
Fund accounting/administration fees     24,999  
Legal fees     51,629  
Interest expense     137  
Professional fees     25,888  
Registration fees     25,507  
Custodian fees     12,942  
Trustees’ fees*     1,135  
Miscellaneous     24,669  
       

Total expenses

     372,004  
Less:        
Expenses waived by Adviser     (126,237 )
       
Net expenses     245,767  
       
Net investment loss     (88,149 )
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     4,962,009  

Swap agreements

     (29,380 )

Futures contracts

     (14,138 )

Foreign currency

     101,721  

Securities sold short

     (477,883 )
       
Net realized gain     4,542,329  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (3,457,155 )

Securities sold short

     451,612  

Swap agreements

     (130,200 )

Futures contracts

     (59,673 )

Foreign currency

     (101,720 )
       
Net change in unrealized appreciation (depreciation)     (3,297,136 )
       
Net realized and unrealized gain     1,245,193  
       
Net increase in net assets resulting        

from operations

   $ 1,157,044  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


ALPHA OPPORTUNITY FUND

STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income (loss)   $ (88,149 )   $ 10,001  
Net realized gain on investments and foreign currency transactions     4,542,329       451,374  
Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities in foreign currencies     (3,297,136 )     1,670,515  
 
Net increase in net assets resulting from operations     1,157,044       2,131,890  
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class*

     2,752,898       135,514  
Cost of shares redeemed                

A-Class

     (3,326,323 )     (1,083,609 )

B-Class

     (628,571 )     (267,677 )

C-Class

     (203,390 )     (541,551 )

Institutional Class

     (270,604 )     (101,940 )
 
Net decrease from capital share transactions     (1,675,990 )     (1,859,263 )
 
Net increase (decrease) in net assets     (518,946 )     272,627  
                 
NET ASSETS:                

Beginning of year

     11,270,197       10,997,570  
 

End of year

   $ 10,751,251     $ 11,270,197  
 
Undistributed net investment income at end of year   $ —     $ 34,046  
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class*

     151,642       9,453  
Shares redeemed                

A-Class

     (185,854 )     (75,328 )

B-Class

     (39,060 )     (20,963 )

C-Class

     (13,056 )     (40,755 )

Institutional Class

     (11,612 )     (4,934 )
 
Net decrease in shares     (97,940 )     (132,527 )
 

* Represents conversion of B-Class to A-Class shares and purchase of 119,923 shares by the Adviser for $2,185,000.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 15

ALPHA OPPORTUNITY FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund's performance for the periods presented.

    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,       September 30,  
A-Class   2014     2013     2012     2011       2010  
 
Per Share Data                                        
Net asset value, beginning of period     $16.22       $13.33       $9.82       $9.70       $8.56  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.13 )     .03       (— )d     (.04 )     (.06 )
Net gain (loss) on investments (realized and unrealized)     1.92       2.86       3.48       .16       1.20  
Net increase from payments by affiliates     —       —       .03 e     —       —  
     
Total from investment operations     1.79       2.89       3.51       .12       1.14  
 
Net asset value, end of period     $18.01       $16.22       $13.33       $9.82       $9.70  
     
                                         
 
Total Returnb     11.04%       21.38%       35.74% e     1.13 %     13.43 %
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $7,989       $7,749       $7,250       $6,708       $8,138  
 
Ratios to average net assets:                                        
Net investment income (loss)     (0.73% )     0.19%       (0.01% )     (0.33% )     (0.71% )
Total expenses     3.25%       3.99%       2.99%       3.39%       3.51%  
Net expensesc,f     2.12%       2.14%       2.21%       2.15%       2.21%  
 
Portfolio turnover rate     —       488%       707%       868%       954%  
                                         
    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
C-Class   2014     2013     2012     2011     2010  
 
Per Share Data                                        
Net asset value, beginning of period     $14.74       $12.21       $9.07       $9.03       $8.02  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.23 )     (.07 )     (.09       (.11 )     (.12 )
Net gain (loss) on investments (realized and unrealized)     1.74       2.60       3.21       .15       1.13  
Net increase from payments by affiliates     —       —       .02 e     —       —  
     
Total from investment operations     1.51       2.53       3.14       .04       1.01  
 
Net asset value, end of period     $16.25       $14.74       $12.21       $9.07       $9.03  
     
                                         
 
Total Returnb     10.24%       20.48%       34.62% e     0.44%       12.59%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $1,117       $1,206       $1,497       $1,292       $1,490  
 
Ratios to average net assets:                                        
Net investment income (loss)     (1.46% )     (0.56% )     (0.76% )     (1.08% )     (1.46% )
Total expenses     4.11%       4.84%       3.80%       4.14%       4.28%  
Net expensesc,f     2.87%       2.89%       2.96%       2.90%       2.95%  
 
Portfolio turnover rate     —       488%       707%       868%       954%  

 
16  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

ALPHA OPPORTUNITY FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund's performance for the periods presented.

    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
Institutional Class   2014     2013     2012     2011     2010  
 
Per Share Data                                        
Net asset value, beginning of period     $22.58       $18.52       $13.53       $13.33       $11.73  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.12 )     .09       .04       (.01 )     (.06 )
Net gain (loss) on investments (realized and unrealized)     2.67       3.97       4.82       .21       1.66  
Net increase from payments by affiliates     —       —       .13 e     —       —  
     
Total from investment operations     2.55       4.06       4.99       .20       1.60  
 
Net asset value, end of period     $25.13       $22.58       $18.52       $13.53       $13.33  
     
                                         
 
Total Returnb     11.29%       $21.60       36.88% e     1.50%       13.64%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $1,645       $1,740       $1,518       $1,326       $1,444  
 
Ratios to average net assets:                                        
Net investment income (loss)     (0.48% )     0.43%       0.24%       (0.08% )     (0.48% )
Total expenses     2.90%       3.67%       2.68%       3.12%       3.28%  
Net expensesc,f     1.87%       1.90%       1.96%       1.90%       1.96%  
 
Portfolio turnover rate     —       488%       707%       868%       954%  







a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges and has not been annualized.
c Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable.
d Net investment income (loss) is less than $0.01 per share.
e For the year ended September 30, 2012, 0.30%, 0.22% and 0.96% of the Fund’s A-Class, C-Class and Institutional Class, respectively, total return consisted of a voluntary reimbursement by the Adviser for losses incurred during fund trading. Excluding this item, total return would have been 35.44%, 34.40% and 35.92% for the Fund’s A-Class, C-Class and Institutional Class, respectively.
f Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratios for the years presented would be:
    09/30/14   09/30/13   09/30/12   09/30/11   09/30/10
 
A-Class   2.11%   2.11%   2.11%   2.11%   2.05%
C-Class   2.86%   2.86%   2.86%   2.86%   2.80%
Institutional Class   1.86%   1.86%   1.86%   1.86%   1.80%


 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS SEMI-ANNUAL REPORT  |  17

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders:

Guggenheim Enhanced World Equity Fund (the “Fund”) is managed by a team of seasoned professionals, including Jayson Flowers, Senior Managing Director and Head of Equity and Derivative Strategies; Daniel Cheeseman, Portfolio Manager; Perry Hollowell, Portfolio Manager; and Jamal Pesaran, Portfolio Manager. Mr. Pesaran resigned from the firm effective after the period end. In the following paragraphs, the investment team discusses positioning of the Fund and performance for the one-year period ended September 30, 2014.

For the one-year period ended September 30, 2014, the Guggenheim Enhanced World Equity Fund returned 8.12%1, compared with the 11.89% return of its benchmark, the MSCI All-Country World Index (ACWI).

The investment objective of the Fund is to achieve total return, comprised of capital appreciation and current income. The Fund invests in a broadly diversified portfolio of equity securities, typically exchange traded funds, selected to gain exposure to the global equity markets. The Fund tries to deliver outperformance primarily through its region selection and its writing (selling) of calls. The Fund dynamically adjusts regional exposures based on the opportunities available expressed in underlying valuations and volatility premiums, in addition to qualitative views from Guggenheim Investments. Once the investment team decides on the regions and allocation ranges it favors, it uses a proprietary, rules-based quantitative framework with qualitative management for portfolio construction.

When the risk premiums paid for call options is attractive, the Fund writes calls more aggressively, in which case the premiums help protect the portfolio’s underlying holdings on the downside; where the risk premiums paid are less attractive, the Fund takes in a smaller total premium, but captures more of the upside movement in the underlying holdings. By implementing this consistently well, the collection of the call premiums becomes a potential source of alpha.

Performance Review

Over the period, the Fund underperformed the benchmark. The Fund has a harder time outperforming when it has to write covered calls during strong upside market moves or when implied volatility is low and option premiums are low, both of which circumstances prevailed during much of the period. The derivatives used during the period benefited performance.

Contributing most to the Fund’s performance was exposure to the U.S. equity market and non-U.S. developed markets. Emerging markets as a whole was also a contributor. The largest detractors from Fund performance were exposure to the Brazilian and the Russian markets.

For most of the period, the Fund was overweight both U.S. and emerging markets and underweight Europe, stances that benefited the Fund. The U.S. allocation was due to its relative attractiveness as a market over the period. The U.S. benefited from continued strong corporate earnings, which helped support global markets, including emerging markets. The Fund’s allocation to Europe was larger early in the period, based on Guggenheim’s view that the outlook there was improving. But in mid-2014, the allocation was reduced when European growth began to stall. Pockets of volatility and less-than-favorable economic data from other non-U.S. markets seem likely to continue for the near term.

The Fund helps manage risk by dynamically adjusting the overall level of calls written on the portfolio’s equity holdings—the hedge ratio. It is typically closer to 100% when underlying equity valuations are deemed expensive with less upside potential, and implied volatility is rich with attractive option premiums. It is typically closer to 0% when underlying equities are seen as cheap, with more upside potential and implied volatility is deemed too low to compensate for the market upside, which is capped by the selling of options.

The Fund’s hedge ratio moved from about 25% at the beginning of the period to more than 60% halfway through the period and remained between 40% and 60% for the last few months of the period.



Performance displayed represents past performance which is no guarantee of future results.
 
1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.
 
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.

18 | THE GUGGENHEIM FUNDS ANNUAL REPORT

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THE GUGGENHEIM FUNDS ANNUAL REPORT | 19

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

ENHANCED WORLD EQUITY FUND

OBJECTIVE: Seeks to achieve total return, comprised of capital appreciation and current income.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*

Inception Dates:    
 
A-Class   June 18, 2013
C-Class   June 18, 2013
Institutional Class   June 18, 2013

Largest Holdings (% of Total Net Assets)      
 
SPDR S&P 500 ETF Trust   43.6 %
iShares MSCI EAFE ETF   34.2 %
iShares MSCI South Korea Capped ETF   5.9 %
SPDR S&P MidCap 400 ETF Trust   5.5 %
Industrial Select Sector SPDR Fund   5.0 %
iShares MSCI Mexico Capped ETF   3.3 %
iShares MSCI Japan ETF   1.4 %
 
Total   98.9 %
 

“Largest Holdings” exclude any temporary cash or derivative investments.

Average Annual Returns*
Periods Ended September 30, 2014
            Since Inception
    1 Year   (06/18/13)
 
A-Class Shares     8.12 %     9.66 %
 
A-Class Shares with sales charge†     2.98 %     5.57 %
 
C-Class Shares     8.00 %     9.33 %
 
C-Class Shares with CDSC‡     7.00 %     9.33 %
 
Institutional Class Shares     8.42 %     9.96 %
 
MSCI All Country World Index     11.89 %     13.14 %
 

*   The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The MSCI All Country World Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
†   Fund returns are calculated using the maximum sales charge of 4.75%.
††   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase

20 | THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS   September 30, 2014
 
ENHANCED WORLD EQUITY FUND    

      SHARES     VALUE  
 
               
EXCHANGE-TRADED FUNDS† - 98.9%              

SPDR S&P 500 ETF Trust1

     13,000   $ 2,561,260  

iShares MSCI EAFE ETF1

     31,400     2,013,368  

iShares MSCI South Korea Capped ETF1

     5,700     344,907  

SPDR S&P MidCap 400 ETF Trust1

     1,300     324,116  

Industrial Select Sector SPDR Fund1

     5,500     292,325  

iShares MSCI Mexico Capped ETF1

     2,800     192,444  

iShares MSCI Japan ETF1

     7,200     84,744  
             
Total Exchange-Traded Funds              

(Cost $5,943,100)

           5,813,164  
             
SHORT TERM INVESTMENTS† - 1.5%              

Dreyfus Treasury Prime Cash

              

Management Fund

     87,177     87,177  
             
Total Short Term Investments              

(Cost $87,177)

           87,177  
             
Total Investments - 100.4%              

(Cost $6,030,277)

         $ 5,900,341  
             
               
      CONTRACTS        
 
               
OPTIONS WRITTEN† - (0.1)%              

Call options on:

              

iShares MSCI Mexico Capped ETF

              

Expiring October 2014 with strike

              

price of $72.00

     21   $ (168 )

SPDR S&P MidCap 400 ETF Trust

              

Expiring October 2014 with strike

              

price of $260.00

     10     (180 )

iShares MSCI South Korea Capped

              

ETF Expiring October 2014 with

              

strike price of $65.00

     43     (215 )

iShares MSCI Japan ETF Expiring

              

October 2014 with strike price

              

of $12.00

     54     (216 )

Industrial Select Sector SPDR Fund

              

Expiring October 2014 with

              

strike price of $55.00

     41     (328 )

iShares MSCI EAFE ETF Expiring October 2014

              

with strike price of $67.00

     236     (708 )

SPDR S&P 500 ETF Trust Expiring

              

October 2014 with strike price of $202.00

     98     (3,038 )
             
Total Options Written              

(Premiums received $25,930)

           (4,853 )
             
Other Assets & Liabilities, net - (0.3)%           (16,326 )
             
Total Net Assets - 100.0%         $ 5,879,162  

†   Value determined based on Level 1 inputs — See Note 4.
1   All or a portion of this security is pledged as collateral for open call options written contracts at September 30, 2014.

THE GUGGENHEIM FUNDS ANNUAL REPORT | 21

ENHANCED WORLD EQUITY FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $6,030,277)

   $ 5,900,341  
Prepaid expenses     19,847  
Receivables:        

Investment adviser

     8,104  

Dividends

     3,079  
       
Total assets     5,931,371  
       
LIABILITIES:        
Options written, at value        

(premiums received $25,930)

     4,853  
Overdraft due to custodian bank     1  
Payable for:        

Professional fees

     18,745  

Legal fees

     8,670  

Direct shareholders expense

     6,066  

Management fees

     3,472  

Transfer agent/maintenance fees

     2,137  

Fund accounting/administration fees

     2,055  

Trustees’ fees*

     168  

Distribution and service fees

     141  

Miscellaneous

     5,901  
       
Total liabilities     52,209  
       
NET ASSETS   $ 5,879,162  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 5,929,652  
Undistributed net investment income     20,574  
Accumulated net realized gain on investments     37,795  
Net unrealized depreciation on investments     (108,859 )
       
Net assets   $ 5,879,162  
       
A-CLASS:        
Net assets   $ 105,739  
Capital shares outstanding     3,935  
Net asset value per share     $26.87  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $28.21  
       
C-CLASS:        
Net assets   $ 124,722  
Capital shares outstanding     4,661  
Net asset value per share     $26.76  
       
INSTITUTIONAL CLASS:        
Net assets   $ 5,648,701  
Capital shares outstanding     210,624  
Net asset value per share     $26.82  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Dividends   $ 83,218  
       

Total investment income

     83,218  
       
         
EXPENSES:        
Management fees     41,814  
Transfer agent/maintenance fees:        

A-Class

     450  

C-Class

     826  

Institutional Class

     6,780  
Distribution and service fees:        

A-Class

     313  

C-Class

     2,553  
Fund accounting/administration fees     24,999  
Registration fees     64,398  
Legal fees     28,519  
Professional fees     28,191  
Custodian fees     6,760  
Tax expense     363  
Trustees’ fees*     248  
Miscellaneous     11,043  
       

Total expenses

     217,257  
Less:        
Expenses waived by Adviser     (154,250 )
       
Net expenses     63,007  
       
Net investment income     20,211  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     299,503  

Options written

     183,195  
       
Net realized gain     482,698  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (50,065 )

Options written

     3,476  
       
Net change in unrealized appreciation (depreciation)     (46,589 )
       
Net realized and unrealized gain     436,109  
       
Net increase in net assets resulting        

from operations

   $ 456,320  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.


 
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

  ENHANCED WORLD EQUITY FUND

STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Period Ended  
      September 30,       September 30,  
      2014       2013a  
 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 20,211     $ 28,029  
Net realized gain on investments     482,698       241,426  
Net change in unrealized appreciation (depreciation) on investments     (46,589 )     (62,270 )
 
Net increase in net assets resulting from operations     456,320       207,185  
 
 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

Institutional Class

     (28,029 )     —  
Net realized gains                

A-Class

     (7,329 )     —  

C-Class

     (19,881 )     —  

Institutional Class

     (245,722 )     —  
 
Total distributions to shareholders     (300,961 )     —  
 
 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     181,525       102,365  

C-Class

     1,289,731       410,855  

Institutional Class

     5,799,760       5,006,074  
Distributions reinvested                

A-Class

     7,324       —  

C-Class

     19,881       —  

Institutional Class

     273,751       —  
Cost of shares redeemed                

A-Class

     (184,029 )     —  

C-Class

     (1,556,501 )     (27,311 )

Institutional Class

     (5,806,807 )     —  
 
Net increase from capital share transactions     24,635       5,491,983  
 
Net increase in net assets     179,994       5,699,168  
 
NET ASSETS:                

Beginning of period

     5,699,168       —  
 

End of period

   $ 5,879,162     $ 5,699,168  
 
Undistributed net investment income at end of period   $ 20,574     $ 28,029  
 
 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     6,829       4,016  

C-Class

     48,882       15,611  

Institutional Class

     210,833       200,246  
Shares issued from reinvestment of distributions                

A-Class

     283       —  

C-Class

     773       —  

Institutional Class

     10,631       —  
Shares redeemed                

A-Class

     (7,193 )     —  

C-Class

     (59,526 )     (1,079 )

Institutional Class

     (211,086 )     —  
 
Net increase in shares     426       218,794  
 

a Since commencement of operations: June 18, 2013.

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT | 23

  ENHANCED WORLD EQUITY FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund's performance for the periods presented.

    Year Ended     Period Ended  
    September 30,     September 30,  
A-Class   2014     2013a  
 
Per Share Data                
Net asset value, beginning of period     $26.03       $25.00  
 
Income (loss) from investment operations:                
Net investment income (loss)b     .02       (.03 )
Net gain (loss) on investments (realized and unrealized)     2.05       1.06  
     
Total from investment operations     2.07       1.03  
 
Less distributions from:                
Net realized gains     (1.23 )     -  
     
Total distributions     (1.23 )     -  
 
Net asset value, end of period     $26.87       $26.03  
     
                 
 
Total Returnc     8.12%       4.32%  
 
Ratios/Supplemental Data                
Net assets, end of period (in thousands)     $106       $105  
 
Ratios to average net assets:                
Net investment income (loss)     0.07%       (0.36% )
Total expensesd     4.04%       7.21% g
Net expensese     1.26% f     1.25%  
 
Portfolio turnover rate     633%       174%  
                 
                 
    Year Ended     Period Ended  
    September 30,     September 30,  
C-Class   2014     2013a  
 
Per Share Data                
Net asset value, beginning of period     $25.96       $25.00  
 
Income (loss) from investment operations:                
Net investment income (loss)b     (.24 )     (.03 )
Net gain (loss) on investments (realized and unrealized)     2.27       .99  
     
Total from investment operations     2.03       .96  
 
Less distributions from:                
Net realized gains     (1.23 )     -  
     
Total distributions     (1.23 )     -  
 
Net asset value, end of period     $26.76       $25.96  
     
                 
 
Total Returnc     8.00%       4.00%  
 
Ratios/Supplemental Data                
Net assets, end of period (in thousands)     $125       $377  
 
Ratios to average net assets:                
Net investment income (loss)     (0.88% )     (0.43% )
Total expensesd     4.57%       9.26% g
Net expensese     2.00% f     2.00%  
 
Portfolio turnover rate     633%       174%  

 
24  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

  ENHANCED WORLD EQUITY FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund's performance for the periods presented.

    Year Ended     Period Ended  
    September 30,     September 30,  
Institutional Class   2014     2013a  
 
Per Share Data                
Net asset value, beginning of period     $26.05       $25.00  
 
Income (loss) from investment operations:                
Net investment income (loss)b     .11       .14  
Net gain (loss) on investments (realized and unrealized)     2.03       .91  
     
Total from investment operations     2.14       1.05  
 
Less distributions from:                
Net investment income     (.14 )     -  
Net realized gains     (1.23 )     -  
     
Total distributions     (1.37 )     -  
 
Net asset value, end of period     $26.82       $26.05  
     
                 
 
Total Returnc     8.42%       4.40%  
 
Ratios/Supplemental Data                
Net assets, end of period (in thousands)     $5,649       $5,217  
 
Ratios to average net assets:                
Net investment income (loss)     0.40%       1.96%  
Total expensesd     3.59%       5.11% g
Net expensese     1.01% f     1.00%  
 
Portfolio turnover rate     633%       174%  








a Since commencement of operations: June 18, 2013. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c Total return does not reflect the impact of any applicable sales charges and has not been annualized.
d Does not include expenses of the underlying funds in which the Fund invests.
e Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable.
f Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratio would be 1.25%, 2.00% and 1.00% for the A-Class, C-Class and Institutional Class, respectively.
g Due to limited length of Fund operations, ratios for this period are not indicative of future performance.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  25

MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders:

Guggenheim Large Cap Value Fund (the “Fund”) is managed by a team of seasoned professionals led by Mark Mitchell, CFA, Portfolio Manager. In the following paragraphs, he discusses performance of the Fund for the fiscal year ended September 30, 2014.

For the one year period ended September 30, 2014, the Guggenheim Large Cap Value Fund returned 15.25%1, compared with the 18.89% return of its benchmark, the Russell 1000® Value Index.

Strategy and Market Overview

Our investment approach focuses on understanding how companies make money and how easily companies can either improve returns, or maintain existing high levels of profitability or benefit from change that occurs in the industries in which they operate.

In today’s rapid-fire environment marked by very sharp, quick but constrained volatility, our long-term orientation and discipline are a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides and when fundamentals once again become a more dominant factor in the market.

Performance Review

Overall, stock selection was positive in seven of ten sectors.

Energy was the most favorable sector for the year. Stock selection more than offset the effect of the Fund’s overweight versus the benchmark. Energy provided the least performance in the benchmark amid a general commodities selloff and falling crude oil prices. Our belief is that longer-term energy prices will be higher than current levels as the cost to pull oil out of the ground isn’t declining and the demand trends ultimately are positive.

Within the Energy sector, positive individual stock selection was broad based. Halliburton Co., an oil field services provider, was the largest individual contributor, followed by Whiting Petroleum Corp., which has exposure to two of the most productive shale fields in the U.S. and announced during the period that it would acquire Kodiak Oil and Gas Corporation. Both Halliburton and Whiting benefited from solid execution and favorable industry dynamics. The Fund also benefited from an underweight position major integrated oil companies, as the fund tends to favor small exploration and production plays.

Utilities was the second-largest contributor to return for the year, benefiting from stock selection from the Fund’s sole holding, Edison International. The sector is one of the largest underweights relative to the index, which also contributed to return, as we do not view Utilities as attractive from either a fundamental or valuation standpoint. Edison was up partly due to a settlement in which it will recoup some expenses related to a nuclear plant shutdown, but we like the holding due to its diversity of business.

Financials was a modest contributor for the year, but included one of the leading individual detractors, Ocwen Financial Corp., a mortgage servicing company. It was down as a result of a delay in a proposed purchase of a large servicing portfolio and an investigation of the company’s servicing practices and intercompany relationships by the New York Director of Financial Services.

Information Technology was the best-performing sector in the benchmark. However, poor stock selection was the leading detractor from return for the Fund. Our overall sector position weight is in-line with the benchmark, but we own more stable, services-related companies and non-personal computer related hardware providers. The Fund also does not own large benchmark companies that were up significantly for the year, Apple and Intel. Both are good companies, but we view their future prospects as already fully valued in the current share price.

Stock selection in Industrials was another detractor. The Fund had an overweight to United Technologies Corp., which was a weak performer for the period. The company is undergoing a portfolio transformation, and we like the stock as a margin improvement story, but it was unable to keep up with the broad market during the period.

We had a significant overweight to the Industrials sector, and it included two holdings that boosted performance: Quanta Services, Inc. and URS Corp., both in the engineering and construction sector. We like the prospects of these companies as the U.S. faces the need to upgrade infrastructure. During the period, URS agreed to be acquired by AECOM.

26 | THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded)   September 30, 2014
 

Fund performance was also hurt by poor stock selection in Materials. Underperformance in this sector was driven mostly by Coeur Mining, Inc., which is not in index and fell as part of a wider commodities selloff over the past year.

Portfolio Positioning

The largest relative sector exposures for the year were an underweight in Health Care and overweights in Energy and Consumer Staples. All three allocations detracted from Fund performance for the year.

The Health Care sector underweight was predominantly driven by our view that the large pharmaceutical companies look fairly valued, thus are less attractive than companies in other sectors.

The overweights in both Energy and Consumer Staples were driven by our bottom-up fundamental research having identified several companies with favorable risk-return profiles. For example, a top individual holding in Staples for the year was CVS. The company has been reporting solid earnings and continues to benefit from its acquisition of pharmacy benefit manager PBM. In addition, store chains like CVS saw less drop-off in traffic compared with more traditional retailers in the discretionary space.

Portfolio and Market Outlook

For most of the period, the market has behaved in a fairly defensive manner. The best performing areas have been larger companies, REITs and utilities. Of late, the strengthening of the dollar primarily from concerns about global (non-U.S.) growth has only added to the hesitancy of the market. Even if the global economy were to prove disappointing, the low bar offered by insignificant fixed income investment opportunities (the 10-year U.S. government bond yields around 2.5%) should continue to make equities an attractive alternative for incremental investment dollars.

Our portfolios are very balanced with a bias to companies with balance sheet quality. We continue to find niche companies with superior growth opportunities and as such are constructive on the outlook for the year.

Performance displayed represents past performance which is no guarantee of future results.
 
1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.
 
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)   September 30, 2014
 

LARGE CAP VALUE FUND

OBJECTIVE: Seeks long-term growth of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*

Inception Dates:    
 
A-Class   August 7, 1944
B-Class   October 19, 1993
C-Class   January 29, 1999
Institutional Class   June 7, 2013

Ten Largest Holdings (% of Total Net Assets)        
 
Wells Fargo & Co.     4.5 %
American International Group, Inc.     3.3 %
CVS Health Corp.     3.3 %
JPMorgan Chase & Co.     2.9 %
Time Warner, Inc.     2.7 %
Chevron Corp.     2.7 %
Edison International     2.7 %
Citigroup, Inc.     2.7 %
Republic Services, Inc. — Class A     2.6 %
Parker-Hannifin Corp.     2.4 %
 
Top Ten Total     29.8 %
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

Average Annual Returns*
Periods Ended September 30, 2014
                         
    1 Year   5 Year   10 Year
 
A-Class Shares     15.25 %     12.70 %     7.83 %
 
A-Class Shares with sales charge†     9.77 %     11.38 %     7.19 %
 
B-Class Shares     15.52 %     12.98 %     7.65 %
 
B-Class Shares with CDSC‡     10.52 %     12.73 %     7.65 %
 
C-Class Shares     14.35 %     11.86 %     6.95 %
 
C-Class Shares with CDSC§     13.35 %     11.86 %     6.95 %
 
Russell 1000 Value Index     18.89 %     15.26 %     7.84 %
 
                         
            Since Inception        
    1 Year   (06/07/13)        
 
Institutional Class Shares     15.52 %     14.99 %        
 
Russell 1000 Value Index     18.89 %     15.93 %        
 

*   The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
†   Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
‡   Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase
§   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

28 | THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS   September 30, 2014
 
LARGE CAP VALUE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS†- 94.8%              
               
FINANCIAL - 24.9%              

Wells Fargo & Co.

     59,530   $ 3,087,821  

American International Group, Inc.

     42,382     2,289,476  

JPMorgan Chase & Co.

     32,620     1,965,028  

Citigroup, Inc.

     35,610     1,845,310  

Allstate Corp.

     24,955     1,531,488  

Bank of New York Mellon Corp.

     39,370     1,524,800  

Reinsurance Group of America, Inc. — Class A

     12,485     1,000,423  

Bank of America Corp.

     51,820     883,531  

NASDAQ OMX Group, Inc.

     17,710     751,258  

Aon plc

     8,125     712,319  

CME Group, Inc. — Class A

     8,290     662,827  

Navient Corp.

     20,090     355,794  

Franklin Resources, Inc.

     4,920     268,681  

Ocwen Financial Corp.*

     9,460     247,663  
             
Total Financial           17,126,419  
             
               
ENERGY - 15.2%              

Chevron Corp.

     15,705     1,873,921  

Halliburton Co.

     19,795     1,276,975  

Phillips 66

     14,865     1,208,673  

Apache Corp.

     11,121     1,043,928  

Whiting Petroleum Corp.*

     11,385     882,907  

Exxon Mobil Corp.

     9,100     855,855  

Marathon Oil Corp.

     21,720     816,455  

Patterson-UTI Energy, Inc.

     20,160     655,805  

Superior Energy Services, Inc.

     17,240     566,679  

Suncor Energy, Inc.

     15,020     542,973  

ConocoPhillips

     4,965     379,922  

Oasis Petroleum, Inc.*

     7,630     319,010  
             
Total Energy           10,423,103  
             
               
INDUSTRIAL - 14.4%              

Republic Services, Inc. — Class A

     45,960     1,793,359  

Parker-Hannifin Corp.

     14,605     1,667,160  

TE Connectivity Ltd.

     27,290     1,508,864  

United Technologies Corp.

     12,420     1,311,552  

Rock-Tenn Co. — Class A

     24,828     1,181,316  

Covanta Holding Corp.

     41,050     871,081  

URS Corp.

     11,880     684,407  

FLIR Systems, Inc.

     18,190     570,075  

General Electric Co.

     13,430     344,077  
             
Total Industrial           9,931,891  
             
               
CONSUMER, NON-CYCLICAL - 14.2%              

Bunge Ltd.

     16,720     1,408,326  

Aetna, Inc.

     15,870     1,285,469  

Teva Pharmaceutical Industries Ltd. ADR

     22,435     1,205,881  

Mondelez International, Inc. — Class A

     31,020     1,062,900  

Quanta Services, Inc.*

     27,850     1,010,677  

Pfizer, Inc.

     25,550     755,514  

UnitedHealth Group, Inc.

     8,635     744,769  

DeVry Education Group, Inc.

     .16,790     718,780  

Kraft Foods Group, Inc.

     8,151     459,716  

Patterson Companies, Inc.

     10,723     444,254  

Johnson & Johnson

     3,300     351,747  

MasterCard, Inc. — Class A

     4,630     342,250  
             
Total Consumer, Non-cyclical           9,790,283  
             
               
CONSUMER, CYCLICAL - 8.3%              

CVS Health Corp.

     28,160     2,241,254  

Wal-Mart Stores, Inc.

     20,875     1,596,311  

Kohl’s Corp.

     9,550     582,837  

PulteGroup, Inc.

     28,120     496,599  

WESCO International, Inc.*

     6,150     481,299  

Lowe’s Companies, Inc.

     6,530     345,568  
             
Total Consumer, Cyclical           5,743,868  
             
               
COMMUNICATIONS - 7.2%              

Time Warner, Inc.

     24,945     1,876,113  

Cisco Systems, Inc.

     64,480     1,622,962  

AT&T, Inc.

     23,950     843,998  

DigitalGlobe, Inc.*

     17,655     503,168  

Time, Inc.*

     3,291     77,108  
             
Total Communications           4,923,349  
             
               
BASIC MATERIALS - 4.5%              

Dow Chemical Co.

     29,230     1,532,821  

Cameco Corp.

     72,230     1,275,582  

Coeur Mining, Inc.*

     59,990     297,550  
             
Total Basic Materials           3,105,953  
             
               
UTILITIES - 3.4%              

Edison International

     33,135     1,852,910  

UGI Corp.

     15,170     517,145  
             
Total Utilities           2,370,055  
             
               
TECHNOLOGY - 2.7%              

Computer Sciences Corp.

     24,945     1,525,387  

NetApp, Inc.

     8,355     358,931  
             
Total Technology           1,884,318  
             
Total Common Stocks              

(Cost $51,631,175)

           65,299,239  
             
               
WARRANTS† - 0.3%              
American International Group, Inc.              

$45.00, 01/19/21

     8,920     213,188  
             
Total Warrants              

(Cost $167,892)

           213,188  
             
               
EXCHANGE-TRADED FUNDS† - 2.0%              
iShares Russell 1000 Value ETF     13,750     1,376,238  
             
Total Exchange-Traded Funds              

(Cost $1,393,717)

           1,376,238  
             
               
SHORT TERM INVESTMENTS† - 4.0%              

Dreyfus Treasury Prime

              

Cash Management Fund

     2,761,536     2,761,536  
             
Total Short Term Investments              

(Cost $2,761,536)

           2,761,536  
             

THE GUGGENHEIM FUNDS ANNUAL REPORT | 29

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 
LARGE CAP VALUE FUND    

      VALUE  
 
Total Investments - 101.1%        

(Cost $55,954,320)

   $ 69,650,201  
       
Other Assets & Liabilities, net - (1.1)%     (778,329)  
       
Total Net Assets - 100.0%   $ 68,871,872  

*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 4.
    ADR – American Depositary Receipt
    plc – Public Limited Company

30 | THE GUGGENHEIM FUNDS ANNUAL REPORT

LARGE CAP VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $55,954,320)

   $ 69,650,201  
Prepaid expenses     24,231  
Cash     729  
Receivables:        

Securities sold

     586,123  

Dividends

     90,490  

Fund shares sold

     49,045  

Investment adviser

     13,830  

Foreign taxes reclaim

     1,062  
       
Total assets     70,415,711  
       
         
LIABILITIES:        
Payable for:        

Securities purchased

     1,308,407  

Fund shares redeemed

     97,626  

Management fees

     37,393  

Distribution and service fees

     15,843  

Transfer agent/maintenance fees

     13,514  

Fund accounting/administration fees

     5,465  

Trustees’ fees*

     199  

Miscellaneous

     65,392  
       
Total liabilities     1,543,839  
       
NET ASSETS   $ 68,871,872  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 56,393,068  
Undistributed net investment income     463,001  
Accumulated net realized loss on investments     (1,680,078 )
Net unrealized appreciation on investments     13,695,881  
       
Net assets   $ 68,871,872  
       
A-CLASS:        
Net assets   $ 60,280,981  
Capital shares outstanding     1,376,400  
Net asset value per share     $43.80  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $45.98  
       
B-CLASS:        
Net assets   $ 1,289,471  
Capital shares outstanding     31,921  
Net asset value per share     $40.40  
       
C-CLASS:        
Net assets   $ 3,962,546  
Capital shares outstanding     96,858  
Net asset value per share     $40.91  
       
INSTITUTIONAL CLASS:        
Net assets   $ 3,338,874  
Capital shares outstanding     76,113  
Net asset value per share     $43.87  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Dividends (net of foreign withholding tax of $6,789)   $ 1,250,639  
Interest     21  
       

Total investment income

     1,250,660  
       
         
EXPENSES:        
Management fees     430,420  
Transfer agent/maintenance fees:        

A-Class

     83,673  

B-Class

     11,528  

C-Class

     8,991  

Institutional Class

     137  
Distribution and service fees:        

A-Class

     144,441  

C-Class

     36,198  
Fund accounting/administration fees     62,907  
Registration fees     65,620  
Legal fees     55,119  
Trustees’ fees*     5,797  
Custodian fees     237  
Tax expense     55  
Miscellaneous     95,923  
       

Total expenses

     1,001,046  
Less:        
Expenses waived by Adviser     (213,340 )
       
Net expenses     787,706  
       
Net investment income     462,954  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     6,780,018  
       
Net realized gain     6,780,018  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     1,707,332  
       
Net change in unrealized appreciation (depreciation)     1,707,332  
       
Net realized and unrealized gain     8,487,350  
       
Net increase in net assets resulting        

from operations

   $ 8,950,304  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 31

LARGE CAP VALUE FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
    Year Ended     Year Ended  
  September 30,   September 30,  
    2014     2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 462,954     $ 414,311  
Net realized gain on investments     6,780,018       5,855,722  
Net change in unrealized appreciation (depreciation) on investments     1,707,332       4,740,834  
 
Net increase in net assets resulting from operations     8,950,304       11,010,867  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (360,085 )     (378,277 )

B-Class

     (19,432 )     (26,337 )

C-Class

     (8,265 )     (6,353 )

Institutional Class

     (26,519 )     —*  
 
Total distributions to shareholders     (414,301 )     (410,967 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     27,638,398       13,972,222  

B-Class

     59,007       382,680  

C-Class

     1,719,770       2,021,529  

Institutional Class

     448,328       2,198,427*  
Distributions reinvested                

A-Class

     345,368       364,307  

B-Class

     19,404       26,251  

C-Class

     8,202       6,329  

Institutional Class

     26,518       —*  
Cost of shares redeemed                

A-Class

     (22,442,543 )     (17,227,823 )

B-Class

     (973,891 )     (1,086,876 )

C-Class

     (1,715,189 )     (1,278,271 )

Institutional Class

     (374,679 )     (56,720)*  
 
Net increase (decrease) from capital share transactions     4,758,693       (677,945 )
 
Net increase in net assets     13,294,696       9,921,955  
                 
NET ASSETS:                

Beginning of year

     55,577,176       45,655,221  
 

End of year

   $ 68,871,872     $ 55,577,176  
 
Undistributed net investment income at end of year   $ 463,001     $ 414,301  
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     660,974       395,711  

B-Class

     1,550       11,387  

C-Class

     42,907       59,294  

Institutional Class

     10,680       75,389*  
Shares issued from reinvestment of distributions                

A-Class

     8,728       11,707  

B-Class

     533       916  

C-Class

     220       216  

Institutional Class

     670       —*  
Shares redeemed                

A-Class

     (529,031 )     (489,224 )

B-Class

     (25,223 )     (34,294 )

C-Class

     (43,704 )     (39,102 )

Institutional Class

     (9,126 )     (1,500)*  
 
Net increase (decrease) in shares     119,178       (9,500 )
 

* Since commencement of operations: June 7, 2013.

32  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

LARGE CAP VALUE FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
A-Class     2014       2013       2012       2011g       2010g  
 
Per Share Data                                        
Net asset value, beginning of period     $38.28       $31.25       $24.58       $26.08       $24.92  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     .30       .29       .25       .16       .12  
Net gain (loss) on investments (realized and unrealized)     5.51       7.03       6.58       (1.54 )     1.24  
     
Total from investment operations     5.81       7.32       6.83       (1.38 )     1.36  
 
Less distributions from:                                        
Net investment income     (.29 )     (.29 )     (.16 )     (.12 )     (.20 )
     
Total distributions     (.29 )     (.29 )     (.16 )     (.12 )     (.20 )
 
Net asset value, end of period     $43.80       $38.28       $31.25       $24.58       $26.08  
     
                                         
 
Total Returnb     15.25%       23.62%       27.90%       (5.38% )     5.46%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $60,281       $47,307       $41,173       $41,036       $47,718  
 
Ratios to average net assets:                                        
Net investment income (loss)     0.72%       0.82%       0.86%       0.56%       0.46%  
Total expensesc     1.48%       1.48%       1.65%       1.52%       1.59%  
Net expensesd     1.17% h     1.15%       1.18%       1.15%       1.18%  
 
Portfolio turnover rate     40%       43%       16%       26%       29%  
 
    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
B-Class     2014f       2013f       2012f       2011f,g       2010f,g  
 
Per Share Data                                        
Net asset value, beginning of period     $35.34       $28.89       $22.75       $24.16       $23.12  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     .36       .34       .29       .21       .16  
Net gain (loss) on investments (realized and unrealized)     5.08       6.49       6.09       (1.46 )     1.16  
     
Total from investment operations     5.44       6.83       6.38       (1.25 )     1.32  
 
Less distributions from:                                        
Net investment income     (.38 )     (.38 )     (.24 )     (.16 )     (.28 )
     
Total distributions     (.38 )     (.38 )     (.24 )     (.16 )     (.28 )
 
Net asset value, end of period     $40.40       $35.34       $28.89       $22.75       $24.16  
     
                                         
 
Total Returnb     15.52%       23.94%       28.23%       (5.22% )     5.78%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $1,289       $1,946       $2,226       $2,682       $4,132  
 
Ratios to average net assets:                                        
Net investment income (loss)     0.95%       1.07%       1.10%       0.78%       0.68%  
Total expensesc     1.78%       1.74%       1.93%       1.29%       1.33%  
Net expensesd     0.92% h     0.90%       0.93%       0.90%       0.94%  
 
Portfolio turnover rate     40%       43%       16%       26%       29%  

SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  33

LARGE CAP VALUE FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended       Year Ended     Year Ended   Year Ended     Year Ended  
    September 30,       September 30,     September 30,   September 30,     September 30,  
C-Class     2014       2013       2012     2011g       2010g  
 
Per Share Data                                      
Net asset value, beginning of period     $35.86       $29.30       $23.08     $24.60       $23.48  
 
Income (loss) from investment operations:                                      
Net investment income (loss)a     (.02 )     .02       .03     (.05 )     (.08 )
Net gain (loss) on investments (realized and unrealized)     5.16       6.62       6.19     (1.47 )     1.20  
     
Total from investment operations     5.14       6.64       6.22     (1.52 )     1.12  
 
Less distributions from:                                      
Net investment income     (.09 )     (.08 )     —     —       —  
     
Total distributions     (.09 )     (.08 )     —     —       —  
 
Net asset value, end of period     $40.91       $35.86       $29.30     $23.08       $24.60  
     
                                     
 
Total Returnb     14.35%       22.73%       26.95%     (6.18% )     4.77%  
 
Ratios/Supplemental Data                                      
Net assets, end of period (in thousands)     $3,963       $3,494       $2,257     $2,013       $2,493  
 
Ratios to average net assets:                                      
Net investment income (loss)     (0.04% )     0.08%       0.12%     (0.20% )     (0.31% )
Total expensesc     2.33%       2.47%       2.45%     2.27%       2.33%  
Net expensesd     1.92% h     1.90%       1.93%     1.90%       1.94%  
 
Portfolio turnover rate     40%       43%       16%     26%       29%  
 
    Year Ended     Period Ended    
    September 30,     September 30,  
Institutional Class     2014       2013e  
 
Per Share Data                
Net asset value, beginning of period     $38.32       $36.84  
 
Income (loss) from investment operations:                
Net investment income (loss)a     .40       .13  
Net gain (loss) on investments (realized and unrealized)     5.51       1.35  
     
Total from investment operations     5.91       1.48  
 
Less distributions from:                
Net investment income     (.36 )     —  
     
Total distributions     (.36 )     —  
 
Net asset value, end of period     $43.87       $38.32  
     
               
 
Total Returnb     15.52%       4.02%  
 
Ratios/Supplemental Data                
Net assets, end of period (in thousands)     $3,339       $2,831  
 
Ratios to average net assets:                
Net investment income (loss)     0.96%       1.12%  
Total expensesc     1.08%       1.12%  
Net expensesd     0.92% h     0.89%  
 
Portfolio turnover rate     40%       43%  

a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges and has not been annualized.
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 Since commencement of operations: June 7, 2013. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
f Effective August 1, 2007 — B-Class shares ceased charging 12b-1 fees in accordance with FINRA sales cap regulations. Per share information reflects this change. This fee will be reinstated when sales exceed the sales cap limits.
g Reverse share split — Per share amounts for the periods presented through April 8, 2011 have been restated to reflect a 1:4 reverse share split effective April 8, 2011.
h Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratio would be 1.15%, 0.90%, 1.90% and 0.90% for the A-Class, B-Class, C-Class and Institutional Class, respectively.

 
34  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

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THE GUGGENHEIM FUNDS ANNUAL REPORT   |   35

MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders

Guggenheim Risk Managed Real Estate Fund (the “Fund”) is managed by a team of seasoned professionals, including Jayson Flowers, Senior Managing Director and Head of Equity and Derivative Strategies, and Thomas Youn, CFA, Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the abbreviated fiscal year ended September 30, 2014.

For the abbreviated fiscal period ended September 30, 2014, the Guggenheim Risk Managed Real Estate Fund returned 8.35%1, compared with the 4.44% return of its benchmark, the FTSE NAREIT Equity REITs Index. The Fund’s inception date was March 28, 2014.

Market Review

Real estate investment trusts (REITs) traded lower as 2014 progressed, as higher interest rate volatility weighed on the sector. Although the FTSE NAREIT Equity REITs Index underperformed the S&P 500 Index for the 12-month period ended September 30, 2014, it outperformed for the nine months of 2014. REITs lagged the broad market by a wide margin in 2013 as interest rates rose sharply following the Federal Reserve’s “taper” announcement in May 2013. The trend reversed in 2014 as REITs have been supported by both declining interest rates and robust underlying fundamentals for commercial real estate (CRE).

CRE fundamentals remain strong across the U.S. and across nearly all property types. Despite the tepid pace of the broader economic recovery, sufficient tenant demand has led to positive net absorption of available space. Occupancy rates are approaching full levels, resulting in upward pressure on market rents, and property cash flows have recovered past prior peak levels. Likewise, CRE values have fully recovered and surpassed prior peak levels of 2007 by roughly 12%.

A unique and favorable characteristic of the current CRE cycle is the unusually low level of new property development and supply on the horizon. The current pipeline of CRE development amounts to roughly 1.0% of existing stock compared with the long-term average of 2.0%. In past downturns, this figure has reached as high as 4.0% and created a headwind for occupancy, rent growth, and property appreciation due to a glut of vacant space. Given the sizeable lead-time needed to start and deliver new development projects, new supply will likely remain muted over the near term. To be sure, new construction activity has picked up recently but still remains at historically low levels.

Performance Review

For the approximately six months since inception through September 30, 2014, the Fund returned 8.35%,1 compared with the 4.44% return of the index. After five strong, positive months, the Fund gave back some of its gains in September. Both the Fund and the index had negative returns for the third quarter, -0.34% versus -3.14%.

The Fund’s outperformance since inception was primarily driven by favorable stock selection in the Long-Only allocation, and the Long/Short allocation. The Fund’s average allocation to the Long-Only REIT and Market-Neutral Long/Short REIT strategies was 95% and 35%, respectively. Based on these allocations, the consolidated Fund had slightly less market exposure than the benchmark index (0.9 beta), which detracted slightly from performance given the benchmark’s better return since inception. Stock selection was particularly strong in the retail, lodging, and healthcare sectors. Two retail REITs owned by the Fund were leading contributors to outperformance: Glimcher Realty Trust and AMREIT Inc., both of which were targeted for acquisition during the third quarter.

Strategy

Our outlook for the REIT sector remains positive based on the favorable trends in underlying property fundamentals, robust capital market conditions and the backdrop of historically low new supply. Despite concerns over rising interest rates, private market property values may continue to appreciate due to underlying property cash flow growth. Said differently, while a rise in interest rates due to stronger economic growth may present a headwind to CRE valuation multiples, underlying property cash flow growth would likely accelerate along with the broader economy and serve as an offsetting tailwind to support further appreciation.

The Fund’s portfolio positioning remains relatively unchanged since inception. It remains positioned to benefit from a continuing economic recovery in the U.S. while also being defensive against a rising interest rate environment.

 
36  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded) September 30, 2014
 

Key sector overweights include manufactured housing, lodging, wireless tower, and office REITs. We believe the manufactured housing and wireless tower sectors present attractive growth prospects relative to current valuations. The lodging and office sectors are enjoying accelerating demand trends, and we believe these sectors should perform well in the latter half of the CRE cycle.

Key sector underweights include the healthcare and net lease REITs, due to their long lease durations and high sensitivity to interest rate changes. In addition, these sectors offer below average cash flow growth potential and trade at significant premium to Net Asset Value that is difficult to justify.

Outlook

We are in the sweet spot of the CRE cycle. Occupancies have reached or are approaching full levels across most property types causing rent growth to accelerate. A key bright spot for this CRE cycle is the low level of new supply on the horizon. Capital market conditions remains supportive of asset prices with strong equity capital flows into private and public real estate (REITs) and ample availability of attractively priced debt.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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  |  37

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

RISK MANAGED REAL ESTATE FUND

OBJECTIVE: Seeks to provide total return, comprised of capital appreciation and current income.

Holdings Diversification (Market Exposure as % of Net Assets)

"Holdings Diversification (Market Exposure as % of Net Assets)" excludes any temporary cash investments.

Inception Dates:    
 
A-Class   March 28, 2014
C-Class   March 28, 2014
Institutional Class   March 28, 2014

Ten Largest Long Holdings (% of Total Net Assets)
 
Simon Property Group, Inc.   6.6 %
WP Carey, Inc.   3.1 %
Sabra Health Care REIT, Inc.   2.9 %
General Growth Properties, Inc.   2.8 %
Chatham Lodging Trust   2.6 %
Ventas, Inc.   2.5 %
American Tower Corp. — Class A   2.5 %
Camden Property Trust   2.5 %
Sun Communities, Inc.   2.4 %
Equity Residential   2.4 %
 
Top Ten Total   30.3 %
 

“Ten Largest Long Holdings” exclude any temporary cash or derivative investments.

Total Returns*
Periods Ended September 30, 2014

    Since Inception
    (03/28/14)
 
A-Class Shares     8.35 %
 
A-Class Shares with sales charge†     3.19 %
 
C-Class Shares     7.85 %
 
C-Class Shares with CDSC‡     6.85 %
 
Institutional Class Shares     8.44 %
 
FTSE NAREIT EQUITY REITs Index     4.44 %
 

*   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 FTSE NAREIT EQUITY REITs Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
†   Fund returns are calculated using the maximum sales charge of 4.75%.
‡   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
38  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS   September 30, 2014
 
RISK MANAGED REAL ESTATE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 93.9%              
               
REITs - 82.8%              
               
REITs-OFFICE PROPERTY - 15.9%              
Parkway Properties, Inc.     124,412   $ 2,336,456  
Gramercy Property Trust, Inc.     309,486     1,782,639  
BioMed Realty Trust, Inc.     87,130     1,760,026  
Boston Properties, Inc.     14,574     1,687,086  
Douglas Emmett, Inc.     62,992     1,617,005  
Brandywine Realty Trust     98,827     1,390,496  
Columbia Property Trust, Inc.     57,714     1,377,633  
Hudson Pacific Properties, Inc.     43,463     1,071,798  
Highwoods Properties, Inc.     25,603     995,957  
SL Green Realty Corp.     7,639     773,983  
Alexandria Real Estate Equities, Inc.     8,275     610,281  
American Realty Capital Properties, Inc.     48,465     584,488  
Kilroy Realty Corp.     9,772     580,848  
             
Total REITs-Office Property           16,568,696  
             
               
REITs-REGIONAL MALLS - 12.0%              
Simon Property Group, Inc.     41,902     6,889,526  
General Growth Properties, Inc.     125,182     2,948,036  
Pennsylvania Real Estate Investment Trust     113,425     2,261,695  
Macerich Co.     5,477     349,597  
             
Total REITs-Regional Malls           12,448,854  
             
               
REITs-APARTMENTS - 11.1%              
Camden Property Trust     37,210     2,550,001  
Equity Residential     40,751     2,509,447  
Post Properties, Inc.     39,183     2,011,655  
Apartment Investment & Management Co. — Class A     60,270     1,917,791  
Essex Property Trust, Inc.     10,241     1,830,579  
UDR, Inc.     16,180     440,905  
AvalonBay Communities, Inc.     1,992     280,812  
             
Total REITs-Apartments           11,541,190  
             
               
REITs-DIVERSIFIED - 10.5%              
American Tower Corp. — Class A     27,355     2,561,249  
American Assets Trust, Inc.     70,613     2,328,111  
Vornado Realty Trust     19,215     1,920,731  
Crown Castle International Corp.     22,937     1,847,117  
Liberty Property Trust     50,010     1,663,333  
Digital Realty Trust, Inc.     9,388     585,623  
             
Total REITs-Diversified           10,906,164  
             
               
REITs-HEALTH CARE - 7.5%              
Sabra Health Care REIT, Inc.     125,674     3,056,392  
Ventas, Inc.     41,952     2,598,926  
Health Care REIT, Inc.     34,499     2,151,703  
             
Total REITs-Health Care           7,807,021  
             
               
REITs-HOTELS - 6.5%              
Chatham Lodging Trust     119,025     2,747,096  
Host Hotels & Resorts, Inc.     87,263     1,861,320  
Strategic Hotels & Resorts, Inc.*     150,446     1,752,696  
LaSalle Hotel Properties     12,053     412,695  
             
Total REITs-Hotels           6,773,807  
             
               
REITs-WAREHOUSE/INDUSTRIES - 6.3%              
Rexford Industrial Realty, Inc.     162,010     2,242,219  
Prologis, Inc.     48,786     1,839,232  
QTS Realty Trust, Inc. — Class A     52,692     1,599,202  
DCT Industrial Trust, Inc.     122,318     918,608  
             
Total REITs-Warehouse/Industries           6,599,261  
             
               
REITs-SHOPPING CENTERS - 5.5%              
Regency Centers Corp.     43,114     2,320,827  
Federal Realty Investment Trust     9,139     1,082,606  
Kimco Realty Corp.     47,258     1,035,423  
Washington Prime Group, Inc.     42,452     742,061  
DDR Corp.     35,270     590,067  
             
Total REITs-Shopping Centers           5,770,984  
             
               
REITs-MANUFACTURED HOMES - 4.3%              
Sun Communities, Inc.     50,194     2,534,797  
Equity Lifestyle Properties, Inc.     44,744     1,895,356  
             
Total REITs-Manufactured Homes           4,430,153  
             
               
REITs-STORAGE - 3.2%              
CubeSmart     101,202     1,819,612  
Public Storage     5,209     863,861  
Extra Space Storage, Inc.     12,423     640,654  
             
Total REITs-Storage           3,324,127  
             
Total REITs           86,170,257  
             
               
REAL ESTATE - 5.3%              
               
REAL ESTATE MANAGEMENT/SERVICES - 3.1%              
WP Carey, Inc.     51,016     3,253,290  
             
               
REAL ESTATE OPERATIONS/DEVELOPMENT - 2.2%              
Forest City Enterprises, Inc. — Class A*     118,819     2,324,100  
             
Total Real Estate           5,577,390  
             
               
LODGING - 3.6%              
               
HOTELS & MOTELS - 3.6%              
Starwood Hotels & Resorts Worldwide, Inc.     26,800     2,230,028  
Hyatt Hotels Corp. — Class A*     25,933     1,569,465  
             
Total Hotels & Motels           3,799,493  
             
Total Lodging           3,799,493  
             
               
HEALTHCARE-SERVICES - 2.2%              
               
MEDICAL-HOSPITALS - 2.2%              
HCA Holdings, Inc.*     32,163     2,268,135  
             
Total Healthcare-Services           2,268,135  
             
Total Common Stocks              

(Cost $100,969,264)

           97,815,275  
             
               
SHORT TERM INVESTMENTS† - 7.2%              

Dreyfus Treasury Prime Cash Management Fund

     7,534,793     7,534,793  
             
Total Short Term Investments              

(Cost $7,534,793)

           7,534,793  
             
               
Total Investments - 101.1%              

(Cost $108,504,057)

         $ 105,350,068  
             

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  39

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 
RISK MANAGED REAL ESTATE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS SOLD SHORT† - (22.2)%              
               
REITs - (22.2)%              
               
REITs-MORTGAGE - (1.3)%              
Annaly Capital Management, Inc.     (131,175 ) $ (1,400,949 )
             
               
REITs-APARTMENTS - (1.6)%              
Home Properties, Inc.     (12,127 )   (706,276 )
American Homes 4 Rent — Class A     (58,336 )   (985,295 )
             
Total REITs-Apartments           (1,691,571 )
             
               
REITs-SHOPPING CENTERS - (2.1)%              
Brixmor Property Group, Inc.     (47,522 )   (1,057,840 )
Weingarten Realty Investors     (36,036 )   (1,135,134 )
             
Total REITs-Shopping Centers           (2,192,974 )
             
               
REITs-HOTELS - (2.2)%              
FelCor Lodging Trust, Inc.     (76,268 )   (713,868 )
Summit Hotel Properties, Inc.     (67,632 )   (729,073 )
Chesapeake Lodging Trust     (29,542 )   (861,149 )
             
Total REITs-Hotels           (2,304,090 )
             
               
REITs-SINGLE TENANT - (2.8)%              
Realty Income Corp.     (35,658 )   (1,454,490 )
National Retail Properties, Inc.     (42,084 )   (1,454,844 )
             
Total REITs-Single Tenant           (2,909,334 )
             
               
REITs-HEALTH CARE - (2.9)%              
HCP, Inc.     (5,956 )   (236,513 )
Omega Healthcare Investors, Inc.     (20,246 )   (692,211 )
Healthcare Realty Trust, Inc.     (44,112 )   (1,044,572 )
Aviv REIT, Inc.     (41,352 )   (1,089,625 )
             
Total REITs-Health Care           (3,062,921 )
             
               
REITs-REGIONAL MALLS - (3.0)%              
Tanger Factory Outlet Centers, Inc.     (31,367 )   (1,026,328 )
Rouse Properties, Inc.     (63,553 )   (1,027,652 )
CBL & Associates Properties, Inc.     (57,653 )   (1,031,989 )
             
Total REITs-Regional Malls           (3,085,969 )
             
               
REITs-DIVERSIFIED - (3.1)%              
STAG Industrial, Inc.     (39,097 )   (809,699 )
Duke Realty Corp.     (60,079 )   (1,032,157 )
Washington Real Estate Investment Trust     (52,941 )   (1,343,643 )
             
Total REITs-Diversified           (3,185,499 )
             
               
REITs-OFFICE PROPERTY - (3.2)%              
First Potomac Realty Trust     (56,259 )   (661,043 )
Piedmont Office Realty Trust, Inc. — Class A     (38,459 )   (678,417 )
Government Properties Income Trust     (45,623 )   (999,600 )
Equity Commonwealth     (38,907 )   (1,000,299 )
             
Total REITs-Office Property           (3,339,359 )
             
Total REITs           (23,172,666 )
             
Total Common Stocks Sold Short              

(Proceeds $24,579,527)

           (23,172,666 )
             
               
EXCHANGE-TRADED FUNDS SOLD SHORT† - (6.1)%              
iShares US Real Estate ETF     91,854     (6,356,297 )
             
               
Total Exchange-Traded Funds Sold Short              

(Proceeds $6,623,923)

           (6,356,297 )
             
Total Securities Sold Short - (28.3)%              

(Proceeds $31,203,450)

         $ (29,528,963 )
             
Other Assets & Liabilities, net - 27.2%           28,330,598  
             
Total Net Assets - 100.0%         $ 104,151,703  
 

            UNREALIZED  
      UNITS     GAIN (LOSS)  
 
               
OTC EQUITY INDEX SWAP AGREEMENTS††              
Bank of America Merrill Lynch              

November 2014 Guggenheim Real Estate Investment

              

Trust Basket Total Return Index

              

Swap, Terminating 11/05/141

              

(Notional Value $31,415,945)

     327,779   $ —  
             

Sector Diversification
 
Bank of America Merrill Lynch Real Estate Investment Trust Index Swap
         
Sector     % of Index
 
Retail REITs     19.9 %
Residential REITs     17.8 %
Office REITs     17.2 %
Health Care REITs     10.3 %
Diversified REITs     8.9 %
Specialized REITs     7.9 %
Hotel & Resort REITs     6.7 %
Industrial REITs     5.4 %
Hotels, Resorts & Cruise Lines     2.9 %
Real Estate Operating Companies     1.5 %
Health Care Facilities     1.5 %
 
Total     100.0 %
 

*   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   Customized basket of 56 exchange-traded equity securities.
    REIT — Real Estate Investment Trust

 
40  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

RISK MANAGED REAL ESTATE FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:          

Investments, at value (cost $108,504,057)

     $ 105,350,068  
Segregated cash with broker       29,635,304  
Prepaid expenses       32,957  
Receivables:          

Securities sold

       1,481,853  

Dividends

       290,263  

Fund shares sold

       14,072  

Investment adviser

       395  
         
Total assets        136,804,912  
         
           
LIABILITIES:          

Securities sold short, at value (proceeds $31,203,450)

       29,528,963  

Distributions payable

       31,134  

Payable for:

          

Swap settlement

       1,640,330  

Securities purchased

       1,335,286  

Management fees

       65,673  

Investment adviser

       9,803  

Fund accounting/administration fees

       4,472  

Trustees’ fees*

       548  

Transfer agent/maintenance fees

       374  

Distribution and service fees

       73  

Miscellaneous

       36,553  
         
Total liabilities       32,653,209  
         
NET ASSETS     $ 104,151,703  
         
           
NET ASSETS CONSIST OF:          
Paid in capital     $ 105,585,001  
Distributions in excess of net investment income       (31,134 )
Accumulated net realized gain on investments       77,338  
Net unrealized depreciation on investments       (1,479,502 )
         
Net assets     $ 104,151,703  
         
A-CLASS:          
Net assets     $ 107,162  
Capital shares outstanding       3,970  
Net asset value per share       $26.99  
         

Maximum offering price per share (Net asset value divided by 95.25%)

       $28.34  
         
C-CLASS:          
Net assets     $ 52,039  
Capital shares outstanding       1,931  
Net asset value per share       $26.95  
         
INSTITUTIONAL CLASS:          
Net assets     $ 103,992,502  
Capital shares outstanding       3,851,177  
Net asset value per share       $27.00  
         

STATEMENT OF OPERATIONS
 
Period Ended September 30, 2014**

INVESTMENT INCOME:        
Dividends   $ 582,779  
       

Total investment income

     582,779  
       
         
EXPENSES:        
Management fees     162,599  
Transfer agent/maintenance fees:        

A-Class

     85  

C-Class

     2,000  

Institutional Class

     82  
Distribution and service fees:        

A-Class

     40  

C-Class

     314  
Fund accounting/administration fees     12,633  
Prime broker interest expense     45,277  
Short sales dividend expense     275,757  
Registration fees     25,065  
Professional fees     24,468  
Custodian fees     3,025  
Trustees’ fees*     903  
Miscellaneous     32,744  
       

Total expenses

     584,992  
Less:        
Expenses waived by Adviser     (25,147 )
       
Net expenses     559,845  
       
Net investment income     22,934  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     1,006,311  

Swap agreements

     (805,004 )

Securities sold short

     13,664  
       
Net realized gain     214,971  
       

Net change in unrealized appreciation (depreciation) on:

        

Investments

     (3,153,989 )

Securities sold short

     1,674,487  
       

Net change in unrealized appreciation (depreciation)

     (1,479,502 )
       

Net realized and unrealized loss

     (1,264,531 )
       
 

Net decrease in net assets resulting from operations

   $ (1,241,597 )
       

* Relates to Trustees not deemed "interested persons" within the meaning of Section 2(a)(19) of the 1940 Act.
** Since commencement of operations: March 28, 2014.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  41


RISK MANAGED REAL ESTATE FUND

STATEMENT OF CHANGES IN NET ASSETS          
 
    Period Ended
    September 30,
    2014a
 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:          
Net investment income     $ 22,934  
Net realized gain on investments       214,971  
Net change in unrealized appreciation (depreciation) on investments       (1,479,502 )
 
Net decrease in net assets resulting from operations       (1,241,597 )
 
           
DISTRIBUTIONS TO SHAREHOLDERS FROM:          
Net investment income          

A-Class

       (156 )

C-Class

       (6 )

Institutional Class

       (191,573 )
 
Total distributions to shareholders       (191,735 )
 
           
CAPITAL SHARE TRANSACTIONS:          
Proceeds from sale of shares          

A-Class

       110,130  

C-Class

       309,239  

Institutional Class

       105,276,555  
Distributions reinvested          

A-Class

       73  

Institutional Class

       160,496  
Cost of shares redeemed          

A-Class

       (105 )

C-Class

       (260,047 )

Institutional Class

       (11,306 )
 
Net increase from capital share transactions       105,585,035  
 
Net increase in net assets       104,151,703  
           
NET ASSETS:          

Beginning of period

       –  
 

End of period

     $ 104,151,703  
 
Distributions in excess of net investment income at end of period     $ (31,134 )
 
           
CAPITAL SHARE ACTIVITY:          
Shares sold          

A-Class

       3,971  

C-Class

       11,307  

Institutional Class

       3,845,861  
Shares issued from reinvestment of distributions          

A-Class

       3  

Institutional Class

       5,733  
Shares redeemed          

A-Class

       (4 )

C-Class

       (9,376 )

Institutional Class

       (417 )
 
Net increase in shares       3,857,078  
 

a Since commencement of operations: March 28, 2014.

 
42  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


RISK MANAGED REAL ESTATE FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Period Ended
    September 30,
A-Class   2014a
 
Per Share Data          
Net asset value, beginning of period       $25.00  
 
Income (loss) from investment operations:          
       
Net investment income (loss)b       02  
Net gain (loss) on investments (realized and unrealized)       2.06  
       
Total from investment operations       2.08  
 
Less distributions from:          
Net investment income       (.09 )
       
Total distributions       (.09 )
 
Net asset value, end of period       $26.99  
       
           
 
Total Returnc       8.35%  
 
Ratios/Supplemental Data          
Net assets, end of period (in thousands)       $107  
 
Ratios to average net assets:          
Net investment income (loss)       0.16%  
Total expensesd,e       4.22%  
Net expensesf,g       3.32%  
 
Portfolio turnover rate       57%  

    Period Ended
    September 30,
C-Class   2014a
 
Per Share Data          
Net asset value, beginning of period       $25.00  
 
Income (loss) from investment operations:          
Net investment income (loss)b       (.23 )
Net gain (loss) on investments (realized and unrealized)       2.19  
       
Total from investment operations       1.96  
 
Less distributions from:          
Net investment income       (.01 )
       
Total distributions       (.01 )
 
Net asset value, end of period       $26.95  
       
 
 
Total Returnc       7.85%  
 
Ratios/Supplemental Data          
Net assets, end of period (in thousands)       $52  
 
Ratios to average net assets:          
Net investment income (loss)       (1.60% )
Total expensesd,e       9.33%  
Net expensesf,g       2.67%  
 
Portfolio turnover rate       57%  


 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  43


RISK MANAGED REAL ESTATE FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Period Ended
      September 30,
Institutional Class     2014a
 
Per Share Data            
Net asset value, beginning of period         $25.00  
 
Income (loss) from investment operations:            
Net investment income (loss)b         .02  
Net gain (loss) on investments (realized and unrealized)         2.09  
         
Total from investment operations         2.11  
 
Less distributions from:            
Net investment income         (.11 )
         
Total distributions         (.11 )
 
Net asset value, end of period         $27.00  
         
 
 
Total Returnc         8.44%  
 
Ratios/Supplemental Data            
Net assets, end of period (in thousands)         $103,993  
 
Ratios to average net assets:            
Net investment income (loss)         0.11%  
Total expensesd,e         2.69%  
Net expensesf,g         2.58%  
 
Portfolio turnover rate         57%  

a   Since commencement of operations: March 28, 2014. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
d   Does not include expenses of the underlying funds in which the Fund invests.
e   Due to limited length of Fund operations, ratios for this period are not indicative of future performance.
f   Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable.
g   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratio would be 1.30%, 2.05% and 1.10% for the A-Class, C-Class and Institutional Class, respectively.

 
44  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

 

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  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  45

MANAGERS’ COMMENTARY (Unaudited) September 30,2014
 

To Our Shareholders:

Guggenheim Small Cap Value Fund (the “Fund”) is managed by a team of seasoned professionals led by James Schier, CFA, Portfolio Manager. In the following paragraphs, he discusses performance of the Fund for the fiscal year ended September 30, 2014.

For the year ended September 30, 2014, the Guggenheim Small Cap Value Fund returned 1.07%1, compared with the 4.13% return of its benchmark, the Russell 2000 Value Index.

Strategy and Market Overview

Our investment approach focuses on understanding how companies make money and how easily companies can improve returns, maintain existing high levels of profitability or benefit from change that occurs within the industry they operate. In today’s rapid fire environment marked by very sharp, quick but constrained volatility, our long-term orientation and discipline is a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and when fundamentals once again become a more dominant factor in the market.

Performance Review

On the positive side, stock selection within Energy was the strongest contributor. This sector also had the leading individual contributor to the Fund, Clayton Williams Energy, Inc., an independent exploration and production company with large acreage positions in the Permian basin. The company has had good earnings growth, in spite of the selloff in oil late in the period. Another top performer for year was Patterson-UTI Energy, Inc., which provides onshore drilling services. Over the past several quarters, the Fund has also been slowly shifting its energy focus from almost exclusively exploration and production (E&P) shale players to more of a balance between E&P companies and service companies. The land grab for shale properties has matured, and the subsequent development of those fields should increase business for services firms.

Next largest contributor the Fund performance for the year was stock selection in Utilities. UGI Corp. was the standout individual holding in this sector. It is a gas pipeline and propane distribution conglomerate that has had several good quarters and offers future growth given pipeline expansion opportunities in its Marcellus operating region and with propane acquisition opportunities in the U.S. and in Europe. Valuations in the utility sector have remained high, and it still looks pricey. We prefer companies that have meaningful exposure to non-regulated businesses, such as MDU Resources Group, Inc., and Black Hills Corp.

Hurting Fund performance for the year was stock selection and allocation in Industrials and Financials.

The Fund’s holdings in the Industrials sector declined, compared with a small gain in the benchmark. Two of the Fund’s leading individual detractors for the year were in the Industrials sector: PMFG, Inc., an energy delivery services company, and Energy Recovery, Inc, a maker of pumps used in various applications, including desalination. Both experienced poor earnings.

We have a significant overweight to the Industrials sector, as it should benefit from any infrastructure upgrading in the U.S. The market seems to favor businesses that experience an immediate pick-up in business when the economy improves, rather than companies reliant on long project rollouts. The portfolio’s holdings, by contrast, include a number of companies that have an engineering and construction orientation, or are tied into fairly large, visible infrastructure projects.

Covanta Holding Corp., an Industrials sector holding, was the one of the leading individual contributors to Fund performance for the year. Covanta advanced after announcing the award of owning and operating a new waste to energy facility in Ireland. This contract had been thought to be a dead opportunity by the market and following a contract win in New York in the prior year, Covanta offers investors a unique blend of utility-like stability and income with above average (non-regulated) growth opportunities.

Both stock selection and an underweight in the Financials sector detracted from Fund performance for the year. The underweight stems from the Fund’s orientation away from real estate investment trusts (REITs), a big part of the sector and which performed well earlier in the period, even though we believe they look fairly expensive, with high valuation relative to reinvestment opportunities. A leading individual detractor in Financials was Ocwen Financial Corp., a mortgage servicing company. It was down as a result of a delay in a proposed purchase of a large servicing portfolio and an investigation of the company’s servicing practices and intercompany relationships by the New York Director of Financial Services.

 
46 | THE GUGGENHEIM FUNDS ANNUAL REPORT

MANAGERS’ COMMENTARY (Unaudited) (concluded) September 30, 2014
 

Portfolio Positioning

The largest relative sector exposures for the year were an underweight in Financials and an overweight in Industrials.

Within Financials, REITs continue to perform well, and the strategy’s underweighting in this industry has been a difficult bias to overcome. Over the period, the Fund also reduced its exposure to the reinsurance market, which has been under pressure as participants outside the industry have entered to provide capital in the search for yield.

The overweight to Industrials detracted from performance over the year. This is a large and eclectic sector in which we have diverse holdings. We believe the portfolio is well positioned to benefit from the growing cap-ex and construction environment tied to infrastructure renewal and reindustrialization in the U.S.

Portfolio and Market Outlook

For the most part, the market has behaved in a very defensive manner over the past year. The best performing areas have been larger companies, REITs and utilities. Of late, the strengthening of the dollar primarily from concerns about global (non-U.S.) growth has only added to the hesitancy of the market. Even if the global economy were to prove disappointing, the low bar offered by insignificant fixed income investment opportunities (the 10-year U.S. Government bond yields around 2.5%) should continue to make equities an attractive alternative for incremental investment dollars. Additionally, the tendency for small cap companies to have limited international business could make them a favored sector of the market despite the perception that they possess above-average risk.

Our portfolios tend to reflect a bias toward companies with balance sheet quality. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.



Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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 | 47

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

SMALL CAP VALUE FUND

OBJECTIVE:  Seeks long-term capital appreciation.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*


Inception Dates:    
 
A-Class   July 11, 2008
C-Class   July 11, 2008
Institutional Class   July 11, 2008

Ten Largest Holdings (% of Total Net Assets)      
 
Hanover Insurance Group, Inc.   4.0 %
Covanta Holding Corp.   2.5 %
Maxwell Technologies, Inc.   2.4 %
UGI Corp.   2.1 %
Patterson-UTI Energy, Inc.   1.9 %
Emergent Biosolutions, Inc.   1.8 %
Laclede Group, Inc.   1.8 %
KEYW Holding Corp.   1.8 %
DigitalGlobe, Inc.   1.7 %
Reinsurance Group of America, Inc. — Class A   1.7 %
 
Top Ten Total   21.7 %
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

Average Annual Returns*
Periods Ended September 30, 2014


                Since Inception
    1 Year   5 Year   (07/11/08)
 
A-Class Shares   1.07 %   12.31 %   16.21 %
 
A-Class Shares with sales charge†   -3.74 %   10.98 %   15.11 %
 
C-Class Shares   0.30 %   11.51 %   15.37 %
 
C-Class Shares with CDSC‡   -0.64 %   11.51 %   15.37 %
 
Institutional Class Shares   1.21 %   12.56 %   16.48 %
 
Russell 2000 Value Index   4.13 %   13.02 %   9.18 %
 

* 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.
† Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
‡ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
48 | THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS   September 30, 2014
 
SMALL CAP VALUE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 96.3%              
               
FINANCIAL - 20.3%              

Hanover Insurance Group, Inc.

     17,440   $ 1,071,164  

Reinsurance Group of America, Inc. — Class A

     5,730     459,145  

Home Loan Servicing Solutions Ltd.

     20,470     433,759  

Horace Mann Educators Corp.

     14,370     409,689  

1st Source Corp.

     10,950     311,856  

Endurance Specialty Holdings Ltd.

     5,234     288,812  

BancFirst Corp.

     4,035     252,430  

Navigators Group, Inc.*

     3,990     245,385  

OFG Bancorp

     15,864     237,642  

Simmons First National Corp. — Class A

     5,780     222,646  

Berkshire Hills Bancorp, Inc.

     8,560     201,074  

AMERISAFE, Inc.

     4,905     191,835  

PrivateBancorp, Inc. — Class A

     5,836     174,555  

Employers Holdings, Inc.

     7,566     145,646  

Blackstone Mortgage Trust, Inc. — Class A

     5,230     141,733  

Hancock Holding Co.

     4,310     138,136  

Eaton Vance Corp.

     3,220     121,491  

Blackhawk Network Holdings, Inc.*

     3,730     120,852  

StanCorp Financial Group, Inc.

     1,052     66,465  

Radian Group, Inc.

     4,240     60,462  

Symetra Financial Corp.

     2,560     59,725  

Argo Group International Holdings Ltd.

     1,180     59,366  
             
Total Financial           5,413,868  
             
               
INDUSTRIAL - 18.5%              

Covanta Holding Corp.

     31,710     672,887  

Curtiss-Wright Corp.

     6,810     448,916  

Orbital Sciences Corp.*

     13,214     367,349  

PMFG, Inc.*

     73,073     365,365  

Celadon Group, Inc.

     18,422     358,308  

Aegion Corp. — Class A*

     12,383     275,522  

FLIR Systems, Inc.

     8,720     273,285  

Rand Logistics, Inc.*

     43,216     246,331  

Dynamic Materials Corp.

     12,482     237,782  

Energy Recovery, Inc.*

     61,937     219,257  

Newport Corp.*

     11,880     210,514  

Berry Plastics Group, Inc.*

     8,130     205,201  

Sterling Construction Company, Inc.*

     26,248     201,322  

Gentex Corp.

     7,200     192,744  

Powell Industries, Inc.

     4,607     188,242  

LMI Aerospace, Inc.*

     11,580     148,224  

Marten Transport Ltd.

     6,530     116,299  

ArcBest Corp.

     1,750     65,275  

Advanced Energy Industries, Inc.*

     1,970     37,016  

II-VI, Inc.*

     2,900     34,133  

Sanmina Corp.*

     1,550     32,333  

UTI Worldwide, Inc.*

     2,935     31,199  

Multi-Fineline Electronix, Inc.*

     107     1,000  
             
Total Industrial           4,928,504  
             
               
TECHNOLOGY - 14.5%              

Maxwell Technologies, Inc.*

     72,068     628,434  

KEYW Holding Corp.*

     42,318     468,460  

Silicon Graphics International Corp.*

     44,580     411,473  

Spansion, Inc. — Class A*

     14,460     329,543  

Digi International, Inc.*

     39,014     292,605  

Insight Enterprises, Inc.*

     11,349     256,828  

Allscripts Healthcare Solutions, Inc.*

     13,980     187,542  

Brooks Automation, Inc.

     14,600     153,446  

IXYS Corp.

     14,030     147,315  

Teradyne, Inc.

     7,430     144,068  

Diebold, Inc.

     3,920     138,454  

Diodes, Inc.*

     5,690     136,105  

Mercury Systems, Inc.*

     11,540     127,055  

ManTech International Corp. — Class A

     4,280     115,346  

Take-Two Interactive Software, Inc.*

     4,860     112,120  

Semtech Corp.*

     2,850     77,378  

iGATE Corp.*

     1,710     62,791  

IPG Photonics Corp.*

     830     57,087  
             
Total Technology           3,846,050  
             
               
CONSUMER, NON-CYCLICAL - 14.0%              

Emergent Biosolutions, Inc.*

     22,720     484,162  

ABM Industries, Inc.

     15,740     404,361  

Global Cash Access Holdings, Inc.*

     50,150     338,513  

Greatbatch, Inc.*

     7,248     308,836  

Tornier N.V.*

     12,630     301,857  

Kindred Healthcare, Inc.

     14,974     290,496  

DeVry Education Group, Inc.

     6,170     264,138  

Invacare Corp.

     21,670     255,923  

Navigant Consulting, Inc.*

     17,440     242,591  

ICU Medical, Inc.*

     3,635     233,294  

ICF International, Inc.*

     7,290     224,459  

Great Lakes Dredge & Dock Corp.*

     35,925     222,017  

Globus Medical, Inc. — Class A*

     3,200     62,944  

Grand Canyon Education, Inc.*

     1,330     54,224  

Alere, Inc.*

     1,030     39,943  
             
Total Consumer, Non-cyclical           3,727,758  
             
               
CONSUMER, CYCLICAL - 7.8%              

Brown Shoe Company, Inc.

     15,474     419,809  

Papa Murphy’s Holdings, Inc.*

     36,320     370,464  

International Speedway Corp. — Class A

     11,611     367,372  

Chico’s FAS, Inc.

     17,270     255,078  

Oshkosh Corp.

     5,340     235,761  

ScanSource, Inc.*

     3,400     117,606  

Wendy’s Co.

     13,680     112,997  

Ryland Group, Inc.

     3,250     108,030  

WESCO International, Inc.*

     1,002     78,417  
             
Total Consumer, Cyclical           2,065,534  
             
               
ENERGY - 6.3%              

Patterson-UTI Energy, Inc.

     15,220     495,107  

Oasis Petroleum, Inc.*

     7,250     303,123  

Resolute Energy Corp.*

     47,930     300,521  

Matrix Service Co.*

     9,849     237,558  

Sanchez Energy Corp.*

     7,248     190,332  

Clayton Williams Energy, Inc.*

     1,547     149,208  
             
Total Energy           1,675,849  
             
               
UTILITIES - 5.7%              

UGI Corp.

     16,379     558,361  

Laclede Group, Inc.

     10,186     472,630  

PICO Holdings, Inc.*

     11,932     238,043  

South Jersey Industries, Inc.

     3,680     196,365  

Avista Corp.

     1,760     53,733  
             
Total Utilities           1,519,132  
             

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 49

SCHEDULE OF INVESTMENTS (concluded)    
 
SMALL CAP VALUE FUND   September 30, 2014

      SHARES     VALUE  
 
               
COMMUNICATIONS - 5.2%              

DigitalGlobe, Inc.*

     16,138   $ 459,932  

Safeguard Scientifics, Inc.*

     15,090     277,656  

Finisar Corp.*

     15,760     262,089  

Scholastic Corp.

     7,252     234,385  

Liquidity Services, Inc.*

     11,620     159,775  
             
Total Communications           1,393,837  
             
               
BASIC MATERIALS - 4.0%              

Luxfer Holdings plc ADR

     16,880     291,348  

Landec Corp.*

     21,546     263,939  

Olin Corp.

     8,902     224,776  

Royal Gold, Inc.

     3,372     218,977  

Allied Nevada Gold Corp.*

     19,300     63,883  
             
Total Basic Materials           1,062,923  
             
Total Common Stocks              

(Cost $23,467,776)

           25,633,455  
             
               
CONVERTIBLE PREFERRED STOCKS††† - 0.0%              

Thermoenergy Corp.*,1

     6,250     91  
             
Total Preferred Stocks              

(Cost $5,968)

           91  
             
               
SHORT TERM INVESTMENTS† - 3.2%              

Dreyfus Treasury Prime Cash Management Fund

     843,505     843,505  
             
Total Short Term Investments              

(Cost $843,505)

           843,505  
             
Total Investments - 99.5%              

(Cost $24,317,249)

         $ 26,477,051  
             
Other Assets & Liabilities, net - 0.5%           145,288  
             
Total Net Assets - 100.0%         $ 26,622,339  

*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 4.
†††   Value determined based on Level 3 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.
    ADR — American Depositary Receipt
    plc — Public Limited Company

 
50 | THE GUGGENHEIM FUNDS ANNUAL REPORT

SMALL CAP VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES
 

September 30, 2014

ASSETS:        
Investments, at value        

(cost $24,317,249)

   $ 26,477,051  
Prepaid expenses     24,583  
Cash     1,937  
Receivables:        

Securities sold

     293,500  

Dividends

     45,359  

Fund shares sold

     22,274  

Investment adviser

     22,272  
       
Total assets     26,886,976  
       
         
LIABILITIES:        
Payable for:        

Securities purchased

     185,394  

Management fees

     33,144  

Distribution and service fees

     11,016  

Fund shares redeemed

     9,261  

Fund accounting/administration fees

     3,149  

Transfer agent/maintenance fees

     3,087  

Trustees’ fees*

     71  

Miscellaneous

     19,515  
       
Total liabilities     264,637  
       
NET ASSETS   $ 26,622,339  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 19,760,143  
Accumulated net investment loss     (146,970 )
Accumulated net realized gain on investments     4,849,364  
Net unrealized appreciation on investments     2,159,802  
       
Net assets   $ 26,622,339  
       
A-CLASS:        
Net assets   $ 17,342,228  
Capital shares outstanding     1,031,176  
Net asset value per share     $16.82  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $17.66  
       
C-CLASS:        
Net assets   $ 8,526,798  
Capital shares outstanding     534,219  
Net asset value per share     $15.96  
       
INSTITUTIONAL CLASS:        
Net assets   $ 753,313  
Capital shares outstanding     44,203  
Net asset value per share     $17.04  
       

STATEMENT OF OPERATIONS
 

Year Ended September 30, 2014

INVESTMENT INCOME:        
Dividends (net of foreign withholding tax of $448)   $ 558,634  
Interest     28,510  
       

Total investment income

     587,144  
       
         
EXPENSES:        
Management fees     504,875  
Transfer agent/maintenance fees:        

A-Class

     50,190  

C-Class

     13,242  

Institutional Class

     796  
Distribution and service fees:        

A-Class

     49,246  

C-Class

     86,459  
Fund accounting/administration fees     47,962  
Registration fees     44,888  
Trustees’ fees*     5,056  
Custodian fees     4,727  
Tax expense     1  
Miscellaneous     69,966  
       

Total expenses

     877,408  
Less:        
Expenses waived by Adviser     (199,545 )
       
Net expenses     677,863  
       
Net investment loss     (90,719 )
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     8,663,768  

Options written

     87,489  
       
Net realized gain     8,751,257  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     (7,303,931 )

Options written

     (5,573 )
       
Net change in unrealized appreciation (depreciation)     (7,309,504 )
       
Net realized and unrealized gain     1,441,753  
       
Net increase in net assets resulting        

from operations

   $ 1,351,034  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.


 
SEE NOTES TO FINANCIAL STATEMENTS   THE GUGGENHEIM FUNDS ANNUAL REPORT | 51

SMALL CAP VALUE FUND

STATEMENTS OF CHANGES IN NET ASSETS
 

      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income (loss)   $ (90,719 )   $ 11,190  
Net realized gain on investments     8,751,257       3,160,916  
Net change in unrealized appreciation (depreciation) on investments     (7,309,504 )     7,028,196  
 
Net increase in net assets resulting from operations     1,351,034       10,200,302  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                
A-Class     (33,808 )     (11,056 )
Institutional Class     (89,016 )     (53,908 )
Net realized gains                
A-Class     (1,236,307 )     (1,047,645 )
C-Class     (508,183 )     (266,068 )
Institutional Class     (1,474,064 )     (1,552,279 )
 
Total distributions to shareholders     (3,341,378 )     (2,930,956 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                
A-Class     9,171,920       10,521,756  
C-Class     4,179,080       2,264,197  
Institutional Class     559,915       331,808  
Distributions reinvested                
A-Class     1,239,655       1,042,444  
C-Class     485,717       248,604  
Institutional Class     25,070       4,422  
Cost of shares redeemed                
A-Class     (8,482,138 )     (10,445,396 )
C-Class     (1,429,909 )     (372,708 )
Institutional Class     (21,823,574 )     (88,984 )
 
Net increase (decrease) from capital share transactions     (16,074,264 )     3,506,143  
 
Net increase (decrease) in net assets     (18,064,608 )     10,775,489  
                 
NET ASSETS:                
Beginning of year     44,686,947       33,911,458  
 
End of year   $ 26,622,339     $ 44,686,947  
 
Accumulated net investment loss at end of year   $ (146,970 )   $ (87,199 )
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                
A-Class     506,970       653,325  
C-Class     242,648       142,887  
Institutional Class     30,658       20,199  
Shares issued from reinvestment of distributions                
A-Class     71,163       75,267  
C-Class     29,190       18,636  
Institutional Class     1,422       316  
Shares redeemed                
A-Class     (472,674 )     (620,391 )
C-Class     (82,761 )     (24,580 )
Institutional Class     (1,224,766 )     (5,715 )
 
Net increase (decrease) in shares     (898,150 )     259,944  
 

 
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

SMALL CAP VALUE FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended    
      September 30,       September 30,       September 30,       September 30,       September 30,    
A-Class     2014       2013       2012       2011       2010    
 
Per Share Data                                          
Net asset value, beginning of period     $17.81       $15.04       $11.66       $14.35       $13.24    
 
Income (loss) from investment operations:                                          
Net investment income (loss)a     (.03 )     (—) b     (.03 )     (.07 )     (.05 )  
Net gain (loss) on investments (realized and unrealized)     .26       4.05       3.73       (.63 )     1.54    
       
Total from investment operations     .23       4.05       3.70       (.70 )     1.49    
 
Less distributions from:                                          
Net investment income     (.03 )     (.01 )     —       —       —    
Net realized gains     (1.19 )     (1.27 )     (.32 )     (1.99 )     (.38 )  
       
Total distributions     (1.22 )     (1.28 )     (.32 )     (1.99 )     (.38 )  
 
Net asset value, end of period     $16.82       $17.81       15.04       $11.66       $14.35    
       
                                           
 
Total Returnc     1.07%       29.39%       32.19%       (7.31% )     11.53%    
 
Ratios/Supplemental Data                                          
Net assets, end of period (in thousands)     $17,342       $16,487       $12,294       $7,592       $6,209    
 
Ratios to average net assets:                                          
Net investment income (loss)     (0.14% )     (0.02% )     (0.24% )     (0.52% )     (0.34% )  
Total expenses     1.85%       1.91%       2.14%       2.33%       2.45%    
Net expensesd     1.32% e     1.30%       1.30%       1.30%       1.30%    
 
Portfolio turnover rate     45%       34%       62%       70%       140%    
                                           
      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended    
      September 30,       September 30,       September 30,       September 30,       September 30,    
C-Class     2014       2013       2012       2011       2010    
 
Per Share Data                                          
Net asset value, beginning of period     $17.05       $14.54       $11.36       $14.13       $13.11    
 
Income (loss) from investment operations:                                          
Net investment income (loss)a     (.15 )     (.12 )     (.14 )     (.18 )     (.15 )  
Net gain (loss) on investments (realized and unrealized)     .25       3.90       3.64       (.60 )     1.55    
       
Total from investment operations     .10       3.78       3.50       (.78 )     1.40    
 
Less distributions from:                                          
Net realized gains     (1.19 )     (1.27 )     (.32 )     (1.99 )     (.38 )  
       
Total distributions     (1.19 )     (1.27 )     (.32 )     (1.99 )     (.38 )  
 
Net asset value, end of period     $15.96       $17.05       $14.54       $11.36       $14.13    
       
                                           
 
Total Returnc     0.30%       28.34%       31.35%       (8.07% )     10.94%    
 
Ratios/Supplemental Data                                          
Net assets, end of period (in thousands)     $8,527       $5,885       $3,026       $2,305       $1,353    
 
Ratios to average net assets:                                          
Net investment income (loss)     (0.87% )     (0.75% )     (1.00% )     (1.26% )     (1.09% )  
Total expenses     2.51%       2.58%       2.70%       3.07%       3.22%    
Net expensesd     2.07% e     2.05%       2.05%       2.05%       2.05%    
 
Portfolio turnover rate     45%       34%       62%       70%       140%    

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  53

SMALL CAP VALUE FUND

FINANCIAL HIGHLIGHTS (concluded)
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.


      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended  
      September 30,       September 30,       September 30,       September 30,       September 30,  
Institutional Class     2014       2013       2012       2011       2010  
 
Per Share Data                                        
Net asset value, beginning of period     $18.04       $15.21       $11.76       $14.43       $13.28  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     .01       .04       — b     (.04 )     (.01 )
Net gain (loss) on investments (realized and unrealized)     .25       4.10       3.77       (.64 )     1.54  
       
Total from investment operations     .26       4.14       3.77       (.68 )     1.53  
 
Less distributions from:                                        
Net investment income     (.07 )     (.04 )     —       —       —  
Net realized gains     (1.19 )     (1.27 )     (.32 )     (1.99 )     (.38 )
       
                                         
Total distributions     (1.26 )     (1.31 )     (.32 )     (1.99 )     (.38 )
 
Net asset value, end of period     $17.04       $18.04       $15.21       $11.76       $14.43  
       
                                           
 
Total Returnc     1.21 %     29.74 %     32.51 %     (7.11 %)     11.80 %
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $753       $22,315       $18,591       $638       $734  
 
Ratios to average net assets:                                        
Net investment income (loss)     0.05 %     0.23 %     0.02 %     (0.30 %)     (0.08 %)
Total expenses     1.33 %     1.34 %     1.44 %     2.09 %     2.21 %
Net expensesd     1.07 %e     1.05 %     1.05 %     1.05 %     1.05 %
 
Portfolio turnover rate     45 %e     34 %     62 %     70 %     140 %

a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Net investment income (loss) is less than $0.01 per share.
c Total return does not reflect the impact of any applicable sales charges and has not been annualized.
d Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable.
e
Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratio would be 1.30%, 2.05% and 1.05% for the A-Class, C-Class and Institutional Class, respectively.

 
54  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

 

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THE GUGGENHEIM FUNDS ANNUAL REPORT  |  55

MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders:

Guggenheim StylePlus—Large Core Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Global Chairman of Investments and Chief Investment Officer; Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Head of Equity and Derivative Strategies; and Scott Hammond, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended September 30, 2014.

For the year ended September 30, 2014, the Guggenheim StylePlus—Large Core Fund returned 21.59%1, compared with the 19.73% return of its benchmark, the S&P 500 Index.

The Fund’s investment objective is to deliver long-term growth of capital in excess of that produced by the total return of the S&P 500 Index. The Fund seeks to add alpha above the target index by leveraging Guggenheim’s competencies in fixed income and systematic stock selection. To accomplish this, the StylePlus strategy allocates to quantitative selection models when stock picking opportunities in the market are high.

When stock selection opportunities are less attractive, the Fund invests in derivatives based on the target index, backed by a diversified portfolio of fixed income instruments. In this way, the Fund believes it will deliver the target index return plus an alpha component commensurate with the yield achieved on the active fixed income portfolio.

Performance Review

The Fund outperformed over the period, with the active equity and active fixed income exposures both boosting performance. The passive equity position was neutral to performance, while the swap agreements contributed to performance.

The Fund maintained an approximate allocation of 20% to systematic equity selection and 80% allocated to the passive equity position, which was maintained with swap agreements and futures contracts. Beginning in December 2013, due to a more favorable outlook for active stock selection, the equity sleeve was increased to 25%, with 74% allocated to the passive equity position, then scaled back to 20% toward mid-2014.

Performance displayed represents past performance which is no guarantee of future results.

1Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares.

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.

 
56  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

 

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THE GUGGENHEIM FUNDS ANNUAL REPORT  |  57

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

STYLEPLUS—LARGE CORE FUND

OBJECTIVE:    Seeks long-term growth of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating**
 
  % of
Rating Total Investments
 
Fixed Income Instruments    

AAA

   6.9%

AA

   3.6%

A

   5.0%

BBB

   6.2%

BB

   1.1%

B

   4.4%

CCC

   1.1%
Other Instruments    

Mutual Funds

   48.6%

Common Stock

   20.6%

Short Term Investments

   2.5%
 
Total Investments   100.0%
 

The chart above reflects percentages of the value of total investments.

Inception Dates:      
 
A-Class   September 10, 1962  
B-Class   October 19, 1993  
C-Class   January 29, 1999  
Institutional Class   March 1, 2012  
       
Ten Largest Holdings (% of Total Net Assets)      
 
Guggenheim Strategy Fund III   21.8%  
Guggenheim Strategy Fund II   15.2%  
HSI Asset Securitization Corporation      

Trust 2007-WF1 — Class 2A3

   1.0%  
Garrison Funding 2013-2 Ltd. — Class A1T   1.0%  
Duane Street CLO IV Ltd. — Class A1T   1.0%  
Cornerstone CLO Ltd. — Class A1S   0.8%  
Argent Securities Incorporated Asset-Backed      

Pass-Through

      

Certificates Series 2005-W3 — Class A2D

   0.8%  
Boca Hotel Portfolio Trust      

2013-BOCA — Class D

   0.8%  
Resource Capital Corporation CRE      

Notes 2013 Ltd. — Class B

   0.8%  
Goldman Sachs Asset Management CLO plc   0.7%  
 
Top Ten Total   43.9%  
 
“Ten Largest Holdings” exclude any temporary cash or derivative investments.

** 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.

 
58  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded) September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*                  
Periods Ended September 30, 2014                  
                   
    1 Year   5 Year   10 Year
 
A-Class Shares   21.59%     12.92%     5.27%  
 
A-Class Shares with sales charge†   15.82%     11.58%     4.65%  
 
B-Class Shares   19.93%     11.72%     4.59%  
 
B-Class Shares with CDSC‡   15.19%     11.46%     4.59%  
 
C-Class Shares   20.40%     11.92%     4.43%  
 
C-Class Shares with CDSC§   19.43%     11.92%     4.43%  
 
S&P 500 Index   19.73%     15.70%     8.11%  
 
                   
          Since Inception      
    1 Year   (03/01/12)      
 
Institutional Class Shares   21.50%     14.66%        
 
S&P 500 Index   19.73%     17.51%        
 

  * The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
  † Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
  ‡ Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase
  § Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  59

SCHEDULE OF INVESTMENTS   September 30, 2014
 
STYLEPLUS—LARGE CORE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 20.6%              
               
CONSUMER, NON-CYCLICAL - 6.2%              

Pfizer, Inc.

     29,990   $ 886,804  

Merck & Company, Inc.

     14,566     863,472  

Altria Group, Inc.

     13,704     629,562  

Procter & Gamble Co.

     7,248     606,948  

UnitedHealth Group, Inc.

     6,717     579,341  

Archer-Daniels-Midland Co.

     11,119     568,181  

Johnson & Johnson

     5,210     555,334  

Mondelez International, Inc. — Class A

     15,463     529,840  

Express Scripts Holding Co.*

     7,407     523,156  

Kroger Co.

     9,440     490,880  

Cardinal Health, Inc.

     6,469     484,657  

Kimberly-Clark Corp.

     4,385     471,694  

Kraft Foods Group, Inc.

     8,316     469,022  

Kellogg Co.

     7,040     433,664  

Medtronic, Inc.

     6,903     427,641  

Aetna, Inc.

     5,147     416,907  

WellPoint, Inc.

     3,425     409,699  

Eli Lilly & Co.

     6,161     399,541  

PepsiCo, Inc.

     4,277     398,146  

Philip Morris International, Inc.

     4,725     394,065  

General Mills, Inc.

     6,919     349,064  

Cigna Corp.

     3,826     346,980  

Becton Dickinson and Co.

     2,752     313,205  

Coca-Cola Co.

     5,648     240,944  

AbbVie, Inc.

     3,649     210,766  

Stryker Corp.

     1,990     160,693  

Amgen, Inc.

     1,063     149,309  

Automatic Data Processing, Inc.

     1,482     123,125  
             
Total Consumer, Non-cyclical           12,432,640  
             
               
INDUSTRIAL - 3.4%              

General Electric Co.

     40,710     1,042,990  

Boeing Co.

     4,887     622,507  

United Technologies Corp.

     5,780     610,368  

General Dynamics Corp.

     4,664     592,748  

Lockheed Martin Corp.

     3,035     554,737  

FedEx Corp.

     3,422     552,482  

Caterpillar, Inc.

     5,334     528,226  

Northrop Grumman Corp.

     3,913     515,577  

CSX Corp.

     15,934     510,844  

Raytheon Co.

     4,715     479,138  

Waste Management, Inc.

     9,974     474,064  

Deere & Co.

     1,443     118,312  

TE Connectivity Ltd.

     1,969     108,866  
             
Total Industrial           6,710,859  
             
               
TECHNOLOGY - 3.1%              

Apple, Inc.

     12,674     1,276,906  

Microsoft Corp.

     20,749     961,924  

International Business Machines Corp.

     3,129     593,978  

Hewlett-Packard Co.

     16,107     571,315  

EMC Corp.

     18,740     548,333  

QUALCOMM, Inc.

     5,459     408,169  

Oracle Corp.

     9,516     364,272  

Broadcom Corp. — Class A

     7,749     313,215  

Micron Technology, Inc.*

     8,360     286,414  

Intel Corp.

     8,121     282,773  

Texas Instruments, Inc.

     5,796     276,411  

Western Digital Corp.

     2,360     229,675  
             
Total Technology           6,113,385  
             
               
ENERGY - 2.4%              

Exxon Mobil Corp.

     12,329     1,159,543  

Anadarko Petroleum Corp.

     4,961     503,243  

Pioneer Natural Resources Co.

     2,343     461,500  

Marathon Oil Corp.

     12,077     453,975  

Apache Corp.

     4,833     453,674  

Hess Corp.

     4,476     422,176  

Marathon Petroleum Corp.

     4,492     380,338  

Valero Energy Corp.

     4,741     219,366  

Occidental Petroleum Corp.

     2,037     195,858  

Chevron Corp.

     1,285     153,326  

ConocoPhillips

     1,975     151,127  

Baker Hughes, Inc.

     1,814     118,019  

Phillips 66

     1,437     116,842  
             
Total Energy           4,788,987  
             
               
FINANCIAL - 2.0%              

JPMorgan Chase & Co.

     16,805     1,012,333  

Bank of America Corp.

     32,231     549,539  

Prudential Financial, Inc.

     5,993     527,024  

Citigroup, Inc.

     9,756     505,556  

Capital One Financial Corp.

     6,042     493,148  

MetLife, Inc.

     8,486     455,868  

Wells Fargo & Co.

     4,274     221,692  

Berkshire Hathaway, Inc. — Class B*

     986     136,206  
             
Total Financial           3,901,366  
             
               
COMMUNICATIONS - 1.7%              

Cisco Systems, Inc.

     28,963     728,999  

eBay, Inc.*

     10,384     588,045  

Corning, Inc.

     22,473     434,628  

Google, Inc. — Class A*

     724     426,009  

CenturyLink, Inc.

     8,516     348,219  

Comcast Corp. — Class A

     6,085     327,251  

Verizon Communications, Inc.

     3,934     196,661  

Amazon.com, Inc.*

     470     151,547  

AT&T, Inc.

     3,588     126,441  

Yahoo!, Inc.*

     2,000     81,500  
             
Total Communications           3,409,300  
             
               
CONSUMER, CYCLICAL - 1.7%              

Wal-Mart Stores, Inc.

     9,338     714,077  

CVS Health Corp.

     8,174     650,569  

Walgreen Co.

     8,756     518,968  

General Motors Co.

     15,072     481,400  

Ford Motor Co.

     25,777     381,242  

Costco Wholesale Corp.

     1,935     242,494  

Target Corp.

     3,480     218,126  

Carnival Corp.

     3,272     131,436  
             
Total Consumer, Cyclical           3,338,312  
             
               
BASIC MATERIALS - 0.1%              

Freeport-McMoRan, Inc.

     4,462     145,684  

EI du Pont de Nemours & Co.

     1,000     71,760  
             
Total Basic Materials           217,444  
             
Total Common Stocks              

(Cost $37,569,392)

           40,912,293  
             

 
60  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
STYLEPLUS —LARGE CORE FUND    

      SHARES     VALUE
 
             
MUTUAL FUNDS† - 48.6%            

Guggenheim Strategy Fund III1

     1,742,203   $ 43,398,278

Guggenheim Strategy Fund II1

     1,216,007     30,278,579

Guggenheim Strategy Fund I1

     925,171     23,036,746
             
Total Mutual Funds            

(Cost $96,959,909)

           96,713,603
           
SHORT TERM INVESTMENTS†- 2.5%            

Dreyfus Treasury Prime Cash Management Fund

     4,952,822     4,952,822
           
Total Short Term Investments            

(Cost $4,952,822)

           4,952,822
           
             
      FACE      
      AMOUNT      
             
ASSET BACKED SECURITIES†† - 20.4%            

Garrison Funding 2013-2 Ltd.

            

2013-2A, 2.03% due 09/25/232,3

   $ 1,980,000     1,967,921

Duane Street CLO IV Ltd.

            

2007-4A, 0.46% due 11/14/212,3

     1,985,068     1,967,401

Brentwood CLO Corp.

            

2006-1A, 0.51% due 02/01/222,3

     1,150,777     1,133,170

2006-1A, 1.06% due 02/01/222,3

     500,000     455,800

Cornerstone CLO Ltd.

            

2007-1A, 0.45% due 07/15/212,3

     1,600,000     1,586,400

Argent Securities Incorporated Asset-Backed

            

Pass-Through Certificates

            

2005-W3, 0.49% due 11/25/352

     1,624,615     1,559,841

Goldman Sachs Asset Management CLO plc

            

2007-1A, 2.99% due 08/01/222,3

     1,500,000     1,475,700

JP Morgan Mortgage Acquisition Trust

            

2007-CH3, 0.30% due 03/25/372

     1,457,736     1,436,009

ALM VII R-2 Ltd. 2013-7R2A,

            

2.83% due 04/24/242,3

     1,450,000     1,423,610

Salus CLO 2012-1 Ltd. 2013-1AN,

            

2.48% due 03/05/212,3

     1,400,000     1,397,760

Central Park CLO Ltd. 2011-1A,

            

3.43% due 07/23/222,3

     1,320,000     1,301,784

Cerberus Onshore II CLO LLC

            

2014-1A, 2.93% due 10/15/232,3

     1,000,000     984,100

2014-1A, 2.23% due 10/15/232,3

     250,000     249,500

Black Diamond CLO 2005-1 Delaware Corp.

            

2005-1A, 2.13% due 06/20/172,3

     1,250,000     1,225,750

Symphony CLO IX, LP 2012-9A,

            

2.73% due 04/16/222,3

     700,000     700,630

2012-9A, 3.48% due 04/16/222,3

     500,000     500,000

N-Star REL CDO VIII Ltd.

            

2006-8A, 0.44% due 02/01/412,3

     1,207,005     1,157,639

Aegis Asset Backed Securities Trust

            

2005-3, 0.62% due 08/25/352

     1,173,060     1,156,393

KKR Financial CLO 2007-1 Ltd.

            

2007-1A, 2.48% due 05/15/212,3

     1,150,000     1,127,690

Lehman XS Trust

            

2007-9, 0.27% due 06/25/372

     1,227,977     1,108,120

GreenPoint Mortgage Funding Trust

            

2005-HE4, 0.86% due 07/25/302

     1,100,000     1,029,777

Symphony CLO VII Ltd.

            

2011-7A, 3.44% due 07/28/212,3

     1,000,000     998,500

Wells Fargo Home Equity Asset-Backed

            

Securities 2006-2 Trust

            

2006-3, 0.30% due 01/25/372

     1,070,506     981,620

GSC Group CDO Fund VIII Ltd.

            

2007-8A, 0.61% due 04/17/212,3

     1,000,000     976,000

Foothill CLO Ltd.

            

2007-1A, 0.48% due 02/22/212,3

     976,198     967,413

Hewett’s Island CDO Ltd.

            

2007-6A, 2.48% due 06/09/192,3

     900,000     896,580

Popular ABS Mortgage Pass-Through Trust

            

2005-A, 0.58% due 06/25/352

     893,510     859,551

TICC CLO LLC

            

2011-1A, 2.48% due 07/25/212,3

     850,000     850,000

Black Diamond CLO 2006-1 Luxembourg S.A.

            

2007-1A, 0.62% due 04/29/192,3

     900,000     846,270

Race Point V CLO Ltd.

            

2014-5AR, 3.08% due 12/15/222,3

     850,000     846,260

Northwoods Capital VII Ltd.

            

2006-7A, 1.78% due 10/22/212,3

     810,000     797,688

H2 Asset Funding Ltd.

            

2.05% due 03/19/37

     750,000     756,375

OFSI Fund V Ltd.

            

2013-5A, 3.43% due 04/17/252,3

     750,000     747,900

Golub Capital Partners CLO 18 Ltd.

            

2014-18A, 2.73% due 04/25/262,3

     720,000     712,800

Tricadia CDO 2006-6 Ltd.

            

2006-6A, 0.79% due 11/05/412,3

     600,000     567,360

Halcyon Loan Advisors Funding 2012-1 Ltd.

            

2012-1A, 3.23% due 08/15/232,3

     500,000     491,300

Soundview Home Loan Trust

            

2003-1, 2.40% due 08/25/312

     478,805     474,209

NewStar Commercial Loan Trust

            

2007-1A, 1.53% due 09/30/222,3

     500,000     472,850

Race Point IV CLO Ltd.

            

2007-4A, 0.99% due 08/01/212,3

     450,000     433,260

DIVCORE CLO Ltd.

            

2013-1A B, 4.05% due 11/15/32

     400,000     400,240

ACS 2007-1 Pass Through Trust

            

2007-1A, 0.47% due 06/14/372,3

     405,232     396,114

West Coast Funding Ltd.

            

2006-1A, 0.38% due 11/02/412,3

     403,354     395,892

Global Leveraged Capital Credit Opportunity Fund

            

2006-1A, 0.53% due 12/20/182,3

     383,825     383,173

JP Morgan Mortgage Acquisition Trust

            

2006-CH2, 0.26% due 10/25/362

     240,904     240,654

Golub Capital Partners Fundings Ltd.

            

2007-1A, 0.48% due 03/15/222,3

     224,024     221,604
           
Total Asset Backed Securities            

(Cost $40,168,889)

           40,658,608
           
             
MORTGAGE BACKED SECURITIES†† - 4.6%            

HSI Asset Securitization Corporation Trust

            

2007-WF1, 0.32% due 05/25/372

     2,227,158     2,077,293

Boca Hotel Portfolio Trust

            

2013-BOCA, 3.20% due 08/15/262,3

     1,550,000     1,551,227

Resource Capital Corporation CRE Notes 2013 Ltd.

            

2013-CRE1, 3.00% due 12/15/282,3

     1,500,000     1,517,158

Hilton USA Trust

            

2013-HLF, 2.91% due 11/05/302,3

     1,350,000     1,350,849

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  61

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
STYLEPLUS—LARGE CORE FUND    

      FACE        
      AMOUNT     VALUE  
 

SRERS Funding Ltd.

              

2011-RS, 0.40% due 05/09/462,3

   $ 1,192,747   $ 1,136,092  

Banc of America Merrill Lynch

              

Commercial Mortgage, Inc.

              

2005-6, 6.33% due 09/10/472,3

     882,500     899,514  

Wachovia Bank Commercial Mortgage Trust

              

Series 2007-WHALE 8

              

2007-WHL8, 0.23% due 06/15/202,3

     566,471     563,690  
             
Total Mortgage Backed Securities              

(Cost $9,006,607)

           9,095,823  
             
               
SENIOR FLOATING RATE INTERESTS††,2 - 2.0%              
               
FINANCIAL - 0.8%              

National Financial Partners Corp.

              

4.50% due 07/01/20

     1,267,204     1,254,532  

First Data Corp.

              

3.65% due 03/23/18

     150,000     146,954  

Cunningham Lindsey U.S., Inc.

              

5.00% due 12/10/19

     108,346     106,450  
             
Total Financial           1,507,936  
             
TECHNOLOGY - 0.5%              

Blue Coat Systems, Inc.

              

4.00% due 05/31/19

     1,037,282     1,015,675  
             
ENERGY - 0.3%              

Pacific Drilling

              

4.50% due 05/18/18

     661,625     638,746  
             
INDUSTRIAL - 0.3%              

Thermasys Corp.

              

5.25% due 05/03/19

     629,688     626,016  
             
CONSUMER, CYCLICAL - 0.1%              

Sears Holdings Corp.

              

5.50% due 06/30/18

     198,500     192,793  
             
Total Senior Floating Rate Interests              

(Cost $4,033,935)

           3,981,166  
             
               
CORPORATE BONDS†† -0.9%              
FINANCIAL - 0.5%              

Icahn Enterprises Limited Partnership / Icahn

              

Enterprises Finance Corp.

              

3.50% due 03/15/17

     790,000     782,100  

International Lease Finance Corp.

              

2.18% due 06/15/162

     300,000     297,000  
             
Total Financial           1,079,100  
             
COMMUNICATIONS - 0.4%              

Level 3 Financing, Inc.

              

3.82% due 01/15/182

     750,000     738,975  
             
Total Corporate Bonds              

(Cost $1,846,140)

           1,818,075  
             
               
COLLATERALIZED MORTGAGE OBLIGATION†† - 0.4%              

HarborView Mortgage Loan Trust

              

2006-12, 0.34% due 01/19/382

     1,038,996     886,870  
             
Total Collateralized Mortgage Obligation              

(Cost $851,755)

           886,870  
             
Total Investments - 100.0%              

(Cost $195,389,449)

         $ 199,019,260  
             
Other Assets & Liabilities, net - 0.0%           (14,566 )
             
Total Net Assets - 100.0%         $ 199,004,694  
 

            UNREALIZED  
      CONTRACTS     GAIN (LOSS)  
 
EQUITY FUTURES CONTRACTS PURCHASED†              

December 2014 S&P 500 Index

              

Mini Futures Contracts

              

(Aggregate Value of

              

Contracts $1,473,563)

     15   $ (8,710 )
             
               
      UNITS        
             
OTC EQUITY INDEX SWAP AGREEMENTS††              

Morgan Stanley Capital Services, Inc.

              

June 2015 S&P 500 Total Return Index Swap,

              

Terminating 06/03/154

              

(Notional Value $102,784,935)

     28,613   $ 5,278,214  

Bank of America

              

August 2015 S&P 500 Total Return Index Swap,

              

Terminating 08/05/154

              

(Notional Value $40,452,406)

     11,261     403,015  

Bank of America

              

November 2014 S&P 500 Index Swap,

              

Terminating 11/05/144

              

(Notional Value $13,099,950)

     6,642     –  
             
(Total Notional Value $156,337,291)         $ 5,681,229  
             

*    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    Affiliated issuer — See Note 12.
2    Variable rate security. Rate indicated is rate effective at September 30, 2014.
3    Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $38,413,324 (cost $38,066,494), or 19.3% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4    Total Return based on S&P 500 Index +/- financing at a variable rate.
    plc — Public Limited Company

 
62  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

STYLEPLUS —LARGE CORE FUND

STATEMENT OF ASSETS AND LIABILITIES
 

September 30, 2014      
       
ASSETS:      
Investments in unaffiliated issuers, at value      

(cost $98,429,540)

   $ 102,305,657
Investments in affiliated issuers, at value      

(cost $96,959,909)

     96,713,603
     
Total investments      

(cost $195,389,449)

     199,019,260
Unrealized appreciation on swap agreements     5,681,229
Segregated cash with broker     69,000
Prepaid expenses     26,198
Cash     7,695
Receivables:      

Dividends

     169,782

Interest

     130,534

Fund shares sold

     112,703
     
Total assets     205,216,401
     
       
LIABILITIES:      
Segregated cash from broker     5,567,000
Payable for:      

Swap settlement

     227,833

Management fees

     125,060

Securities purchased

     101,387

Distribution and service fees

     45,440

Fund shares redeemed

     27,011

Transfer agent/maintenance fees

     16,593

Fund accounting/administration fees

     15,847

Variation margin

     3,563

Trustees’ fees*

     3,125

Miscellaneous

     78,848
     
Total liabilities     6,211,707
     
NET ASSETS   $ 199,004,694
     
       
NET ASSETS CONSIST OF:      
Paid in capital   $ 163,007,684
Undistributed net investment income     1,516,265
Accumulated net realized gain on investments     25,178,415
Net unrealized appreciation on investments     9,302,330
     
Net assets   $ 199,004,694
     
A-CLASS:      
Net assets   $ 192,850,181
Capital shares outstanding     7,862,168
Net asset value per share     $24.53
     
Maximum offering price per share      

(Net asset value divided by 95.25%)

     $25.75
     
B-CLASS:      
Net assets   $ 3,033,206
Capital shares outstanding     164,938
Net asset value per share     $18.39
     
C-CLASS:      
Net assets   $ 3,041,595
Capital shares outstanding     148,011
Net asset value per share     $20.55
     
INSTITUTIONAL CLASS:      
Net assets   $ 79,712
Capital shares outstanding     3,264
Net asset value per share     $24.42
     

STATEMENT OF OPERATIONS
 

Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Interest   $ 2,199,901  
Dividends from securities of affiliated issuers     1,103,251  
Dividends from securities of unaffiliated issuers     1,071,461  
       

Total investment income

     4,374,613  
       
         
EXPENSES:        
Management fees     1,459,478  
Transfer agent/maintenance fees:        

A-Class

     239,640  

B-Class

     26,189  

C-Class

     8,816  

Institutional Class

     152  
Distribution and service fees:        

A-Class

     471,341  

B-Class

     33,542  

C-Class

     26,654  
Fund accounting/administration fees     184,865  
Legal fees     153,704  
Trustees’ fees*     21,002  
Line of credit expense     12,940  
Custodian fees     7,900  
Tax expense     5  
Miscellaneous     172,966  
       

Total expenses

     2,819,194  
Less:        
Expenses waived by Adviser     (38,920 )
       
Net expenses     2,780,274  
       
Net investment income     1,594,339  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     8,133,655  

Investments in affiliated issuers

     (115,684 )

Swap agreements

     24,173,953  

Futures contracts

     94,546  

Realized gain distributions received from

        

investment company shares

     51,299  
       
Net realized gain     32,337,769  
       
Net change in unrealized appreciation (depreciation) on:        

Investments in unaffiliated issuers

     2,236,162  

Investments in affiliated issuers

     (18,404 )

Swap agreements

     1,383,821  

Futures contracts

     3,141  
       
Net change in unrealized appreciation (depreciation)     3,604,720  
       
Net realized and unrealized gain     35,942,489  
       
Net increase in net assets resulting        

from operations

   $ 37,536,828  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  63


STYLEPLUS—LARGE CORE FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 1,594,339     $ 387,876  
Net realized gain on investments     32,337,769       41,977,296  
Net change in unrealized appreciation (depreciation) on investments     3,604,720       (18,317,757 )
 
Net increase in net assets resulting from operations     37,536,828       24,047,415  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (394,204 )     (616,535 )

Institutional Class

     (125 )     (73 )
Net realized gains                

A-Class

     (30,898,467 )     —  

B-Class

     (755,687 )     —  

C-Class

     (490,315 )     —  

Institutional Class

     (4,758 )     —  
 
Total distributions to shareholders     (32,543,556 )     (616,608 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     5,232,403       3,891,702  

B-Class

     139,271       216,333  

C-Class

     926,456       827,015  

Institutional Class

     60,516       12,929  
Distributions reinvested                

A-Class

     29,159,068       571,200  

B-Class

     750,686       —  

C-Class

     483,096       —  

Institutional Class

     4,883       73  
Cost of shares redeemed                

A-Class

     (22,280,678 )     (23,445,161 )

B-Class

     (1,341,102 )     (1,828,228 )

C-Class

     (628,059 )     (459,100 )

Institutional Class

     (13,481 )     —  
 
Net increase (decrease) from capital share transactions     12,493,059       (20,213,237 )
 
Net increase in net assets     17,486,331       3,217,570  
                 
NET ASSETS:                

Beginning of year

     181,518,363       178,300,793  
 

End of year

   $ 199,004,694     $ 181,518,363  
 
Undistributed net investment income at end of year   $ 1,516,265     $ 94,876  
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     221,145       171,925  

B-Class

     7,794       12,018  

C-Class

     45,606       41,241  

Institutional Class

     2,509       592  
Shares issued from reinvestment of distributions                

A-Class

     1,349,957       27,448  

B-Class

     45,857       —  

C-Class

     26,486       —  

Institutional Class

     227       4  
Shares redeemed                

A-Class

     (944,947 )     (1,051,893 )

B-Class

     (75,228 )     (100,705 )

C-Class

     (31,801 )     (23,259 )

Institutional Class

     (548 )     —  
 
Net increase (decrease) in shares     647,057       (922,629 )
 

 
64  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


STYLEPLUS—LARGE CORE FUND

FINANCIAL HIGHLIGHTS
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
A-Class   2014     2013     2012     2011 f     2010 f  
 
Per Share Data                              
Net asset value, beginning of period   $24.27     $21.25     $16.79     $17.56     $16.20  
 
Income (loss) from investment operations:                              
Net investment income (loss)a   .20     .06     .06     .01     .04  
Net gain (loss) on investments (realized and unrealized)   4.45     3.04     4.42     (.74 )   1.32  
     
Total from investment operations   4.65     3.10     4.48     (.73 )   1.36  
 
Less distributions from:                              
Net investment income   (.06 )   (.08 )   (.02 )   (.04 )   —  
Net realized gains   (4.33 )   —     —     —     —  
 
Total distributions   (4.39 )   (.08 )   (.02 )   (.04 )   —  
 
Net asset value, end of period   $24.53     $24.27     $21.25     $16.79     $17.56  
     
                               
 
Total Returnb   21.59%     14.64%     26.71%     (4.11% )   8.40%  
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)   $192,850     $175,601     $171,907     $156,232     $174,371  
 
Ratios to average net assets:                              
Net investment income (loss)   0.86%     0.26%     0.32%     0.06%     0.31%  
Total expensesc   1.41%     1.37%     1.36%     1.35%     1.43%  
Net expensesd   1.39%     1.37%     1.36%     1.35%     1.43%  
 
Portfolio turnover rate   107%     217%     101%     92%     100%  
                               
    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
B-Class   2014     2013     2012     2011 f     2010 f  
 
Per Share Data                              
Net asset value, beginning of period   $19.39     $17.13     $13.69     $14.40     $13.36  
 
Income (loss) from investment operations:                              
Net investment income (loss)a   (.10 )   (.17 )   (.15 )   (.11 )   (.08 )
Net gain (loss) on investments (realized and unrealized)   3.43     2.43     3.59     (.60 )   1.12  
     
Total from investment operations   3.33     2.26     3.44     (.71 )   1.04  
 
Less distributions from:                              
Net realized gains   (4.33 )   —     —     —     —  
     
Total distributions   (4.33 )   —     —     —     —  
 
Net asset value, end of period   $18.39     $19.39     $17.13     $13.69     $14.40  
     
                               
 
Total Returnb   19.93%     13.19%     25.13%     (4.93% )   7.78%  
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)   $3,033     $3,617     $4,714     $5,121     $6,817  
 
Ratios to average net assets:                              
Net investment income (loss)   (0.56% )   (0.94% )   (0.92% )   (0.70% )   (0.48% )
Total expensesc   2.81%     2.59%     2.59%     2.10%     2.17%  
Net expensesd   2.80%     2.59%     2.59%     2.10%     2.17%  
 
Portfolio turnover rate   107%     217%     101%     92%     100%  

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  65


STYLEPLUS—LARGE CORE FUND

FINANCIAL HIGHLIGHTS (concluded)
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
      September 30,     September 30,     September 30,     September 30,     September 30,  
C-Class     2014     2013     2012     2011 f     2010 f  
 
Per Share Data                                
Net asset value, beginning of period     $21.12     $18.60     $14.81     $15.56     $14.48  
 
Income (loss) from investment operations:                                
Net investment income (loss)a     (.02 )   (.15 )   (.10 )   (.12 )   (.08 )
Net gain (loss) on investments (realized and unrealized)     3.78     2.67     3.89     (.63 )   1.16  
     
Total from investment operations     3.76     2.52     3.79     (.75 )   1.08  
 
Less distributions from:                                
Net realized gains     (4.33 )   —     —     —     —  
     
Total distributions     (4.33 )   —     —     —     —  
 
Net asset value, end of period     $20.55     $21.12     $18.60     $14.81     $15.56  
     
                                 
 
Total Returnb     20.40%     13.55%     25.59%     (4.82% )   7.46%  
 
Ratios/Supplemental Data                                
Net assets, end of period (in thousands)     $3,042     $2,275     $1,669     $1,600     $2,158  
 
Ratios to average net assets:                                
Net investment income (loss)     (0.08% )   (0.77% )   (0.55% )   (0.70% )   (0.44% )
Total expensesc     2.36%     2.34%     2.22%     2.10%     2.18%  
Net expensesd     2.34%     2.34%     2.22%     2.10%     2.18%  
 
Portfolio turnover rate     107%     217%     101%     92%     100%  
 
      Year Ended     Year Ended     Period Ended            
      September 30,     September 30,     September 30,  
Institutional Class     2014     2013     2012 e  
 
Per Share Data                    
Net asset value, beginning of period     $24.25          $21.28     $20.84  
 
Income (loss) from investment operations:                    
Net investment income (loss)a     .23     .06     .07  
Net gain (loss) on investments (realized and unrealized)     4.38     3.06     .37  
     
Total from investment operations     4.61     3.12     .44  
 
Less distributions from:                    
Net investment income     (.11 )   (.15 )   —  
Net realized gains     (4.33 )   —     —  
 
Total distributions     (4.44 )   (.15 )   —  
 
Net asset value, end of period     $24.42     $24.25     $21.28  
     
                     
 
Total Returnb     21.50%     14.79%     2.11%  
 
Ratios/Supplemental Data                    
Net assets, end of period (in thousands)     $80     $26     $10  
 
Ratios to average net assets:                    
Net investment income (loss)     0.97%     0.26%     0.59%  
Total expensesc     1.39%     1.25%     1.12%  
Net expensesd     1.37%     1.25%     1.12%  
 
Portfolio turnover rate     107%     217%     101%  

a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges and has not been annualized.
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.
e Since commencement of operations: March 1, 2012. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
f Reverse share split — Per share amounts for the periods presented through April 8, 2011 have been restated to reflect a 1:4 reverse share split effective April 8, 2011.

 
66  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

 

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THE GUGGENHEIM FUNDS ANNUAL REPORT  |  67


MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders:

Guggenheim StylePlus—Mid Growth Fund (the “Fund”) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Jayson Flowers, Senior Managing Director and Head of Equity and Derivative Strategies; and Scott Hammond, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended September 30, 2014.

For the one year period ended September 30, 2014, the Guggenheim StylePlus—Mid Growth Fund returned 15.61%1, compared with the 14.43% return of its benchmark, the Russell Midcap Growth® Index.

The Fund’s investment objective is to deliver long-term growth of capital in excess of that produced by the total return of the Russell Midcap Growth Index. The Fund seeks to add alpha above the target index by leveraging Guggenheim’s competencies in fixed income and systematic stock selection. To accomplish this, the StylePlus strategy allocates to quantitative selection models when stock picking opportunities in the market are high.

When stock selection opportunities are less attractive, the Fund invests in derivatives based on the target index, backed by a diversified portfolio of fixed income instruments. In this way, the Fund believes it will deliver the target index return plus an alpha component commensurate with the yield achieved on the active fixed income portfolio.

Performance Review

The Fund outperformed over the period, with the active equity and active fixed income exposures both boosting performance. The passive equity position was neutral to performance, while the swap agreements contributed to performance.

The Fund maintained an approximate allocation of 20% to systematic equity selection, 80% allocated to the passive equity position, which was maintained with swap agreements and futures contracts. Beginning in December 2013, due to a more favorable outlook for active stock selection, the equity sleeve was increased to 25%, with 74% allocated to the passive equity position, then scaled back to 20% toward mid-2014.



Performance displayed represents past performance which is no guarantee of future results.

1Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares.

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.


 
68  |  THE GUGGENHEIM FUNDS ANNUAL REPORT



 

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THE GUGGENHEIM FUNDS ANNUAL REPORT  |  69


PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

STYLEPLUS—MID GROWTH FUND

OBJECTIVE:   Seeks long-term growth of capital.

Holdings Diversification
(Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Portfolio Composition by Quality Rating**
 
    % of
Rating   Total Investments
 
Fixed Income Instruments      

AAA

   7.1 %

AA

   3.3 %

A

   5.8 %

BBB

   6.3 %

BB

   1.1 %

B

   4.4 %

CCC

   1.1 %
Other Instruments      

Mutual Funds

   47.3 %

Common Stock

   20.3 %

Short Term Investments

   3.3 %
 
Total Investments   100.0 %
 

The chart above reflects percentages of the value of total investments.

Inception Dates:      
 
A-Class   September 17, 1969
B-Class   October 19, 1993
C-Class   January 29, 1999
Institutional Class   March 1, 2012
       
Ten Largest Holdings (% of Total Net Assets)      
 
Guggenheim Strategy Fund III   21.4 %
Guggenheim Strategy Fund II   15.9 %
HSI Asset Securitization Corporation      

Trust 2007-WF1 — Class 2A3

   1.1 %
Garrison Funding 2013-2 Ltd. — Class A1T   1.0 %
Duane Street CLO IV Ltd. — Class A1T   1.0 %
N-Star REL CDO VIII Ltd. — Class A1   1.0 %
Argent Securities Incorporated      

Asset-Backed Pass-Through

      

Certificates Series 2005-W3 —

      

Class A2D

   0.8 %
Boca Hotel Portfolio Trust 2013-      

BOCA — Class D

   0.8 %
JP Morgan Mortgage Acquisition      

Trust 2007-CH3 — Class A3

   0.8 %
Resource Capital Corporation CRE      

Notes 2013 Ltd.

   0.7 %
 
Top Ten Total   44.5 %
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

** 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.

 
70  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*                    
Periods Ended September 30, 2014                    
      1 Year   5 Year     10 Year
 
A-Class Shares     15.61 %   13.99 %     6.38 %
 
A-Class Shares with sales charge†     10.12 %   12.64 %     5.75 %
 
B-Class Shares     13.95 %   12.68 %     5.69 %
 
B-Class Shares with CDSC‡     8.96 %   12.43 %     5.69 %
 
C-Class Shares     14.56 %   13.02 %     5.53 %
 
C-Class Shares with CDSC§     13.56 %   13.02 %     5.53 %
 
Russell Midcap Growth Index     14.43 %   17.12 %     10.24 %
                       
                  Since Inception
            1 Year   (03/01/12)
 
Institutional Class Shares           15.42 %   13.77%  
 
Russell Midcap Growth Index           14.43 %   16.10%  
 



* The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell Midcap Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
‡ Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase
§ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  71

SCHEDULE OF INVESTMENTS   September 30, 2014
STYLEPLUS—MID GROWTH FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 20.4%              
               
CONSUMER, NON-CYCLICAL - 7.2%              

Kroger Co.

     5,424   $ 282,048  

Dr Pepper Snapple Group, Inc.

     3,530     227,014  

DaVita HealthCare Partners, Inc.*

     2,972     217,372  

Vertex Pharmaceuticals, Inc.*

     1,849     207,661  

Mylan, Inc.*

     4,357     198,200  

Cigna Corp.

     2,065     187,275  

Coca-Cola Enterprises, Inc.

     3,886     172,383  

Cardinal Health, Inc.

     2,027     151,863  

Kellogg Co.

     2,412     148,579  

Western Union Co.

     9,036     144,937  

Constellation Brands, Inc. — Class A*

     1,616     140,851  

Avis Budget Group, Inc.*

     2,552     140,079  

HCA Holdings, Inc.*

     1,909     134,623  

Hershey Co.

     1,396     133,220  

Clorox Co.

     1,369     131,479  

St. Jude Medical, Inc.

     2,160     129,880  

Campbell Soup Co.

     3,003     128,318  

Mead Johnson Nutrition Co. — Class A

     1,304     125,470  

Keurig Green Mountain, Inc.

     961     125,055  

Intuitive Surgical, Inc.*

     253     116,840  

Avon Products, Inc.

     9,241     116,436  

Laboratory Corporation of America Holdings*

     1,141     116,097  

Hologic, Inc.*

     4,754     115,665  

Vantiv, Inc. — Class A*

     3,524     108,892  

Boston Scientific Corp.*

     9,012     106,432  

Pilgrim’s Pride Corp.*

     3,439     105,096  

Hertz Global Holdings, Inc.*

     4,084     103,693  

Perrigo Company plc

     683     102,580  

Alliance Data Systems Corp.*

     409     101,542  

Ingredion, Inc.

     1,332     100,952  

Universal Health Services, Inc. — Class B

     952     99,484  

RR Donnelley & Sons Co.

     5,697     93,773  

Becton Dickinson and Co.

     781     88,886  

Total System Services, Inc.

     2,491     77,121  

Hormel Foods Corp.

     1,383     71,072  

Herbalife Ltd.

     1,598     69,913  

United Rentals, Inc.*

     575     63,883  

Illumina, Inc.*

     389     63,765  

CR Bard, Inc.

     436     62,222  

Endo International plc*

     875     59,798  

McGraw Hill Financial, Inc.

     700     59,115  

Centene Corp.*

     711     58,807  

Coty, Inc. — Class A

     3,436     56,866  

Church & Dwight Company, Inc.

     794     55,707  

Spectrum Brands Holdings, Inc.

     615     55,676  

H&R Block, Inc.

     1,792     55,570  

Monster Beverage Corp.*

     602     55,185  

AmerisourceBergen Corp. — Class A

     697     53,878  

Henry Schein, Inc.*

     449     52,295  

Brown-Forman Corp. — Class B

     570     51,425  

Brookdale Senior Living, Inc. — Class A*

     1,576     50,779  

McCormick & Company, Inc.

     759     50,777  

Sanderson Farms, Inc.

     563     49,516  

Genpact Ltd.*

     3,020     49,286  

Jarden Corp.*

     818     49,170  

KAR Auction Services, Inc.

     1,706     48,843  

Salix Pharmaceuticals Ltd.*

     200     31,248  
             
Total Consumer, Non-cyclical           5,954,592  
             
               
COMMUNICATIONS - 3.0%              

Omnicom Group, Inc.

     3,085     212,433  

Juniper Networks, Inc.

     8,270     183,180  

Liberty Interactive Corp. — Class A*

     6,205     176,966  

Corning, Inc.

     8,934     172,784  

Twitter, Inc.*

     3,102     160,001  

Nielsen N.V.

     3,414     151,343  

ARRIS Group, Inc.*

     4,771     135,282  

LinkedIn Corp. — Class A*

     549     114,077  

Harris Corp.

     1,607     106,705  

Motorola Solutions, Inc.

     1,682     106,437  

Discovery Communications, Inc. — Class A*

     2,099     79,342  

DISH Network Corp. — Class A*

     1,210     78,141  

Charter Communications, Inc. — Class A*

     516     78,107  

Anixter International, Inc.

     905     76,780  

Splunk, Inc.*

     1,214     67,207  

Interpublic Group of Companies, Inc.

     3,531     64,688  

EchoStar Corp. — Class A*

     1,185     57,781  

Netflix, Inc.*

     127     57,300  

Lamar Advertising Co. — Class A

     1,160     57,130  

Discovery Communications, Inc. — Class C*

     1,496     55,771  

CenturyLink, Inc.

     1,307     53,443  

VeriSign, Inc.*

     959     52,860  

Cablevision Systems Corp. — Class A

     3,013     52,758  

Sirius XM Holdings, Inc.*

     14,898     51,994  

CDW Corp.

     1,625     50,456  

Liberty Ventures*

     925     35,113  
             
Total Communications           2,488,079  
             
               
TECHNOLOGY - 3.0%              

Computer Sciences Corp.

     2,730     166,939  

Electronic Arts, Inc.*

     3,909     139,200  

Intuit, Inc.

     1,467     128,582  

Fiserv, Inc.*

     1,949     125,974  

Maxim Integrated Products, Inc.

     3,833     115,910  

Pitney Bowes, Inc.

     4,316     107,857  

Applied Materials, Inc.

     4,904     105,976  

NetApp, Inc.

     2,418     103,877  

SanDisk Corp.

     1,047     102,554  

Fidelity National Information Services, Inc.

     1,804     101,565  

Activision Blizzard, Inc.

     4,694     97,588  

ON Semiconductor Corp.*

     10,588     94,657  

Xilinx, Inc.

     2,022     85,632  

IHS, Inc. — Class A*

     625     78,244  

DST Systems, Inc.

     913     76,619  

Citrix Systems, Inc.*

     929     66,275  

VeriFone Systems, Inc.*

     1,869     64,257  

Paychex, Inc.

     1,447     63,957  

 
72  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
STYLEPLUS—MID GROWTH FUND    

      SHARES     VALUE  
 
               

Cerner Corp.*

     1,021   $ 60,821  

Teradata Corp.*

     1,369     57,388  

SS &C Technologies Holdings, Inc.*

     1,275     55,960  

Informatica Corp.*

     1,618     55,400  

Autodesk, Inc.*

     1,002     55,210  

Microsemi Corp.*

     2,142     54,428  

Microchip Technology, Inc.

     1,140     53,842  

Teradyne, Inc.

     2,742     53,167  

Jack Henry & Associates, Inc.

     930     51,764  

Freescale Semiconductor Ltd.*

     2,601     50,798  

Diebold, Inc.

     1,417     50,048  

Solera Holdings, Inc.

     820     46,215  
             
Total Technology           2,470,704  
             
               
CONSUMER, CYCLICAL - 2.9%              

Southwest Airlines Co.

     7,796     263,270  

Macy’s, Inc.

     2,747     159,821  

United Continental Holdings, Inc.*

     3,324     155,530  

Allison Transmission Holdings, Inc.

     4,285     122,079  

Rite Aid Corp.*

     23,725     114,829  

PACCAR, Inc.

     1,902     108,176  

PVH Corp.

     781     94,618  

Best Buy Company, Inc.

     2,763     92,809  

Wyndham Worldwide Corp.

     1,107     89,955  

WW Grainger, Inc.

     349     87,826  

VF Corp.

     1,293     85,377  

Harley-Davidson, Inc.

     1,367     79,559  

Starwood Hotels & Resorts Worldwide, Inc.

     935     77,801  

Kohl’s Corp.

     1,238     75,555  

Tesla Motors, Inc.*

     279     67,708  

MGM Resorts International*

     2,946     67,110  

Dollar Tree, Inc.*

     1,168     65,490  

Alaska Air Group, Inc.

     1,318     57,386  

Tiffany & Co.

     592     57,016  

Wynn Resorts Ltd.

     298     55,750  

Genuine Parts Co.

     635     55,696  

Nordstrom, Inc.

     803     54,901  

O’Reilly Automotive, Inc.*

     363     54,581  

American Airlines Group, Inc.

     1,535     54,462  

Hilton Worldwide Holdings, Inc.*

     2,100     51,723  

Dollar General Corp.*

     840     51,332  

Michael Kors Holdings Ltd.*

     700     49,973  

Goodyear Tire & Rubber Co.

     2,069     46,728  

BorgWarner, Inc.

     852     44,824  
             
Total Consumer, Cyclical           2,441,885  
             
               
INDUSTRIAL - 2.5%              

Fluor Corp.

     2,947     196,830  

Waste Management, Inc.

     4,108     195,253  

Stanley Black & Decker, Inc.

     2,178     193,385  

Ingersoll-Rand plc

     2,848     160,513  

Parker-Hannifin Corp.

     1,303     148,737  

Dover Corp.

     1,849     148,530  

Pentair plc

     1,969     128,950  

Huntington Ingalls Industries, Inc.

     905     94,310  

Allegion plc

     1,797     85,609  

Masco Corp.

     3,433     82,117  

Rockwell Automation, Inc.

     637     69,994  

Waste Connections, Inc.

     1,288     62,493  

Spirit AeroSystems Holdings, Inc. — Class A*

     1,637     62,304  

Roper Industries, Inc.

     422     61,734  

Covanta Holding Corp.

     2,575     54,642  

Rexnord Corp.*

     1,910     54,340  

Tyco International Ltd.

     1,207     53,796  

Moog, Inc. — Class A*

     778     53,215  

Agilent Technologies, Inc.

     915     52,137  

Pall Corp.

     617     51,643  

Belden, Inc.

     742     47,503  

Manitowoc Company, Inc.

     1,710     40,100  
             
Total Industrial           2,098,135  
             
               
ENERGY - 1.7%              

Noble Energy, Inc.

     2,105     143,898  

Nabors Industries Ltd.

     6,253     142,318  

Superior Energy Services, Inc.

     3,729     122,572  

Concho Resources, Inc.*

     800     100,312  

Cameron International Corp.*

     1,271     84,369  

Tesoro Corp.

     1,319     80,433  

Chesapeake Energy Corp.

     2,988     68,694  

Range Resources Corp.

     984     66,725  

Valero Energy Corp.

     1,388     64,223  

Cheniere Energy, Inc.*

     715     57,221  

Cabot Oil & Gas Corp. — Class A

     1,742     56,946  

FMC Technologies, Inc.*

     1,034     56,157  

Southwestern Energy Co.*

     1,554     54,312  

Patterson-UTI Energy, Inc.

     1,641     53,382  

Helmerich & Payne, Inc.

     540     52,850  

Equities Corp.

     565     51,720  

Kosmos Energy Ltd.*

     5,057     50,368  

PBF Energy, Inc. — Class A

     1,949     46,776  

Cobalt International Energy, Inc.*

     2,859     38,882  
             
Total Energy           1,392,158  
             
               
FINANCIAL - 0.1%              

T. Rowe Price Group, Inc.

     703     55,116  

American Financial Group, Inc.

     915     52,969  
             
Total Financial           108,085  
             
               
DIVERSIFIED - 0.0%              

Liberty TripAdvisor Holdings, Inc. — Class A*

     925     31,358  
             
               
BASIC MATERIALS - 0.0%              

Veritiv Corp.*

     35     1,752  
             
Total Common Stocks              

(Cost $16,451,468)

           16,986,748  
             
               
MUTUAL FUNDS† - 47.5%              

Guggenheim Strategy Fund III1

     715,078     17,812,592  

Guggenheim Strategy Fund II1

     532,590     13,261,482  

Guggenheim Strategy Fund I1

     342,075     8,517,668  
             
Total Mutual Funds              

(Cost $39,688,096)

           39,591,742  
             
               
SHORT TERM INVESTMENTS† - 3.3%              

Dreyfus Treasury Prime Cash

              

Management Fund

     2,744,522     2,744,522  
             
Total Short Term Investments              

(Cost $2,744,522)

           2,744,522  
             

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  73

SCHEDULE OF INVESTMENTS (continued)   September 30, 2014
STYLEPLUS—MID GROWTH FUND    

      FACE        
      AMOUNT     VALUE  
 
               
ASSET BACKED SECURITIES†† - 21.2%              

Garrison Funding 2013-2 Ltd.

              

2013-2A, 2.03% due 09/25/232,3

   $ 830,000   $ 824,936  

Duane Street CLO IV Ltd.

              

2007-4A, 0.46% due 11/14/212,3

     823,990     816,657  

N-Star REL CDO VIII Ltd.

              

2006-8A, 0.44% due 02/01/412,3

     832,417     798,372  

Brentwood CLO Corp.

              

2006-1A, 0.51% due 02/01/222,3

     472,640     465,409  

2006-1A, 1.06% due 02/01/222,3

     250,000     227,900  

Argent Securities Incorporated

              

Asset-Backed Pass-Through

              

Certificates Series

              

2005-W3, 0.49% due 11/25/352

     706,354     678,192  

JP Morgan Mortgage Acquisition Trust

              

2007-CH3, 0.30% due 03/25/372

     652,231     642,509  

2006-CH2, 0.26% due 10/25/362

     97,837     97,735  

Salus CLO 2012-1 Ltd.

              

2013-1AN, 2.48% due 03/05/212,3

     600,000     599,040  

Cornerstone CLO Ltd.

              

2007-1A, 0.45% due 07/15/212,3

     600,000     594,900  

Cerberus Onshore II CLO LLC

              

2014-1A, 2.93% due 10/15/232,3

     350,000     344,435  

2014-1A, 2.23% due 10/15/232,3

     250,000     249,500  

ALM VII R-2 Ltd.

              

2013-7R2A, 2.83% due 04/24/242,3

     600,000     589,080  

Central Park CLO Ltd.

              

2011-1A, 3.43% due 07/23/222,3

     550,000     542,410  

Symphony CLO IX, LP

              

2012-9A, 3.48% due 04/16/222,3

     500,000     500,000  

TICC CLO LLC

              

2011-1A, 2.48% due 07/25/212,3

     500,000     500,000  

Symphony CLO VII Ltd.

              

2011-7A, 3.44% due 07/28/212,3

     500,000     499,250  

Aegis Asset Backed Securities Trust

              

2005-3, 0.62% due 08/25/352

     502,740     495,597  

Goldman Sachs Asset Management CLO plc

              

2007-1A, 2.99% due 08/01/222,3

     500,000     491,900  

Black Diamond CLO 2005-1 Delaware Corp.

              

2005-1A, 2.13% due 06/20/172,3

     500,000     490,300  

KKR Financial CLO 2007-1 Ltd.

              

2007-1A, 2.48% due 05/15/212,3

     500,000     490,300  

NewStar Commercial Loan Trust 2007-1

              

2007-1A, 1.53% due 09/30/222,3

     500,000     472,850  

Lehman XS Trust 2007-9

              

2007-9, 0.27% due 06/25/372

     514,667     464,433  

Wells Fargo Home Equity Asset-Backed

              

Securities 2006-2 Trust

              

2006-3, 0.30% due 01/25/372

     444,361     407,465  

Foothill CLO Ltd.

              

2007-1A, 0.48% due 02/22/212,3

     410,376     406,683  

Hewett’s Island CDO Ltd.

              

2007-6A, 2.48% due 06/09/192,3

     400,000     398,480  

Race Point V CLO Ltd.

              

2014-5AR, 3.08% due 12/15/222,3

     400,000     398,240  

GSC Group CDO Fund VIII Ltd.

              

2007-8A, 0.61% due 04/17/212,3

     400,000     390,400  

Black Diamond CLO 2006-1 Luxembourg S.A.

              

2007-1A, 0.62% due 04/29/192,3

     400,000     376,120  

GreenPoint Mortgage Funding Trust

              

2005-HE4, 0.86% due 07/25/302

     400,000     374,464  

Popular ABS Mortgage

              

Pass-Through Trust

              

2005-A, 0.58% due 06/25/352

     365,174     351,295  

Northwoods Capital VII Ltd.

              

2006-7A, 1.78% due 10/22/212,3

     340,000     334,832  

Golub Capital Partners CLO 18 Ltd.

              

2014-18A, 2.73% due 04/25/262,3

     310,000     306,900  

H2 Asset Funding Ltd.

              

2.05% due 03/19/37

     300,000     302,550  

OFSI Fund V Ltd.

              

2013-5A, 3.43% due 04/17/252,3

     300,000     299,160  

DIVCORE CLO Ltd.

              

2013-1A B, 4.05% due 11/15/32

     250,000     250,150  

Race Point IV CLO Ltd.

              

2007-4A, 0.99% due 08/01/212,3

     250,000     240,700  

Tricadia CDO 2006-6 Ltd.

              

2006-6A, 0.79% due 11/05/412,3

     250,000     236,400  

Soundview Home Loan Trust

              

2003-1, 2.40% due 08/25/312

     199,183     197,271  

West Coast Funding Ltd.

              

2006-1A, 0.38% due 11/02/412,3

     170,650     167,493  

Global Leveraged Capital

              

Credit Opportunity Fund

              

2006-1A, 0.53% due 12/20/182,3

     153,530     153,269  

ACS 2007-1 Pass Through Trust

              

2007-1A, 0.47% due 06/14/372,3

     154,374     150,901  

Golub Capital Partners Fundings Ltd.

              

2007-1A, 0.48% due 03/15/222,3

     98,010     96,952  
             
Total Asset Backed Securities              

(Cost $17,495,893)

           17,715,430  
             
               
MORTGAGE BACKED SECURITIES†† - 4.6%              

HSI Asset Securitization Corporation Trust

              

2007-WF1, 0.32% due 05/25/372

     939,582     876,358  

Boca Hotel Portfolio Trust

              

2013-BOCA, 3.20% due 08/15/262,3

     650,000     650,516  

Resource Capital Corporation CRE

              

Notes 2013 Ltd.

              

2013-CRE1, 3.00% due 12/15/282,3

     600,000     606,863  

Hilton USA Trust

              

2013-HLF, 2.91% due 11/05/302,3

     600,000     600,377  

SRERS Funding Ltd.

              

2011-RS, 0.40% due 05/09/462,3

     526,212     501,217  

Banc of America Merrill Lynch

              

Commercial Mortgage, Inc.

              

2005-6, 6.33% due 09/10/472,3

     353,000     359,805  

Wachovia Bank Commercial Mortgage

              

Trust Series 2007-WHALE 8

              

2007-WHL8, 0.23% due 06/15/202,3

     238,972     237,798  
             
Total Mortgage Backed Securities              

(Cost $3,789,241)

           3,832,934  
             

 
74  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
STYLEPLUS—MID GROWTH FUND    

      FACE        
      AMOUNT     VALUE  
 
               
SENIOR FLOATING RATE INTERESTS††,2 - 2.1%              
               
FINANCIAL - 0.9%              

National Financial Partners Corp.

              

4.50% due 07/01/20

   $ 524,702   $ 519,454  

First Data Corp.

              

3.65% due 03/23/18

     100,000     97,968  

Cunningham Lindsey U.S., Inc.

              

5.00% due 12/10/19

     98,496     96,773  
             
Total Financial           714,195  
             
               
TECHNOLOGY - 0.5%              

Blue Coat Systems, Inc.

              

4.00% due 05/31/19

     456,147     446,645  
             
               
INDUSTRIAL - 0.3%              

Thermasys Corp.

              

5.25% due 05/03/19

     261,563     260,038  
             
               
ENERGY - 0.3%              

Pacific Drilling

              

4.50% due 05/18/18

     217,250     209,738  
             
               
CONSUMER, CYCLICAL - 0.1%              

Sears Holdings Corp.

              

5.50% due 06/30/18

     99,250     96,397  
             
Total Senior Floating Rate Interests              

(Cost $1,749,458)

           1,727,013  
             
               
CORPORATE BONDS†† - 0.9%              
               
FINANCIAL - 0.5%              

Icahn Enterprises Limited Partnership /

              

Icahn Enterprises Finance Corp.

              

3.50% due 03/15/17

     320,000     316,800  

International Lease Finance Corp.

              

2.18% due 06/15/162

     130,000     128,700  
             
Total Financial           445,500  
             
               
COMMUNICATIONS - 0.4%              

Level 3 Financing, Inc.

              

3.82% due 01/15/182

     320,000     315,296  
             
Total Corporate Bonds              

(Cost $772,620)

           760,796  
             
               
COLLATERALIZED MORTGAGE OBLIGATION†† - 0.4%              

HarborView Mortgage Loan Trust

              

2006-12, 0.34% due 01/19/382

     399,614     341,104  
             
Total Collateralized Mortgage Obligation              

(Cost $327,598)

           341,104  
             
Total Investments - 100.4%              

(Cost $83,018,896)

         $ 83,700,289  
             
Other Assets & Liabilities, net - (0.4)%           (316,167 )
             
Total Net Assets - 100.0%         $ 83,384,122  
 
               
            UNREALIZED  
    CONTRACTS     GAIN (LOSS)  
 
               
EQUITY FUTURES CONTRACTS PURCHASED†              
December 2014 NASDAQ-100              

Index Mini Futures Contracts

              

(Aggregate Value of Contracts $161,760)

     2   $ 724  
December 2014 S&P 500              

Index Mini Futures Contracts

              

(Aggregate Value of Contracts $196,475)

     2     (1,161 )
December 2014 S&P MidCap 400              

Index Mini Futures Contracts

              

(Aggregate Value of Contracts $545,560)

     4     (19,353 )
             
(Total Aggregate Value of Contracts $903,795)         $ (19,790 )
             
               
      UNITS        
             
               
OTC EQUITY INDEX SWAP AGREEMENTS††              
Morgan Stanley Capital Services, Inc.              

June 2015 Russell Midcap Growth Total Return

              

Index Swap, Terminating 06/03/154

              

(Notional Value $43,638,829)

     21,873   $ 2,063,496  
Bank of America              

November 2014 Russell Midcap Growth

              

Index Swap, Terminating 11/05/144

              

(Notional Value $2,299,684)

     3,246     —  
Bank of America              

August 2015 Russell Midcap Growth Total Return

              

Index Swap, Terminating 08/05/154

              

(Notional Value $18,862,044)

     9,454     (160,037 )
             
(Total Notional Value $64,800,557)         $ 1,903,459  
             

*  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  Affiliated issuer — See Note 12.
2  Variable rate security. Rate indicated is rate effective at September 30, 2014.
3  Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $16,725,641 (cost $16,558,212), or 20.1% of total net assets. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
4  Total Return based on Russell Midcap Growth Index +/- financing at a variable rate.
  plc — Public Limited Company

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  75

STYLEPLUS—MID GROWTH FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments in unaffiliated issuers, at value        

(cost $43,330,800)

   $ 44,108,547  
Investments in affiliated issuers, at value        

(cost $39,688,096)

     39,591,742  
       
Total investments        

(cost $83,018,896)

     83,700,289  
Unrealized appreciation on swap agreements     2,063,496  
Segregated cash with broker     342,600  
Prepaid expenses     23,515  
Cash     4,288  
Receivables:        

Dividends

     59,538  

Interest

     55,716  

Fund shares sold

     29,455  

Foreign taxes reclaim

     18  
       
Total assets     86,278,915  
       
         
LIABILITIES:        
Segregated cash from broker     2,376,010  
Unrealized depreciation on swap agreements     160,037  
Payable for:        

Swap settlement

     116,183  

Management fees

     52,972  

Securities purchased

     42,215  

Fund shares redeemed

     39,188  

Distribution and service fees

     21,455  

Transfer agent/maintenance fees

     15,763  

Fund accounting/administration fees

     6,712  

Variation margin

     5,655  

Trustees’ fees*

     1,949  

Miscellaneous

     56,654  
       
Total liabilities     2,894,793  
       
NET ASSETS   $ 83,384,122  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 71,642,834  
Undistributed net investment income     —  
Accumulated net realized gain on investments     9,176,226  
Net unrealized appreciation on investments     2,565,062  
       
Net assets   $ 83,384,122  
       
A-CLASS:        
Net assets   $ 77,362,540  
Capital shares outstanding     1,688,295  
Net asset value per share     $45.82  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $48.10  
       
B-CLASS:        
Net assets   $ 1,662,810  
Capital shares outstanding     53,034  
Net asset value per share     $31.35  
       
C-CLASS:        
Net assets   $ 4,328,828  
Capital shares outstanding     115,493  
Net asset value per share     $37.48  
       
INSTITUTIONAL CLASS:        
Net assets   $ 29,944  
Capital shares outstanding     652  
Net asset value per share     $45.96  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Interest   $ 924,530  
Dividends from securities of affiliated issuers     468,624  
Dividends from securities of unaffiliated issuers        

(net of foreign withholding tax of $39)

     269,978  
       

Total investment income

     1,663,132  
       
         
EXPENSES:        
Management fees     622,055  
Transfer agent/maintenance fees:        

A-Class

     131,342  

B-Class

     17,203  

C-Class

     13,992  

Institutional Class

     141  
Distribution and service fees:        

A-Class

     191,496  

B-Class

     19,673  

C-Class

     43,504  
Fund accounting/administration fees     78,793  
Legal fees     111,603  
Custodian fees     8,826  
Line of credit expense     5,577  
Trustees’ fees*     3,294  
Tax expense     55  
Miscellaneous     201,872  
       

Total expenses

     1,449,426  
Less:        
Expenses waived by Adviser     (16,469 )
       
Net expenses     1,432,957  
       
Net investment income     230,175  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     3,579,147  

Investments in affiliated issuers

     (55,332 )

Swap agreements

     8,936,682  

Futures contracts

     223,904  

Realized gain distributions received from

        

investment company shares

     21,529  
       
Net realized gain     12,705,930  
       
Net change in unrealized appreciation (depreciation) on:        

Investments in unaffiliated issuers

     (188,897 )

Investments in affiliated issuers

     (2,109 )

Swap agreements

     (963,698 )

Futures contracts

     (25,861 )
       
Net change in unrealized appreciation (depreciation)     (1,180,565 )
       
Net realized and unrealized gain     11,525,365  
       
Net increase in net assets resulting        

from operations

   $ 11,755,540  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
76  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


STYLEPLUS—MID GROWTH FUND

STATEMENTS OF CHANGES IN NET ASSETS                    
 
    Year Ended     Year Ended  
    September 30,     September 30,  
    2014     2013  
 
                     
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                    
Net investment income (loss)     $ 230,175       $ (373,253 )
Net realized gain on investments       12,705,930         14,868,014  
Net change in unrealized appreciation (depreciation) on investments       (1,180,565 )       (1,298,013 )
 
Net increase in net assets resulting from operations       11,755,540         13,196,748  
 
                     
DISTRIBUTIONS TO SHAREHOLDERS FROM:                    
Net realized gains                    

A-Class

       (6,590,240 )       —  

B-Class

       (268,820 )       —  

C-Class

       (456,906 )       —  

Institutional Class

       (2,003 )       —  
 
Total distributions to shareholders       (7,317,969 )       —  
 
                     
CAPITAL SHARE TRANSACTIONS:                    
Proceeds from sale of shares                    

A-Class

       4,986,267         4,893,749  

B-Class

       13,919         101,193  

C-Class

       321,841         502,866  

Institutional Class

       5,279         8,544  
Distributions reinvested                    

A-Class

       6,337,566         —  

B-Class

       267,782         —  

C-Class

       436,749         —  

Institutional Class

       2,003         —  
Cost of shares redeemed                    

A-Class

       (9,031,518 )       (11,996,493 )

B-Class

       (801,755 )       (1,015,996 )

C-Class

       (663,153 )       (1,451,309 )

Institutional Class

       —         —  
 
Net increase (decrease) from capital share transactions       1,874,980         (8,957,446 )
 
Net increase in net assets       6,312,551         4,239,302  
                     
NET ASSETS:                    

Beginning of year

       77,071,571         72,832,269  
 

End of year

     $ 83,384,122       $ 77,071,571  
 
Undistributed net investment income/Accumulated net investment loss at end of year     $ —       $ (421,422 )
 
                     
CAPITAL SHARE ACTIVITY:                    
Shares sold                    

A-Class

       112,690         124,546  

B-Class

       438         3,484  

C-Class

       8,737         15,252  

Institutional Class

       114         213  
Shares issued from reinvestment of distributions                    

A-Class

       152,676         —  

B-Class

       9,321         —  

C-Class

       12,770         —  

Institutional Class

       48         —  
Shares redeemed                    

A-Class

       (202,301 )       (305,981 )

B-Class

       (26,103 )       (35,652 )

C-Class

       (18,028 )       (43,786 )

Institutional Class

       —         —  
 
Net increase (decrease) in shares       50,362         (241,924 )
 

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  77


STYLEPLUS—MID GROWTH FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

  Year Ended   Year Ended   Year Ended   Year Ended   Year Ended  
  September 30,   September 30,   September 30,   September 30,   September 30,  
A-Class 2014   2013   2012   2011f   2010f  
 
Per Share Data                                        
Net asset value, beginning of period     $  43.54       $  36.40       $  28.67       $  29.44       $  26.16  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     .16       (.16 )     (.25 )     (.24 )     (.24 )
Net gain (loss) on investments (realized and unrealized)     6.21       7.30       7.98       (.53 )     3.52  
     
Total from investment operations     6.37       7.14       7.73       (.77 )     3.28  
 
Less distributions from:                                        
Net realized gains     (4.09 )     —       —       —       —  
     
Total distributions     (4.09 )     —       —       —       —  
 
Net asset value, end of period     $  45.82       $  43.54       $  36.40       $  28.67       $  29.44  
     
                                         
 
Total Returnb     15.61%       19.62%       26.96%       (2.62% )     12.54%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $77,363       $70,767       $65,767       $62,575       $71,858  
 
Ratios to average net assets:                                        
Net investment income (loss)     0.36%       (0.40% )     (0.74% )     (0.72% )     (0.85% )
Total expensesc     1.67%       1.57%       1.62%       1.49%       1.67%  
Net expensesd     1.65%       1.57%       1.62%       1.49%       1.67%  
 
Portfolio turnover rate     112%       214%       149%       157%       133%  

  Year Ended   Year Ended   Year Ended   Year Ended   Year Ended  
  September 30,   September 30,   September 30,   September 30,   September 30,  
B-Class 2014   2013   2012   2011f   2010f  
 
Per Share Data                                        
Net asset value, beginning of period     $31.43       $26.68       $21.30       $22.04       $19.72  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.35 )     (.54 )     (.52 )     (.37 )     (.32 )
Net gain (loss) on investments (realized and unrealized)     4.36       5.29       5.90       (.37 )     2.64  
     
Total from investment operations     4.01       4.75       5.38       (.74 )     2.32  
 
Less distributions from:                                        
Net realized gains     (4.09 )     —       —       —       —  
     
Total distributions     (4.09 )     —       —       —       —  
 
Net asset value, end of period     $31.35       $31.43       $26.68       $21.30       $22.04  
     
                                         
 
Total Returnb     13.95%       17.80%       25.26%       (3.36% )     11.76%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $1,663       $2,181       $2,710       $3,197       $4,537  
 
Ratios to average net assets:                                        
Net investment income (loss)     (1.13% )     (1.90% )     (2.08% )     (1.50% )     (1.60% )
Total expensesc     3.13%       3.07%       2.95%       2.26%       2.42%  
Net expensesd     3.11%       3.07%       2.95%       2.26%       2.42%  
 
Portfolio turnover rate     112%       214%       149%       157%       133%  

 
78  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.


STYLEPLUS—MID GROWTH FUND


FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

  Year Ended   Year Ended   Year Ended   Year Ended   Year Ended  
  September 30,   September 30,   September 30,   September 30,   September 30,  
C-Class 2014   2013   2012   2011f   2010f  
 
Per Share Data                                        
Net asset value, beginning of period     $36.63       $30.92       $24.55       $25.40       $22.76  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.20 )     (.45 )     (.46 )     (.42 )     (.40 )
Net gain (loss) on investments (realized and unrealized)     5.14       6.16       6.83       (.43 )     3.04  
     
Total from investment operations     4.94       5.71       6.37       (.85 )     2.64  
 
Less distributions from:                                        
Net realized gains     (4.09 )     —       —       —       —  
     
Total distributions     (4.09 )     —       —       —       —  
 
Net asset value, end of period     $37.48       $36.63       $30.92       $24.55       $25.40  
     
                                         
 
Total Returnb     14.56%       18.47%       25.95%       (3.35% )     11.60%  
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $4,329       $4,103       $4,346       $4,162       $5,339  
 
Ratios to average net assets:                                        
Net investment income (loss)     (0.55% )     (1.36% )     (1.57% )     (1.48% )     (1.60% )
Total expensesc     2.57%       2.53%       2.45%       2.25%       2.43%  
Net expensesd     2.55%       2.53%       2.45%       2.25%       2.43%  
 
Portfolio turnover rate     112%       214%       149%       157%       133%  
 
Year Ended		  
Year Ended		  
Period Ended		                  
  September 30,   September 30,   September 30,  
Institutional Class 2014   2013   2012e  
 
Per Share Data                        
Net asset value, beginning of period     $43.72       $36.46       $36.16  
 
Income (loss) from investment operations:                        
Net investment income (loss)a     .11       (.07 )     (.08 )
Net gain (loss) on investments (realized and unrealized)     6.22       7.33       .38  
     
Total from investment operations     6.33       7.26       .30  
 
Less distributions from:                        
Net realized gains     (4.09 )     —       —  
     
Total distributions     (4.09 )     —       —  
 
Net asset value, end of period     $45.96       $43.72       $36.46  
     
                         
 
Total Returnb     15.42%       19.91%       0.83%  
 
Ratios/Supplemental Data                        
Net assets, end of period (in thousands)     $30       $21       $10  
 
Ratios to average net assets:                        
Net investment income (loss)     0.24%       (0.17% )     (0.41% )
Total expensesc     1.81%       1.33%       1.37%  
Net expensesd     1.79%       1.33%       1.37%  
 
Portfolio turnover rate     112%       214%       149%  

a Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges and has not been annualized.
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 Since commencement of operations: March 1, 2012. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
f Reverse share split — Per share amounts for the periods presented through April 8, 2011 have been restated to reflect a 1:4 reverse share split effective April 8, 2011.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  79


MANAGERS’ COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders

Guggenheim World Equity Income Fund (the “Fund”) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Nardin Baker, CFA, Managing Director and Portfolio Manager; Ole Jakob Wold, Managing Director and Portfolio Manager; and Scott Hammond, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended September 30, 2014.

For the one year period ended September 30, 2014, the Guggenheim World Equity Income Fund returned 10.62%1, compared with the 12.22% return of its benchmark, the MSCI World Index.

The Fund seeks to deliver superior risk-adjusted returns by taking advantage of market inefficiencies that, at times, misprice stable companies. To identify the degree to which the market could potentially reward stability and other factors, the Fund’s investment team distills the global equity market down to 60 discrete fundamental stock characteristics which it uses to rank stocks it considers for the portfolio.

Performance Review

For the period, the Health Care and Telecommunications Services sectors were the largest contributors to return. Energy and Information Technology were the largest detractors from return.

During the period, merger and acquisition activity drove a significant portion of Fund performance. In Health Care, the Fund benefited from the price rise in AstraZeneca, the target of a takeover bid by Pfizer that was ultimately withdrawn. Because the Fund focuses on stable appreciation, it sold its AstraZeneca holdings after the initial bid but before the deal fell through.

The Telecommunications Services sector continues to be the Fund’s largest overweight. The Fund’s investment team believes the sector is benefiting from consolidation within the sector and the wider merger and acquisition trend driven by high cash balances and low financing costs.

A significant underweight for the year was Financials—which included an underweight in the banking industry and overweight in the real estate industry. The overall Financials allocation was additive because of good stock selection and avoiding of some poorly performing securities within banking. The overweight to real estate was also a positive contributor given the industry’s strong returns early in 2014.

The Fund traditionally has a large overweight to the Utilities sector, given its characteristics of low volatility and higher yields relative to the broad market. The overweight worked against the Fund at times, such as the fourth quarter of 2013, when the sector could not keep up with the strong performance of the broad market.

The Fund favored positions with ties to tangible goods, which hedge against currency debasement that is occurring in many countries around the world as way to promote growth. The Fund’s investment team believes mining offers this and a country with extensive mining interests, Australia, is the Fund’s largest country overweight. But to avoid being overly exposed to the potential for a slowdown in China, which could dampen demand for minerals and metals, the Australian allocation is skewed to banking and insurance holdings.

The Fund was underweight the Energy sector for the period as a whole. But late in the period, the models used by the Fund began to favor the Energy sector, mostly attributable to the rapid industry growth tied to shale oil technology. Markets were rewarding a number of the sector’s favorable attributes: low earnings variability, high growth of return on assets and return on equity and strong stock price momentum. In addition, trailing and projected valuation metrics (earnings, cash flow, free cash flow, yield) were growing at a far faster rate than the broad market. Among the Energy sub-industries, the Fund’s models preferred Energy Exploration & Production (E&P).

This allocation suffered in tandem with the decline in the price of oil late in the period. We believe the falling price was more a function of the strengthening U.S. dollar, as opposed to a change in demand fundamentals, so we view the selloff in upstream oil names significantly overdone.

The strong dollar was also detrimental to the Fund’s underweight of the U.S. In the short-term this effect has been negative, as an increasing dollar has been the tide to lift all U.S. “boats,” thus hurting the U.S. underweight, the Fund’s largest. However, once 3Q 2014 earnings season kicks off, earnings of U.S. companies could come under pressure due to substantial foreign earnings being translated into fewer U.S. dollars.


 
80  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


MANAGERS’ COMMENTARY (Unaudited) (concluded) September 30, 2014
 

We also believe the macro picture will ultimately reward a U.S. underweight strategy. As central banks of the world compete to implement ever more aggressive stimulus plans, we continue to look for attractive equity opportunities. The greatest driver of returns within the U.S. equity markets since 2009 has been size of Fed’s balance sheet. We believe this will be the case in Europe and Japan, as they continue along their plans for quantitative easing. The Fund is overweight Japan, and underweight U.S. and UK, countries late in the monetary cycle. Europe remains an underweight, but the longer term thesis remains in play.



Performance displayed represents past performance which is no guarantee of future results.

1Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fee waivers and/or reimbursements reduce Fund expenses, and, in the absence of such waivers, the performance quoted would be reduced.

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)   September 30, 2014
 

WORLD EQUITY INCOME FUND

OBJECTIVE:   Seeks to provide total return, comprised of capital appreciation and income.

Holdings Diversification (Market Exposure as % of Net Assets)

"Holdings Diversification (Market Exposure as % of Net Assets)" excludes any temporary cash investments.

COUNTRY DIVERSIFICATION
At September 30, 2014, the investment diversification of the Fund by country was as follows:

    % of      
Country   Common Stocks     Value
 
United States   51.2 %     $43,220,441
Japan   10.0 %     8,472,214
Australia   6.6 %     5,571,982
United Kingdom   6.2 %     5,250,947
Hong Kong   5.6 %     4,724,196
Canada   5.2 %     4,395,840
Switzerland   2.4 %     2,031,185
Other   12.8 %     10,742,358
 
Total Investments   100.0 %     $84,409,163
 

Inception Dates:
 
A-Class   October 1, 1993
B-Class   October 19, 1993
C-Class   January 29, 1999
Institutional Class   May 2, 2011

Ten Largest Holdings (% of Total Net Assets)
 
Eli Lilly & Co.   2.3 %
Lockheed Martin Corp.   2.2 %
NTT DOCOMO, Inc.   2.0 %
Dow Chemical Co.   2.0 %
AP Moeller - Maersk A/S — Class A   1.9 %
ConocoPhillips   1.8 %
ITOCHU Corp.   1.7 %
Mitsui & Company Ltd.   1.5 %
iShares MSCI All Country World Minimum      
     Volatility ETF   1.5 %
Koninklijke Ahold N.V.   1.4 %
 
Top Ten Total   18.3 %
 
“Ten Largest Holdings” exclude any temporary cash or derivative investments.

 
82  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


PERFORMANCE REPORT AND FUND PROFILE (Unaudited) (concluded)   September 30, 2014
 

Cumulative Fund Performance*

Average Annual Returns*
Periods Ended September 30, 2014

    1 Year   5 Year   10 Year
 
A-Class Shares     10.62 %     7.61 %     5.93 %
 
A-Class Shares with sales charge†     5.35 %     6.34 %     5.31 %
 
B-Class Shares     10.91 %     7.87 %     6.05 %
 
B-Class Shares with CDSC‡     5.91 %     7.58 %     6.05 %
 
C-Class Shares     9.79 %     6.79 %     5.14 %
 
C-Class Shares with CDSC§     8.79 %     6.79 %     5.14 %
 
MSCI World Index     12.22 %     10.86 %     7.12 %
 

            Since Inception        
    1 Year   (05/02/11)        
 
Institutional Class Shares     10.83 %     4.39%          
 
MSCI World Index     12.22 %     8.35%          
 

* The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The MSCI World Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.
† Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
‡ Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase
§ Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  83


SCHEDULE OF INVESTMENTS   September 30, 2014
WORLD EQUITY INCOME FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 94.8%              
               
COMMUNICATIONS - 14.4%              

NTT DOCOMO, Inc.

     104,500   $ 1,750,269  

Deutsche Telekom AG

     76,400     1,156,409  

Swisscom AG

     1,900     1,076,960  

Belgacom S.A.

     28,612     996,141  

Windstream Holdings, Inc.

     90,400     974,512  

Spark New Zealand Ltd.

     380,500     881,833  

PCCW Ltd.

     1,395,600     877,097  

Time Warner Cable, Inc.

     6,100     875,289  

Frontier Communications Corp.

     133,700     870,387  

Elisa Oyj

     32,100     850,358  

Bezeq The Israeli Telecommunication

              

Corporation Ltd.

     417,600     720,842  

Motorola Solutions, Inc.

     9,900     626,472  

CenturyLink, Inc.

     12,500     511,125  

Lagardere SCA

     14,900     398,717  
             
Total Communications           12,566,411  
             
               
FINANCIAL - 13.8%              

National Australia Bank Ltd. ADR

     37,000     1,052,311  

Insurance Australia Group Ltd.

     190,300     1,019,788  

Annaly Capital Management, Inc.

     91,100     972,948  

People’s United Financial, Inc.

     66,500     962,255  

Stockland

     263,100     908,873  

New York Community Bancorp, Inc.

     56,200     891,894  

Friends Life Group Ltd.

     169,200     842,613  

American Capital Agency Corp.

     39,600     841,500  

CFS Retail Property Trust Group

     472,800     825,350  

Government Properties Trust, Inc.

     241,300     817,097  

Bendigo and Adelaide Bank Ltd.

     77,000     803,036  

Hannover Rueck SE

     9,800     790,938  

Boston Properties, Inc.

     4,600     532,496  

Admiral Group plc

     20,700     428,953  

ASX Ltd.

     10,300     323,004  
             
Total Financial           12,013,056  
             
               
ENERGY - 12.8%              

ConocoPhillips

     20,900     1,599,268  

Devon Energy Corp.

     17,000     1,159,060  

Pembina Pipeline Corp.

     27,300     1,150,074  

Chesapeake Energy Corp.

     43,400     997,766  

Baytex Energy Corp.

     24,000     907,549  

HollyFrontier Corp.

     19,500     851,760  

Canadian Oil Sands Ltd.

     43,300     798,773  

Vermilion Energy, Inc.

     12,000     730,539  

TonenGeneral Sekiyu K.K.

     82,700     723,430  

Transocean Ltd.

     20,300     652,918  

Diamond Offshore Drilling, Inc.

     16,800     575,736  

Noble Corporation plc

     24,100     535,502  

Williams Companies, Inc.

     7,400     409,590  
             
Total Energy           11,091,965  
             
               
CONSUMER, NON-CYCLICAL - 12.7%              

Eli Lilly & Co.

     30,600     1,984,410  

Koninklijke Ahold N.V.

     76,600     1,239,031  

WellPoint, Inc.

     10,100     1,208,162  

Dr Pepper Snapple Group, Inc.

     17,900     1,151,149  

Cardinal Health, Inc.

     12,200     914,024  

Singapore Press Holdings Ltd.

     270,000     888,588  

Avery Dennison Corp.

     17,800     794,770  

Pfizer, Inc.

     26,400     780,648  

Baxter International, Inc.

     9,900     710,523  

Altria Group, Inc.

     12,200     560,468  

Amgen, Inc.

     2,200     309,012  

Nestle S.A.

     4,100     301,307  

AmerisourceBergen Corp. — Class A

     2,200     170,060  
             
Total Consumer, Non-cyclical           11,012,152  
             
               
INDUSTRIAL - 12.5%              

Lockheed Martin Corp.

     10,400     1,900,912  

AP Moeller - Maersk A/S — Class A

     700     1,614,659  

Northrop Grumman Corp.

     9,000     1,185,840  

TransDigm Group, Inc.

     5,200     958,516  

Cheung Kong Infrastructure Holdings Ltd.

     127,500     893,530  

L-3 Communications Holdings, Inc.

     7,500     891,900  

Raytheon Co.

     8,400     853,608  

Rexam plc

     105,500     838,485  

IMI plc

     31,100     617,948  

Caterpillar, Inc.

     6,100     604,083  

Waste Management, Inc.

     6,000     285,180  

United Parcel Service, Inc. — Class B

     2,500     245,725  
             
Total Industrial           10,890,386  
             
               
UTILITIES - 10.5%              

SSE plc

     42,300     1,058,516  

Entergy Corp.

     13,400     1,036,222  

CLP Holdings Ltd.

     127,100     1,020,951  

Power Assets Holdings Ltd.

     106,000     936,904  

Snam SpA

     165,000     911,079  

TransAlta Corp.

     77,100     808,905  

PPL Corp.

     24,200     794,728  

Duke Energy Corp.

     10,300     770,131  

Southern Co.

     17,600     768,240  

AGL Energy Ltd.

     54,000     639,620  

Enagas S.A.

     11,300     363,390  
             
Total Utilities           9,108,686  
             
               
CONSUMER, CYCLICAL - 10.2%              

ITOCHU Corp.

     124,000     1,514,481  

Mitsui & Company Ltd.

     83,200     1,312,464  

Sumitomo Corp.

     90,400     997,801  

Ford Motor Co.

     63,400     937,686  

InterContinental Hotels Group plc

     24,100     928,930  

Marubeni Corp.

     130,800     895,091  

Wynn Resorts Ltd.

     4,700     879,276  

Delta Air Lines, Inc.

     22,600     816,990  

Mitsubishi Corp.

     30,500     624,676  
             
Total Consumer, Cyclical           8,907,395  
             
               
TECHNOLOGY - 4.1%              

NVIDIA Corp.

     50,000     922,500  

Seagate Technology plc

     14,300     818,961  

Intel Corp.

     20,400     710,328  

Canon, Inc.

     20,100     654,002  

Apple, Inc.

     4,700     473,525  
             
Total Technology           3,579,316  
             
               
BASIC MATERIALS - 2.7%              

Dow Chemical Co.

     33,300     1,746,252  

International Paper Co.

     12,500     596,750  
             
Total Basic Materials           2,343,002  
             

 
84  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
WORLD EQUITY INCOME FUND    

      SHARES     VALUE  
 
               
DIVERSIFIED - 1.1%              

Hutchison Whampoa Ltd.

     82,368   $ 995,714  
             
Total Common Stocks              

(Cost $81,182,519)

           82,508,083  
             
               
EXCHANGE-TRADED FUNDS† - 2.2%              

iShares MSCI All Country World Minimum Volatility ETF

     19,000     1,267,680  

PowerShares S&P International Developed

              

Low Volatility Portfolio

     20,000     633,400  
             
Total Exchange-Traded Funds              

(Cost $1,942,195)

           1,901,080  
             
               
SHORT TERM INVESTMENTS† - 2.5%              

Goldman Sachs Financial Square Funds - Treasury

              

Instruments Fund

     2,148,947     2,148,947  
             
Total Short Term Investments              

(Cost $2,148,947)

           2,148,947  
             
Total Investments - 99.5%              

(Cost $85,273,661)

         $ 86,558,110  
             
Other Assets & Liabilities, net - 0.5%           405,983  
             
Total Net Assets - 100.0%         $ 86,964,093  

† Value determined based on Level 1 inputs — See Note 4.
  ADR — American Depositary Receipt
  plc — Public Limited Company

 
THE GUGGENHEIM FUNDS ANNUAL REPORT  |  85


WORLD EQUITY INCOME FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $85,273,661)

   $ 86,558,110  
Foreign currency, at value        

(cost $122,686)

     122,483  
Prepaid expenses     17,923  
Receivables:        

Dividends

     328,678  

Foreign taxes reclaim

     112,429  

Fund shares sold

     33,316  

Investment adviser

     1,448  
       
Total assets     87,174,387  
       
         
LIABILITIES        
Overdraft due to custodian bank     11  
Distributions payable     7,979  
Payable for:        

Fund shares redeemed

     73,539  

Management fees

     51,300  

Distribution and service fees

     20,789  

Fund accounting/administration fees

     10,993  

Transfer agent/maintenance fees

     8,282  

Investment adviser

     3,971  

Trustees’ fees*

     682  

Miscellaneous

     32,748  
       
Total liabilities     210,294  
       
NET ASSETS   $ 86,964,093  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 104,348,602  
Undistributed net investment income     64,616  
Accumulated net realized loss on investments     (18,720,882 )
Net unrealized appreciation on investments     1,271,757  
       
Net assets   $ 86,964,093  
       
A-CLASS:        
Net assets   $ 78,783,384  
Capital shares outstanding     5,831,286  
Net asset value per share     $13.51  
       
Maximum offering price per share        

(Net asset value divided by 95.25%)

     $14.18  
       
B-CLASS:        
Net assets   $ 1,933,014  
Capital shares outstanding     164,521  
Net asset value per share     $11.75  
       
C-CLASS:        
Net assets   $ 5,337,112  
Capital shares outstanding     459,652  
Net asset value per share     $11.61  
       
INSTITUTIONAL CLASS:        
Net assets   $ 910,583  
Capital shares outstanding     67,691  
Net asset value per share     $13.45  
       

STATEMENT OF OPERATIONS        
 
Year Ended September 30, 2014        
         
INVESTMENT INCOME:        
Dividends (net of foreign withholding tax of $374,197)   $ 3,445,799  
Interest     1,294  
       

Total investment income

     3,447,093  
       
         
EXPENSES:        
Management fees     561,034  
Transfer agent/maintenance fees:        

A-Class

     99,976  

B-Class

     20,374  

C-Class

     13,825  

Institutional Class

     528  
Distribution and service fees:        

A-Class

     183,930  

C-Class

     39,622  
Fund accounting/administration fees     120,222  
Legal fees     94,711  
Custodian fees     41,043  
Tax expense     10,077  
Trustees’ fees*     7,751  
Miscellaneous     189,554  
       

Total expenses

     1,382,647  
Less:        
Expenses waived by Adviser     (167,150 )
       
Net expenses     1,215,497  
       
Net investment income     2,231,596  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     5,082,445  

Foreign currency

     (50,402 )
       
Net realized gain     5,032,043  
       
Net change in unrealized appreciation (depreciation) on:        

Investments

     129,558  

Foreign currency

     (17,018 )
       
Net change in unrealized appreciation (depreciation)     112,540  
       
Net realized and unrealized gain     5,144,583  
       
Net increase in net assets resulting from operations   $ 7,376,179  
       

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
86  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

WORLD EQUITY INCOME FUND

STATEMENTS OF CHANGES IN NET ASSETS                
 
      Year Ended       Year Ended  
      September 30,       September 30,  
      2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income   $ 2,231,596     $ 1,126,395  
Net realized gain on investments     5,032,043       6,107,494  
Net change in unrealized appreciation (depreciation) on investments     112,540       7,243,481  
 
Net increase in net assets resulting from operations     7,376,179       14,477,370  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income                

A-Class

     (2,342,975 )     (1,672,199 )

B-Class

     (82,131 )     (73,946 )

C-Class

     (87,065 )     (47,041 )

Institutional Class

     (17,450 )     (4,606 )
 
Total distributions to shareholders     (2,529,621 )     (1,797,792 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares                

A-Class

     19,667,007       15,420,639  

B-Class

     316,980       425,854  

C-Class

     2,381,875       688,147  

Institutional Class

     729,944       378,957  
Distributions reinvested                

A-Class

     2,327,878       1,659,730  

B-Class

     81,697       73,635  

C-Class

     81,979       46,791  

Institutional Class

     17,450       4,606  
Cost of shares redeemed                

A-Class

     (13,679,896 )     (24,573,617  

B-Class

     (985,303 )     (1,387,459 )

C-Class

     (707,859 )     (952,484 )

Institutional Class

     (87,320 )     (254,172 )
 
Net increase (decrease) from capital share transactions     10,144,432       (8,469,373 )
 
Net increase in net assets     14,990,990       4,210,205  
                 
NET ASSETS:                

Beginning of year

     71,973,103       67,762,898  
 

End of year

   $ 86,964,093     $ 71,973,103  
 
Undistributed net investment income at end of year   $ 64,616     $ 391,872  
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold                

A-Class

     1,436,425       1,314,259  

B-Class

     26,018       41,564  

C-Class

     202,224       68,601  

Institutional Class

     52,741       33,315  
Shares issued from reinvestment of distributions                

A-Class

     172,998       148,443  

B-Class

     7,052       7,438  

C-Class

     7,031       5,072  

Institutional Class

     1,301       398  
Shares redeemed                

A-Class

     (1,012,114 )     (2,089,282 )

B-Class

     (84,436 )     (138,796 )

C-Class

     (62,524 )     (95,590 )

Institutional Class

     (6,471 )     (22,190 )
 
Net increase (decrease) in shares     740,245       (726,768 )
 

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  87

WORLD EQUITY INCOME FUND

FINANCIAL HIGHLIGHTS                                          
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
                                           
      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended    
      September 30,       September 30,       September 30,       September 30,       September 30,    
A-Class     2014       2013       2012       2011       2010    
 
Per Share Data                                          
Net asset value, beginning of period     $12.60       $10.55       $9.70       $10.52       $9.97    
 
Income (loss) from investment operations:                                          
Net investment income (loss)a     .38       .18       .15       .05       .02    
Net gain (loss) on investments (realized and unrealized)     .95       2.16       .70       (.81 )     .53    
     
Total from investment operations     1.33       2.34       .85       (.76 )     .55    
 
Less distributions from:                                          
Net investment income     (.42 )     (.29 )     (— )b     (.06 )     —    
     
Total distributions     (.42 )     (.29 )     (— )b     (.06 )     —    
 
Net asset value, end of period     $13.51       $12.60       $10.55       $9.70       $10.52    
     
                                           
 
Total Returnc     10.62%       22.58%       8.82%       (7.32 %)     5.52%    
 
Ratios/Supplemental Data                                          
Net assets, end of period (in thousands)     $78,783       $65,966       $61,838       $65,573       $78,201    
 
Ratios to average net assets:                                          
Net investment income (loss)     2.81%       1.59%       1.45%       0.40%       0.24%    
Total expensesd     1.66%       1.93%       2.05%       1.85%       1.86%    
Net expensese     1.49% h     1.59%       1.63%       1.82%       1.86%    
 
Portfolio turnover rate     131%       154%       41%       206%       288%    
                                           
      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended    
      September 30,       September 30,       September 30,       September 30,       September 30,    
B-Class     2014g       2013g       2012g       2011g       2010g    
 
Per Share Data                                          
Net asset value, beginning of period     $11.01       $9.22       $8.46       $9.19       $8.69    
 
Income (loss) from investment operations:                                          
Net investment income (loss)a     .35       .18       .14       .05       .04    
Net gain (loss) on investments (realized and unrealized)     .84       1.90       .63       (.69 )     .46    
     
Total from investment operations     1.19       2.08       .77       (.64 )     .50    
 
Less distributions from:                                          
Net investment income     (.45 )     (.29 )     (.01 )     (.09 )     —    
     
Total distributions     (.45 )     (.29 )     (.01 )     (.09 )     —    
 
Net asset value, end of period     $11.75       $11.01       $9.22       $8.46       $9.19    
     
                                           
 
Total Returnc     10.91%       22.95%       9.07%       (7.13 %)     5.75%    
 
Ratios/Supplemental Data                                          
Net assets, end of period (in thousands)     $1,933       $2,378       $2,820       $4,148       $6,769    
 
Ratios to average net assets:                                          
Net investment income (loss)     2.96%       1.77%       1.60%       0.53%       0.45%    
Total expensesd     2.24%       2.43%       2.34%       1.61%       1.61%    
Net expensese     1.24% h     1.31%       1.38%       1.59%       1.61%    
 
Portfolio turnover rate     131%       154%       41%       206%       288%    

 
88  |  THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

WORLD EQUITY INCOME FUND

FINANCIAL HIGHLIGHTS (concluded)                                          
 

This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended         Year Ended         Year Ended         Year Ended         Year Ended  
      September 30,         September 30,         September 30,         September 30,         September 30,  

C-Class

     2014         2013         2012         2011         2010  
 

Per Share Data

                                                

Net asset value, beginning of period

     $10.79         $9.01         $8.33         $9.06         $8.66  
 

Income (loss) from investment operations:

                                                

Net investment income (loss)a

     .25         .08         .06         (.04 )       (.04 )

Net gain (loss) on investments (realized and unrealized)

     .81         1.84         .62         (.69 )       .44  
       

Total from investment operations

     1.06         1.92         .68         (.73 )       .40  
 

Less distributions from:

                                                

Net investment income

     (.24 )       (.14 )       —         —         —  
       

Total distributions

     (.24 )       (.14 )       —         —         —  
 

Net asset value, end of period

     $11.61         $10.79         $9.01         $8.33         $9.06  
       
                                                 
 

Total Returnc

     9.79%         21.57%         8.16%         (8.06% )       4.62%  
 

Ratios/Supplemental Data

                                                

Net assets, end of period (in thousands)

     $5,337         $3,377         $3,015         $3,426         $4,295  
 

Ratios to average net assets:

                                                

Net investment income (loss)

     2.13%         0.80%         0.68%         (0.37% )       (0.50% )

Total expensesd

     2.62%         2.89%         2.88%         2.60%         2.62%  

Net expensese

     2.24% h       2.35%         2.38%         2.58%         2.62%  
 

Portfolio turnover rate

     131%         154%         41%         206%         288%  
                                                 
      Year Ended         Year Ended         Year Ended         Period Ended    
      September 30,         September 30,         September 30,         September 30,  

Institutional Class

     2014         2013         2012         2011f  
 

Per Share Data

                                      

Net asset value, beginning of period

     $12.53         $10.50         $9.70         $12.37  
 

Income (loss) from investment operations:

                                      

Net investment income (loss)a

     .44         .28         .28         .13  

Net gain (loss) on investments (realized and unrealized)

     .90         2.10         .52         (2.80 )

Total from investment operations

     1.34         2.38         .80         (2.67 )
 

Less distributions from:

                                      

Net investment income

     (.42 )       (.35 )       (— )b       —  

Total distributions

     (.42 )       (.35 )       (— )b       —  
 

Net asset value, end of period

     $13.45         $12.53         $10.50         $9.70  
       
                                     
 

Total Returnc

     10.83%         23.17%         8.17%         (21.58% )
 

Ratios/Supplemental Data

                                      

Net assets, end of period (in thousands)

     $911         $252         $90         $285  
 

Ratios to average net assets:

                                      

Net investment income (loss)

     3.27%         2.42%         2.70%         2.99%  

Total expensesd

     1.33%         1.73%         1.90%         2.27%  

Net expensese

     1.23% h       1.26%         1.32%         1.36%  
 

Portfolio turnover rate

     131%         154%         41%         206%  

  a   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
  b   Distributions from net investment income are less than $0.01 per share.
  c   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
  d   Does not include expenses of the underlying funds in which the Fund invests.
  e   Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable.
  f   Since commencement of operations: May 2, 2011. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
  g   Effective August 1, 2007 — B-Class shares ceased charging 12b-1 fees in accordance with FINRA sales cap regulations. Per share information reflects this change. This fee will be reinstated when sales exceed the sales cap limits.
  h   Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding those amounts, the operating expense ratio would be 1.46%, 1.21%, 2.21% and 1.21% for the A-Class, B-Class, C-Class and Institutional Class, respectively.
     

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT  |  89

NOTES TO FINANCIAL STATEMENTS
 

1. Organization and Significant Accounting Policies

Organization

Guggenheim Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.

The Trust offers a combination of four separate classes of shares, A-Class shares, B-Class shares, C-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. Prior to February 22, 2011, the maximum sales charge was 5.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”), if shares are redeemed within 12 months of purchase. B-class shares were offered without a front-end sales charge, but were subject to a CDSC of up to 5% for five years and convert to A-Class shares after eight years. Effective January 4, 2010, subscriptions for B-Class shares are no longer accepted. Effective July 31, 2014, all outstanding B-Class shares of the Alpha Opportunity Fund were converted into A-class shares. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a CDSC. At September 30, 2014, the Trust consisted of eighteen Funds.

This report covers the Alpha Opportunity Fund, Enhanced World Equity Fund, Large Cap Value Fund, Risk Managed Real Estate Fund, Small Cap Value Fund, StylePlus—Large Core Fund, StylePlus—Mid Growth Fund and World Equity Income Fund (the “Funds”).

The Guggenheim Alpha Opportunity Fund, Guggenheim Enhanced World Equity Fund, Guggenheim Large Cap Value Fund, Guggenheim Small Cap Value Fund, Guggenheim StylePlus—Large Core Fund, Guggenheim StylePlus—Mid Growth Fund, and Guggenheim World Equity Income Fund were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund, different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at a special meeting of shareholders, the shareholders of the Predecessor Funds approved the reorganization of each Predecessor Fund with and into the Funds, a corresponding “shell” series of the Trust. The Funds succeeded to the accounting and performance history of the Predecessor Funds. Any such historical information provided for the Funds that relates to periods prior to January 28, 2014 (September 23, 2014 for the Guggenheim Alpha Opportunity Fund), therefore, is that of the Predecessor Fund.

Guggenheim Investments (“GI”) provides advisory services, and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.

Significant Accounting Policies

The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.

The NAV of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.

A. The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.

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
90 | THE GUGGENHEIM FUNDS ANNUAL REPORT


NOTES TO FINANCIAL STATEMENTS (continued)
 

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 a given day, the security is valued at the closing bid price on that day.

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 Shares. In addition, the Board of Trustees has authorized the Valuation Committee and GI to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.

Open-end investment companies (“Mutual Funds”) are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds (“ETFs”) are valued at the last quoted sales price.

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 are valued at amortized cost, which approximates market value.

Repurchase agreements are valued at amortized cost, which approximates market value.

Typically loans are valued using information provided by an independent third party pricing service which uses broker quotes in a non-active market.

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 value of futures contracts is accounted for using the unrealized gain or loss on the contracts that is determined by marking the contracts to their current realized settlement prices. Financial futures contracts are valued at the 4:00 p.m. price on the valuation date. In the event that the exchange for a specific futures contract closes earlier than 4:00 p.m., the futures contract is valued at the Official Settlement Price of the exchange. However, the underlying securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide a more accurate valuation.

The value of OTC swap agreements entered into by a Fund is accounted for using the unrealized gain or loss on the agreements that is determined by marking the agreements to the last quoted value of the index that the swap pertains to at the close of the NYSE. The swap’s value is then adjusted to include dividends accrued, and financing charges and/or interest associated with the swap agreements.

Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).

In connection with futures contracts and other derivative investments, obtaining information as to how (a) these contracts and other derivative investments trade in the futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative investments trade in the cash market.

B. Senior loans in which the Funds invest generally pay interest rates which are periodically adjusted by reference to a base short-term, floating rate plus a premium. These base lending rates are generally (I) the lending rate offered by one or more major European banks, such as the London Inter-Bank Offered Rate (LIBOR), (ii) the prime rate offered by one or more major United States banks, or (iii) the bank’s certificate of deposit rate. Senior floating rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. The interest rate indicated is the rate in effect at September 30, 2014.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 91

NOTES TO FINANCIAL STATEMENTS (continued)
 

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. When a Fund engages in a short sale of a security, an amount equal to the proceeds is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the market value of the short sale. The Fund maintains a segregated account of cash and/or securities as collateral for short sales.

Fees, if any, paid to brokers to borrow securities in connection with short sales are recorded as interest expense. In addition, the Fund must pay out the dividend rate of the equity or coupon rate of the obligation to the lender and record this as an expense. Short dividend or interest expense is a cost associated with the investment objective of short sales transactions, rather than an operational cost associated with the day-to-day management of any mutual fund. The Funds may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.

E. Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.

When the Fund writes (sells) an option, an amount equal to the premium received is entered in that 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 a written option expires, or if the 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).

F. 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.

G. OTC swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of an agreement or termination of the agreement are recognized as realized gains or losses.

H. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from REITs is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.

I. Dividends from net investment income are declared quarterly in the World Equity Income Fund and Risk Managed Real Estate Fund. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions of net investment income in the remaining Funds and distributions of net realized gains, if any, in all Funds are declared at least annually and recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.

J. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.

K. 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 Statements of Operations are before the reduction in expense from the related earnings credits, if any. For the year ended September 30, 2014, there were no earnings credits received.
92 | THE GUGGENHEIM FUNDS ANNUAL REPORT


NOTES TO FINANCIAL STATEMENTS (continued)
 

The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate.

L. 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 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.

M. Under the Funds’ organizational documents, its Trustees and Officers 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, the Funds utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statements of Assets and Liabilities.

A short sale is a transaction in which a Fund sells a security it does not own. If the security sold short decreases in price between the time the Fund sells the security and closes its short position, that Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, that Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.

An option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security (put option) or the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security (call option) at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid. The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a 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 may be an imperfect correlation between the movement in prices of options and the underlying securities and 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.

A futures contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery at a future date. There are significant risks associated with a Fund’s use of futures contracts, including (i) there may be an imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange; and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit risk to the Fund because futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees against default. Cash deposits are shown as restricted cash on the Statement of Assets and Liabilities; securities held as collateral are noted on the Schedule of Investments.

A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. A Fund utilizing OTC swaps bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. Additionally, there is no guarantee that a Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party.

Certain Funds use derivative instruments to achieve leveraged exposure to their respective underlying indices. Since these Funds’ investment strategy involves consistently applied leverage, the value of the Fund’s shares will tend to increase or decrease more than the value of any increase or decrease in the underlying index. In addition, as investment in derivative instruments generally requires a small investment relative to the amount of investment
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 93

NOTES TO FINANCIAL STATEMENTS (continued)
 

exposure assumed, this creates an opportunity for increased net income but, at the same time, additional leverage risk. The Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile and riskier than if they had not been leveraged.

In conjunction with the use of short sales and derivative instruments, the Funds are required to maintain collateral in various forms. The Funds use, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to each Fund.

The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.

3. Fees and Other Transactions with Affiliates

Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:

    Management Fees
Fund   (as a % of Net Assets)
 
Alpha Opportunity Fund   1.25 %
Enhanced World Equity Fund   0.70 %
Large Cap Value Fund   0.65 %
Risk Managed Real Estate Fund   0.75 %
Small Cap Value Fund   1.00 %
StylePlus —Large Core Fund   0.75 %
StylePlus —Mid Growth Fund   0.75 %
World Equity Income Fund   0.70 %

RFS provides transfer agent services to the Fund for fees calculated at the rates below, which are assessed to the applicable class of the Fund. For these services, RFS receives the following:

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

†Not subject to Funds during first twelve months of operations.

RFS 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, RFS receives the following:

    Fund Accounting/
    Administrative Fees
Fund   (as a % of Net Assets)
 
Alpha Opportunity Fund   0.150 %
Enhanced World Equity Fund   0.095 %
Large Cap Value Fund   0.095 %
Risk Managed Real Estate Fund   0.095 %
Small Cap Value Fund   0.095 %
StylePlus —Large Core Fund   0.095 %
StylePlus —Mid Growth Fund   0.095 %
World Equity Income Fund   greater of 0.15% or $60,000
Minimum annual charge per Fund   $25,000
Certain out-of-pocket charges   Varies

RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
94 | THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

The investment advisory contracts for the following Funds provide that the total expenses be limited to a percentage of average net assets for each class of shares, 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. The limits are listed below:

          Effective   Contract  
    Limit     Date   End Date  
 
Alpha Opportunity Fund – A-Class   2.11 %   11/30/12   02/01/15  
Alpha Opportunity Fund – C-Class   2.86 %   11/30/12   02/01/15  
Alpha Opportunity Fund – Institutional Class   1.86 %   11/30/12   02/01/15  
Enhanced World Equity Fund – A-Class   1.25 %   06/05/13   02/01/15  
Enhanced World Equity Fund – C-Class   2.00 %   06/05/13   02/01/15  
Enhanced World Equity Fund – Institutional Class   1.00 %   06/05/13   02/01/15  
Large Cap Value Fund – A-Class   1.15 %   11/30/12   02/01/15  
Large Cap Value Fund – B-Class   1.90 %   11/30/12   02/01/15  
Large Cap Value Fund – C-Class   1.90 %   11/30/12   02/01/15  
Large Cap Value Fund – Institutional Class   0.90 %   06/05/13   02/01/15  
Risk Managed Real Estate Fund – A-Class*   1.30 %   03/26/14   04/01/15  
Risk Managed Real Estate Fund – C-Class*   2.05 %   03/26/14   04/01/15  
Risk Managed Real Estate Fund – Institutional Class*   1.10 %   03/26/14   04/01/15  
Small Cap Value Fund – A-Class   1.30 %   11/30/12   02/01/15  
Small Cap Value Fund – C-Class   2.05 %   11/30/12   02/01/15  
Small Cap Value Fund – Institutional Class   1.05 %   11/30/12   02/01/15  
World Equity Income Fund – A-Class   1.46 %   08/15/13   02/01/15  
World Equity Income Fund – B-Class   2.21 %   08/15/13   02/01/15  
World Equity Income Fund – C-Class   2.21 %   08/15/13   02/01/15  
World Equity Income Fund – Institutional Class   1.21 %   08/15/13   02/01/15  

* Commencement of operations: March 28, 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 September 30, 2014, the amount of fees waived or expenses reimbursed that are subject to recoupment are presented in the following table:

Fund     Expires 2015     Expires 2016     Expires 2017     Fund Total  
 
Alpha Opportunity Fund   $ 88,316   $ 204,142   $ 126,237   $ 418,695  
Enhanced World Equity Fund     —     61,313     154,250     215,563  
Large Cap Value Fund     243,289     189,178     213,340     645,807  
Risk Managed Real Estate Fund     —     —     25,147     25,147  
Small Cap Value Fund     175,113     175,376     199,545     550,034  
World Equity Income Fund     314,425     269,453     167,150     751,028  

For the year ended September 30, 2014, no amounts were recouped by GI.

If a Fund invests in an affiliated fund, the investing Fund’s Adviser will determine whether to waive fees at the investing fund level. Fee waivers will be calculated at the investing Fund level without regard to any expense cap in effect for the investing Fund. Fees waived under this arrangement are not subject to reimbursement to GI.

The Funds have adopted Distribution Plans related to the offering of A-Class, B-Class and C-Class shares pursuant to Rule 12b-1 under the 1940 Act. The plans provide for payments at an annual rate of 0.25% of the average daily net assets of each Fund’s A-Class shares and 1.00% of the average daily net assets of each Fund’s B-Class and C-Class shares. Effective August 1, 2007, the Large Cap Value Fund ceased charging 12b-1 fees on B-Class shares in accordance with the FINRA sales cap regulations. These fees may be reinstated at any time. Effective August 25, 2005, the World Equity Income Fund ceased charging 12b-1 fees on B-Class shares in accordance with the FINRA sales cap regulations. These fees may be reinstated at any time.

For the year ended September 30, 2014, GFD retained sales charges of $86,407 relating to sales of A-Class shares of the Trust.

Certain trustees and officers of the Trust are also officers of GI, RFS and GFD.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 95

NOTES TO FINANCIAL STATEMENTS (continued)
 

4. Fair Value Measurement

In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.
 
Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).
 
Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

The following table summarizes the inputs used to value the Funds’ net assets at September 30, 2014:

      Level 1     Level 1   Level 2     Level 2     Level 3        
      Investments     Other Financial   Investments     Other Financial     Investments        
      In Securities     Instruments*   In Securities     Instruments*     In Securities     Total  
 
Assets                                    
Alpha Opportunity Fund   $ —   $ — $ 10,736,308   $ 94,008   $ —   $ 10,830,316  
Enhanced World Equity Fund     5,900,341     —   —     —     —     5,900,341  
Large Cap Value Fund     69,650,201     —   —     —     —     69,650,201  
Risk Managed Real Estate Fund     105,350,068     —   —     —     —     105,350,068  
Small Cap Value Fund     26,476,960     —   —     —     91     26,477,051  
StylePlus —Large Core Fund     142,578,718     —   56,440,542     5,681,229     —     204,700,489  
StylePlus —Mid Growth Fund     59,323,012     724   24,377,277     2,063,496     —     85,764,509  
World Equity Income Fund     86,558,110     —   —     —     —     86,558,110  
 
 
Liabilities                                    
Alpha Opportunity Fund   $ —   $ 32,652 $ —   $ 224,208   $ —   $ 256,860  
Enhanced World Equity Fund     4,853     —   —     —     —     4,853  
Risk Managed Real Estate Fund     29,528,963     —   —     —     —     29,528,963  
StylePlus —Large Core Fund     —     8,710   —     —     —     8,710  
StylePlus —Mid Growth Fund     —     20,514   —     160,037     —     180,551  

* Other financial instruments may include futures contracts and/or swaps, which are reported as unrealized gain/loss at period end.

Independent pricing services are used to value a majority of the Funds’ investments. When values are not available from a pricing service, they may be computed by the Funds’ investment adviser or an affiliate. In any event, values may be determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information and analysis. A significant portion of the Funds’ assets and liabilities are categorized as Level 2 or Level 3, as indicated in this report.

Indicative quotes from broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may be also used to value the Funds’ assets and liabilities, i.e. prices provided by a broker-dealer or other market participant who has not committed to trade at that price. Although indicative quotes are typically received from established market participants, the Funds may not have the transparency to view the underlying inputs which support the market quotations. Significant changes in an indicative quote would generally result in significant changes in the fair value of the security.

Certain fixed income securities are valued by obtaining a monthly indicative quote from a broker-dealer, adjusted for fluctuations in criteria such as credit spreads and interest rates. The Funds’ fair valuation guidelines were recently revised to transition such monthly indicative quoted securities from Level 2 to Level 3.
96 | THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

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 recognized transfers between the levels as of the beginning of the period. As of September 30, 2014, the Funds had transfers out of Level 3 due to changes in securities valuation method. See the tables below for changes to Level 2. There were no other securities that transferred between levels.

Summary of Fair Value Level 3 Activity

Following is a reconciliation of Level 3 assets and liabilities for which significant unobservable inputs were used to determine fair value for the year ended September 30, 2014:

LEVEL 3 - Fair value measurement using significant unobservable inputs

      Total  
 
Alpha Opportunity Fund        
Liabilities:        
Beginning Balance   $ 7,341,377  
Sales     (7,341,377 )
 
Ending Balance   $ —  
 
StylePlus —Large Core Fund        
Assets:        
Beginning Balance   $ 847,036  
Transfer out of Level 3     (847,036 )
 
Ending Balance   $ —  
 

5. Repurchase Agreements

In connection with transactions in repurchase agreements, it is the Fund’s policy that their custodian takes possession of the underlying collateral. The collateral is in the possession of the Fund’s 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 September 30, 2014, the collateral for the repurchase agreements was as follows:

    Counterparty and       Repurchase            
Fund   Terms of Agreement   Face Value   Price   Collateral   Par Value   Fair Value
 
Alpha Opportunity Fund   State Street           Fannie Mae        
    0.00%           2.26%        
    Due 10/01/14   $10,7,36,308   $10,736,308   10/17/22   $11,390,000   $10,951,861

In the event of counterparty default, the Fund has the right to collect the collateral to offset losses incurred. There is potential loss to the Fund in the event the Fund is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. GI, acting under the supervision of the Board of Trustees, reviews the value of the collateral and the creditworthiness of those banks and dealers with which the Fund enters 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 Enhanced World Equity Fund and Small Cap Value Fund utilized options to minimally hedge the Fund’s portfolio to increase returns, to maintain exposure to equity markets and create liquidity.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 97

NOTES TO FINANCIAL STATEMENTS (continued)
 

The following Funds utilized futures and swaps for the following purposes:

Fund   Index Exposure   Hedge   Leverage   Income   Speculation
 
Alpha Opportunity Fund   x   x   x   x   x
Risk Managed Real Estate Fund   —   —   x   —   —
StylePlus —Large Core Fund   x   —   —   —   —
StylePlus —Mid Growth Fund   x   —   —   —   —

The following table represents the notional amount of futures and swaps 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  
 
Alpha Opportunity Fund     90 %   25 %
Risk Managed Real Estate Fund     30 %   —  
StylePlus —Large Core Fund     80 %   —  
StylePlus —Mid Growth Fund     80 %   —  

The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of September 30, 2014:

Derivative Investment Type   Asset Derivatives   Liability Derivatives
 
Equity contracts   Variation margin   Variation margin
    Unrealized appreciation on swap agreements   Unrealized depreciation on swap agreements
        Options written, at value

The following table sets forth the fair value of the Funds’ September 30, 2014:

Asset Derivative Investments Value                
 
      Futures     Swaps     Options     Total Value at
      Equity     Equity     Written Equity     September 30,
Fund     Contracts*     Contracts     Contracts     2014
 
Alpha Opportunity Fund   $ —   $ 94,008   $ —   $ 94,008
StylePlus —Large Core Fund     —     5,681,229     —     5,681,229
StylePlus —Mid Growth Fund     724     2,063,496     —     2,064,220
 
 
Liability Derivative Investments Value                
 
      Futures     Swaps     Options     Total Value at
      Equity     Equity     Written Equity     September 30,
Fund     Contracts*     Contracts     Contracts     2014
 
Alpha Opportunity Fund   $ 32,652   $ 224,208   $ –   $ 256,860
Enhanced World Equity Fund     —     —     4,853     4,853
StylePlus —Large Core Fund     8,710     —     —     8,710
StylePlus —Mid Growth Fund     20,514     160,037     —     180,551
 

* 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 September 30, 2014:

Derivative Investment Type   Location of Gain (Loss) on Derivatives
 
Equity contracts   Net realized gain (loss) on futures contracts
    Net realized gain (loss) on swap agreements
    Net realized gain (loss) on options written
    Net change in unrealized appreciation (depreciation) on futures contracts
    Net change in unrealized appreciation (depreciation) on swap agreements
    Net change in unrealized appreciation (depreciation) on options written

98 | THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

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 September 30, 2014:

Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations
 
      Futures       Swaps       Options          
      Equity       Equity       Written Equity          
Fund     Contracts       Contracts       Contracts       Total  
 
Alpha Opportunity Fund   $ (14,138 )   $ (29,380 )   $ —     $ (43,518 )
Enhanced World Equity Fund     —       —       183,195       183,195  
Risk Managed Real Estate Fund     —       (805,004 )     —       (805,004 )
Small Cap Value Fund     —       —       87,489       87,489  
StylePlus —Large Core Fund     94,546       24,173,953       —       24,268,499  
StylePlus —Mid Growth Fund     223,904       8,936,682       —       9,160,586  
 
 
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations
 
      Futures       Swaps       Options          
      Equity       Equity       Written Equity          
Fund     Contracts       Contracts       Contracts       Total  
 
Alpha Opportunity Fund   $ (59,673 )   $ (130,200 )   $ —     $ (189,873 )
Enhanced World Equity Fund     —       —       3,476       3,476  
Small Cap Value Fund     —       —       (5,573 )     (5,573 )
StylePlus —Large Core Fund     3,141       1,383,821       —       1,386,962  
StylePlus —Mid Growth Fund     (25,861 )     (963,698 )     —       (989,559 )

7. Offsetting

In the normal course of business, the Funds enter into transactions subject to enforceable master netting arrangements or other similar arrangements. Generally, the right to offset in those agreements allows the Funds to counteract the exposure to a specific counterparty with collateral received or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate upon the occurrence of an event of default, credit event upon merger or additional termination event.

In order to better define their contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, the Funds may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with their derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.

For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Funds and the counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is required to be made. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty nonperformance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Assets and Liabilities.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 99

NOTES TO FINANCIAL STATEMENTS (continued)
 

The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and offset in the Statements of Assets and Liabilities in conformity with U.S. GAAP.

                                  Gross Amounts Not Offset          
                                  in the Statements of Assets          
                                  and Liabilities          
                                         
                          Net Amount of                          
                  Gross Amounts Offset     Assets Presented             Cash          
          Gross Amounts of     In the Statements of     on the Statements of     Financial     Collateral     Net  
Fund       Instrument     Recognized Assets1     Assets and Liabilities     Assets and Liabilities     Instruments     Received2     Amount  
 
Alpha Opportunity Fund                                                      
    Swap equity                                                  

 

      contracts        $ 94,008        $ —        $ 94,008        $ 94,008        $ —        $ —  
StylePlus—Large Core Fund                                                      
    Swap equity                                                  

 

   contracts       5,681,229       —       5,681,229       —       —       5,681,229  
StylePlus—Mid Growth Fund                                                      
    Swap equity                                                  

 

   contracts       2,063,496       —       2,063,496       —       —       2,063,496  
                                                       
                                  Gross Amounts Not Offset          
                                  in the Statements of Assets          
                                  and Liabilities          
                                         
                          Net Amount of                          
                  Gross Amounts Offset     Assets Presented             Cash          
          Gross Amounts of     In the Statements of     on the Statements of     Financial     Collateral     Net  
Fund       Instrument     Recognized Liabilities1     Assets and Liabilities     Assets and Liabilities     Instruments     Pledged2     Amount  
 
Alpha Opportunity Fund                                                      
    Swap equity                                                  

 

   contracts     $ 224,208     $ —     $ 224,208     $ 94,008     $ —     $ 130,200  
StylePlus—Mid Growth Fund                                                      
    Swap equity                                                  

 

   contracts       160,037       —       160,037       —       —       160,037  

1   Exchange-traded futures are excluded from these reported amounts.
2   Excludes maintenance margin deposits held at the broker related to derivatives. These amounts are reflected as segregated cash with broker on the Statements of Assets and Liabilities.

8. Federal Income Tax Information

The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and 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 threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

The RIC Modernization Act of 2010 was signed into law on December 22, 2010, and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Funds was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010.

One of the more prominent changes addresses capital loss carryforwards. The 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.

 
100  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

The tax character of distributions paid during the year ended September 30, 2014 was as follows:

      Ordinary     Long-Term     Total
Fund     Income     Capital Gain     Distribution
 
Alpha Opportunity Fund   $ —   $ —   $ —
Enhanced World Equity Fund     300,961     —     300,961
Large Cap Value Fund     414,301     —     414,301
Risk Managed Real Estate     191,735     —     191,735
Small Cap Value Fund     717,032     2,624,346     3,341,378
StylePlus—Large Core Fund     5,969,443     26,574,113     32,543,556
StylePlus—Mid Growth Fund     3,936,969     3,381,000     7,317,969
World Equity Income Fund     2,529,621     —     2,529,621

The tax character of distributions paid during the year ended September 30, 2013 was as follows:

      Ordinary     Long-Term     Total
Fund     Income     Capital Gain     Distributions
 
Alpha Opportunity Fund   $ —   $ —   $ —
Enhanced World Equity Fund     —     —     —
Large Cap Value Fund     410,967     —     410,967
Risk Managed Real Estate     —     —     —
Small Cap Value Fund     2,056,835     874,121     2,930,956
StylePlus—Large Core Fund     616,608     —     616,608
StylePlus—Mid Growth Fund     —     —     —
World Equity Income Fund     1,797,792     —     1,797,792

Note: For federal income tax purposes, short term capital gain distributions are treated as ordinary income distributions.

The tax character of distributable earnings/(accumulated losses) at September 30, 2014 was as follows:

      Undistributed     Undistributed     Accumulated       Net Unrealized       Other     Total  
      Ordinary     Long-Term     Capital and       Appreciation/       Temporary     Accumulated  
Fund     Income     Capital Gain     Other Losses*       (Depreciation)*       Differences     Earnings/(Deficit)  
 
                                           
Alpha Opportunity Fund   $ —   $ —   $ (5,646,776 )   $ (130,200 )   $ —     $(5,776,976 )
Enhanced World Equity Fund     76,353     —     —       (126,843 )     —     (50,490 )
Large Cap Value Fund     463,001     —     (1,534,201 )     13,550,004       —     12,478,804 )
Risk Managed Real Estate     247,276     100,031     — )     (1,749,471 )     (31,134 )   (1,433,298 )
Small Cap Value Fund     —     4,989,811     (75,571 )     1,947,956       —     6,862,196 )
StylePlus—Large Core Fund     26,784,857     —     —       9,212,153       —     35,997,010 )
StylePlus—Mid Growth Fund     9,174,607     —     —       2,566,681       —     11,741,288 )
World Equity Income Fund     89,126     —     (18,618,364 )     1,152,709       (7,980 )   (17,384,509 )

*The Fund had net capital loss carryovers and deferred post-October losses as identified elsewhere in the Notes to the Financial Statements.

** Any differences between book-basis and tax-basis unrealized appreciation (depreciation) are attributable primarily to the tax deferral of wash sale losses, and the differences between book and tax basis passive foreign investment companies.

For the year ended September 30, 2014, the capital loss carryovers utilized or expired and the accumulated net realized loss on sales of investments for federal income tax purposes which are available to offset future taxable gains are shown in the table below:

      Capital Loss       Capital Loss                                 Remaining  
      Carryovers       Carryovers     Expires in       Expires in       Unlimited     Capital Loss  
Fund     Utilized       Expired     2017       2018       Short Term     Long Term     Carryforward  
 
Alpha Opportunity Fund     $ (4,455,920 )   $ —     $ (1,304,849 )     $ (4,341,927 )   $ —   $ —     $ (5,646,776 )
Enhanced World Equity Fund     —       —     —       —       —     —     —  
Large Cap Value Fund     (6,723,361 )     —     —       (1,534,201 )     —     —     (1,534,201 )
Risk Managed Real Estate     —       —     —       —       —     —     —  
Small Cap Value Fund     —       —     —       —       —     —     —  
StylePlus—Large Core Fund     —       —     —       —       —     —     —  
StylePlus—Mid Growth Fund     —       —     —       —       —     —     —  
World Equity Income Fund     (4,942,528 )     —     (13,260,860 )     (5,357,504 )     —     —     (18,618,364 )

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 due to wash sales, foreign currency gains and losses, the “mark-to-market” of certain
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 101

NOTES TO FINANCIAL STATEMENTS (continued)
 

passive foreign investment companies (PFICs) for tax purposes, utilization of earnings and profits on shareholder redemptions, and net operating losses. 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 Net  
              Net Investment       Realized  
      Paid-In Capital       Income       Gain/(Loss)  
 
Alpha Opportunity Fund     $(56,662 )     $  54,103       $        2,559  
Enhanced World Equity Fund     412,447       363       (412,810 )
Large Cap Value Fund     —       47       (47 )
Risk Managed Real Estate     (34 )     137,667       (137,633 )
Small Cap Value Fund     2,684,748       153,772       (2,838,520 )
StylePlus—Large Core Fund     2,536,139       221,379       (2,757,518 )
StylePlus—Mid Growth Fund     870,051       191,247       (1,061,298 )
World Equity Income Fund     (10,587 )     (29,231 )     39,818  

At September 30, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:

            Tax     Tax       Net  
      Tax     Unrealized     Unrealized       Unrealized  
Fund     Cost     Gain     Loss       Gain/(Loss)  
 
Alpha Opportunity Fund   $ 10,736,308   $ —   $ —     $ —  
Enhanced World Equity Fund     6,048,261     1,473     (149,393 )     (147,920 )
Large Cap Value Fund     56,100,197     15,114,543     (1,564,539 )     13,550,004  
Risk Managed Real Estate     108,774,026     870,939     (4,294,897 )     (3,423,958 )
Small Cap Value Fund     24,529,095     3,460,260     (1,512,304 )     1,947,956  
StylePlus—Large Core Fund     195,488,336     4,428,020     (897,096 )     3,530,924  
StylePlus—Mid Growth Fund     83,037,067     1,438,336     (775,114 )     663,222  
World Equity Income Fund     85,392,709     4,869,197     (3,703,796 )     1,165,401  

Pursuant to Federal income tax regulations applicable to investment companies, the Funds have elected to treat net capital losses and certain ordinary losses realized between November 1 and September 30 of each year as occurring on the first day of the following tax year. The Funds have also elected to treat certain ordinary losses realized between January 1 and September 30 of each year as occurring on the first day of the following tax year. For the year ended September 30, 2014, the following losses reflected in the accompanying financial statements were deferred for Federal income tax purposes until October 1, 2014:

Fund     Ordinary       Capital
 
Small Cap Value Fund   $ (75,571 )   $ —

9. Securities Transactions

For the year ended September 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:

Fund     Purchases     Sales  
 
Alpha Opportunity Fund   $ —   $ 4,723,777  
Enhanced World Equity Fund     37,735,488     37,723,395  
Large Cap Value Fund     30,340,262     25,418,666  
Risk Managed Real Estate Fund     87,839,467     18,858,851  
Small Cap Value Fund     21,424,349     44,307,478  
StylePlus—Large Core Fund     216,383,099     164,747,800  
StylePlus—Mid Growth Fund     94,176,446     71,945,945  
World Equity Income Fund     105,455,460     103,239,031  

102 | THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

10. Options Written

Information as to options written by the Funds during the year ended September 30, 2014, and options outstanding at period end is provided below:

Written Call Options

    Enhanced World Equity     Small Cap Value
     
    Number of       Premium     Number of       Premium  
    contracts       amount     contracts       amount  
 
Balance at September 30, 2013   370     $ 34,151     107     $ 31,283  
Options Written   8,963       625,059     210       35,346  
Options terminated in closing purchase transactions   (8,395 )     (591,478 )   —       —  
Options expired   (295 )     (32,075 )   (317 )     (66,629 )
Options exercised   (140 )     (9,727 )   —       —  
 
Balance at September 30, 2014   503     $ (25,930 )   —     $ —  
 

Written Put Options

    Small Cap Value Fund
     
    Number of       Premium  
    contracts       amount  
 
Balance at September 30, 2013   200     $ 12,810  
Options Written   60       8,050  
Options terminated in closing purchase transactions   —       —  
Options expired   (260 )     (20,860 )
Options exercised   —       —  
 
Balance at September 30, 2014   —       —  
 

11. Line of Credit

The StylePlus—Large Core Fund and StylePlus—Mid Growth Fund secured a committed, $275,000,000 line of credit from Citibank, N.A., good through October 10, 2014, at which time the line of credit may be renewed. This line of credit is reserved for emergency or temporary purposes. Fees related to borrowings, if any, vary under s arrangement between the greater of Citibank’s “base rate”, LIBOR plus 1.0%, and the Fed Funds rate, plus 0.50%. The StylePlus—Large Core Fund and StylePlus—Mid Growth Fund did not have any borrowings under this agreement as of and for the year-ended September 30, 2014. The StylePlus—Large Core Fund and StylePlus—Mid Growth Fund also pay a commitment fee at an annualized rate of 0.08% of the average daily amount of their unused commitment amount.

12. Affiliated Transactions

Investments representing 5% or more of the outstanding voting shares of a portfolio company of a fund, or control of or by, or common control under GI, result in that portfolio company being considered an affiliated company of such fund, as defined in the 1940 Act.

The Funds may invest in the Guggenheim Strategy Funds Trust consisting of Guggenheim Strategy Fund I, Guggenheim Strategy Fund II, and Guggenheim Strategy Fund III (collectively, the “Cash Management Funds”), open-end management investment companies managed by GI. The Cash Management Funds, which launched on March 11, 2014, are offered as cash management options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Cash Management Funds pay no investment management fees. The Cash Management Funds’ annual report on Form N-CSR dated September 30, 2014 will be available publicly or upon request.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 103

NOTES TO FINANCIAL STATEMENTS (concluded)
 

Transactions during the year ended September 30, 2014 in which the portfolio company is an “affiliated person” are as follows:

      Value                   Value     Shares     Investment     Realized       Capital Gain
Affiliated issuers by Fund     09/30/201     Additions     Reductions       09/30/2014     09/30/2014     Income     Gain (Loss)       Distributions
 
StylePlus—Large Core Fund                                                    

Guggenheim Strategy Fund III

   $ —   $ 43,537,575   $ —     $ 43,398,278     1,742,203   $ 298,420   $ —     $ —

Guggenheim Strategy Fund II

     —     30,324,641     —       30,278,579     1,216,007     76,622     —       —

Guggenheim Strategy Fund I

     —     27,112,144     (4,014,452 )     23,036,746     925,171     111,670     (14,452 )     —

Guggenheim BulletShares 2017 High

                                                    

Yield Corporate Bond ETF

     —     3,238,907     (3,238,907 )     —     —     62,220     9,284       —

Guggenheim BulletShares 2016 High

                                                    

Yield Corporate Bond ETF

     2,242,106     1,602,803     (3,849,263 )     —     —     111,112     49,232       4,886

Guggenheim BulletShares 2015 High

                                                    

Yield Corporate Bond ETF

     2,243,640     1,603,391     (3,851,139 )     —     —     106,479     (12,997 )     24,903

Guggenheim BulletShares 2014 High

                                                    

Yield Corporate Bond ETF

     2,244,797     1,596,131     (3,844,273 )     —     —     31,472     (27,442 )     15,200

Guggenheim Enhanced Short

                                                    

Duration ETF

     3,961,310     —     (3,959,467 )     —     —     6,840     2,889       —

Floating Rate Strategies Fund

                                                    

Institutional Class

     3,332,741     158,888     (3,537,286 )     —     —     141,195*     (30,339 )     6,310

Macro Opportunities Fund

                                                    

Institutional Class

     3,199,526     170,864     (3,552,635 )     —     —     157,221*     (91,859 )     —
     
    $ 17,224,120   $ 109,345,344   $ (29,847,422 )   $ 96,713,603     3,883,381   $ 1,103,251   $ (115,684 )   $ 51,299
StylePlus—Mid Growth Fund                                                    

Guggenheim Strategy Fund III

   $ —   $ 17,869,742   $ —     $ 17,812,592     715,078   $ 124,193   $ —     $ —

Guggenheim Strategy Fund II

     —     13,280,649     —       13,261,482     532,590     31,516     —       —

Guggenheim Strategy Fund I

     —     12,552,158     (4,014,452 )     8,517,668     342,075     51,959     (14,452 )     —

Guggenheim BulletShares 2017 High

                                                    

Yield Corporate Bond ETF

     —     1,536,370     (1,536,370 )     —     —     29,514     4,404       —

Guggenheim BulletShares 2016 High

                                                    

Yield Corporate Bond ETF

     965,092     653,469     (1,620,436 )     —     —     46,910     20,893       2,057

Guggenheim BulletShares 2015 High

                                                    

Yield Corporate Bond ETF

     964,231     652,605     (1,618,597 )     —     —     44,895     (5,349 )     10,467

Guggenheim BulletShares 2014 High

                                                    

Yield Corporate Bond ETF

     963,581     652,332     (1,617,350 )     —     —     13,344     (11,521 )     6,395

Guggenheim Enhanced Short

                                                    

Duration ETF

     1,669,991     —     (1,669,214 )     —     —     2,887     1,226       —

Floating Rate Strategies Fund

                                                    

Institutional Class

     1,378,201     65,706     (1,462,788 )     —     —     58,389*     (12,546 )     2,610

Macro Opportunities Fund

                                                    

Institutional Class

     1,323,112     70,658     (1,469,135 )     —     —     65,017*     (37,987 )     —
     
    $ 7,264,208   $ 47,333,689     (15,008,342 )   $ 39,591,742     1,589,743   $ 468,624   $ (55,332 )   $ 21,529
                                                     
* Includes A-Class and C-Class.

13. Other Liabilities

StylePlus—Large Core Fund wrote put option contracts through Lehman Brothers Inc., (“LBI”) that were exercised prior to the option contracts’ expiration and prior to the bankruptcy filing by LBI, during September, 2008. However, these transactions have not settled and the securities have not been delivered to the Fund as of September 30, 2014.

Although the ultimate resolution of these transactions is uncertain, the Fund has recorded a liability on its respective book equal to the difference between the strike price on the put options and the market price of the underlying security on the exercise date. The amount of the liability recorded by the Fund as of September 30, 2014, was $18,615.

14. Alpha Opportunity Fund

As noted in the Fund’s prior shareholder reports, the Fund has been working to resolve certain outstanding short sale transactions with Lehman Brothers International Europe (“LBIE”) and its administrator. The Fund contracted with LBIE to provide prime brokerage services related to the Fund’s short selling, and on September 15, 2008, LBIE was placed into administration and a third party administrator was named. The Fund’s exposure to LBIE consisted of short sale proceeds held by LBIE, and restricted long positions held at the Fund’s custodian, as collateral for said short sales. These matters have been resolved; in June 2014, the Fund made a settlement payment to discharge all remaining obligations to LBIE, and its former affiliate, Lehman Brothers, Inc., released the collateral held in connection with the Fund’s open short sale transactions.

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.
104 | THE GUGGENHEIM FUNDS ANNUAL REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

The Board of Trustees and Shareholders
of Guggenheim Funds Trust

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Guggenheim Alpha Opportunity Fund, Guggenheim Enhanced World Equity Fund, Guggenheim Large Cap Value Fund, Guggenheim Risk Managed Real Estate Fund, Guggenheim Small Cap Value Fund, Guggenheim StylePlus—Large Core Fund, Guggenheim StylePlus—Mid Growth Fund and Guggenheim World Equity Income Fund (eight of the series constituting the Guggenheim Funds Trust) (the “Funds”) as of September 30, 2014, and the related statements of operations, statements of changes in net assets, and the financial highlights for each of the years or periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control 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 September 30, 2014, by correspondence with the custodian, transfer agents, 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.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above listed Funds (eight of the series constituting the Guggenheim Funds Trust) at September 30, 2014, and the results of their operations, the changes in their net assets, and their financial highlights for each of the years or periods indicated therein, in conformity with U.S. generally accepted accounting principles.




McLean, Virginia
November 25, 2014
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OTHER INFORMATION (Unaudited)
 

Tax Information

This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.

Of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following funds had the corresponding percentages qualify for the dividends received deduction for corporations:

Fund   % Qualifying  
 
Enhanced World Equity Fund   0.59 %
Large Cap Value Fund   100.00 %
Risk Managed Real Estate Fund   4.20 %
Small Cap Value Fund   39.12 %
StylePlus—Large Core Fund   24.65 %
StylePlus—Mid Growth Fund   1.86 %
World Equity Income Fund   41.11 %

Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:

Fund   % Qualifying  
 
Enhanced World Equity Fund   0.55 %
Large Cap Value Fund   100.00 %
Risk Managed Real Estate Fund   4.20 %
Small Cap Value Fund   38.96 %
StylePlus—Large Core Fund   24.65 %
StylePlus—Mid Growth Fund   1.86 %
World Equity Income Fund   55.59 %

Additionally, of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following funds had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:

Fund   % Qualifying     % STCG Qualifying  
 
StylePlus—Large Core Fund   4.04 %   100.00 %
StylePlus—Mid Growth Fund   3.97 %   100.00 %

With respect to the taxable year ended September 30, 2014, the Funds hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:

          LT Capital Gain
    LT Capital Gains     Using Proceeds from
Fund   Dividends     Shareholder Redemptions
 
Small Cap Value Fund   $2,624,346     $2,687,822
StylePlus—Large Core Fund   26,574,113     2,017,743
StylePlus—Mid Growth Fund   3,381,000     517,382

In January 2015, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by you in the calendar year 2014.

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 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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.
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OTHER INFORMATION (Unaudited) (continued
 

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 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.

Office Locations

The offices of Guggenheim Investments can be found in the following locations:

330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)

Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850

9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210

Distributor change

Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds was consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD serves as the Funds’ distributor.

GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.

The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.

Guggenheim Funds Trust

Guggenheim Funds Trust (the “Trust”), which was organized as a Delaware statutory trust on November 8, 2013, is registered with the Securities and Exchange Commission (“SEC”) as an investment company. The Trust is an open-end management investment company that, upon the demand of the investor, must redeem its shares and pay the investor the next calculated NAV. The Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”), Guggenheim Large Cap Value Fund (“Large Cap Value Fund”), Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”), Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional Fund”), Guggenheim Small Cap Value Fund (“Small Cap Value Fund”), Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core Fund”), Guggenheim StylePlus Mid—Growth Fund (“StylePlus—Mid Growth Fund”) and Guggenheim World Equity Income Fund (“World Equity Income Fund”) (collectively, the “Funds”) were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund (the “Predecessor Corporations”), different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at special meetings of shareholders, the shareholders of each Predecessor Fund approved the reorganization of each Predecessor Fund with and into a corresponding “shell” series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any such historical information provided for a series of the Trust that relates to periods prior to January 28, 2014, therefore, is that of the corresponding Predecessor Fund.

Effective January 28, 2014, the Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”), Guggenheim High Yield Fund (“High Yield Fund”), Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”), Guggenheim Limited Duration Fund (“Limited Duration Fund”), Guggenheim
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OTHER INFORMATION (Unaudited) (continued)
 

Macro Opportunities Fund (“Macro Opportunities Fund”), Guggenheim Municipal Income Fund (“Municipal Income Fund”), and Guggenheim Total Return Bond Fund (“Total Return Bond Fund”), which were series of Security Income Fund, a Kansas corporation, reorganized with and into corresponding series of Guggenheim Funds Trust, a Delaware Statutory Trust (each, a “Reorganization”). Upon completion of each Reorganization, the respective share classes of each Fund assumed the performance, financial and other historical information of those of the corresponding predecessor fund.

At a meeting of shareholders held on January 8, 2014, shareholders of the Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”) approved the reorganization of the Fund from a Kansas corporation to a Delaware statutory trust. After the close of business on September 23, 2014, the Fund, which is a series of Security Equity Fund, a Kansas corporation, will reorganize with and into a corresponding “shell” fund (the “New Fund”), which is a series of Guggenheim Funds Trust, a Delaware statutory trust. Upon completion of the Reorganization, shareholders of the Fund will own shares of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the New Fund will assume the performance, financial and other historical information of that of the Fund. Once the Reorganization is completed, the Fund will no longer be offered as a series of Security Equity Fund.

Report of the Guggenheim Funds Trust Contracts Review Committee

Guggenheim Funds Trust (the “Trust”) was organized as a Delaware statutory trust on November 8, 2013, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Effective January 28, 2014, the Trust is the successor of all of the existing and active series of Security Equity Fund (except for Guggenheim Alpha Opportunity Fund),1 Security Large Cap Value Fund, Security Mid Cap Growth Fund and Security Income Fund, each, a Kansas corporation (collectively, the “Corporations”), following the reorganization of each series of the Corporations with and into a corresponding “shell” series of the Trust (the “Reorganizations”). The Reorganizations, which were approved by the Boards of Directors of the Corporations (collectively, the “Board of Directors” or the “Predecessor Board” and the members of the Board of Directors individually, “Directors”), including the Directors who are not “interested persons,” as defined by the 1940 Act, of the Corporations (the “Independent Directors”), and by shareholders, were intended to, among other things, take advantage of various benefits available to registered investment companies organized as Delaware statutory trusts, including, but not limited to, Delaware’s comprehensive body of law related to investment companies which may reduce legal uncertainty and risk.

The Trust includes the following series (the “New Series”), each of which assumed the accounting and performance histories of the corresponding predecessor fund (a “Predecessor Fund” and collectively, the “Predecessor Funds”):

  •   Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”)2   •   Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”)
  •   Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”)   •   Guggenheim High Yield Fund (“High Yield Fund”)
  •   Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”)   •   Guggenheim Large Cap Value Fund (“Large Cap Value Fund”)
  •   Guggenheim Limited Duration Fund (“Limited Duration Fund”)   •   Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”)
  •   Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional”)   •   Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”)
  •   Guggenheim Municipal Income Fund (“Municipal Income Fund”)   •   Guggenheim Small Cap Value Fund (“Small Cap Value Fund”)
  •   Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth”)   •   Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core”)
  •   Guggenheim Total Return Bond Fund (“Total Return Bond Fund”)   •   Guggenheim World Equity Income Fund (“World Equity Income Fund”)

With the exception of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund, Security Investors, LLC, also known as Guggenheim Investments (“Security Investors”) and an indirect subsidiary of Guggenheim Partners, LLC, a global diversified financial services firm (“Guggenheim Partners”), serves as investment manager to each series of the Trust. (Guggenheim Partners, Security Investors, Guggenheim Partners Investment Management, LLC (“GPIM”) and their affiliates may be referred to herein collectively as “Guggenheim.”) In this connection, the Trust and Security Investors have entered into four separate investment management agreements which group the New Series of the Trust to correspond with the Predecessor Funds that were series of a common Corporation: (i) Mid Cap Value Fund, Mid Cap Value Institutional, Small Cap Value Fund, StylePlus—Large Core Fund, World Equity Income Fund and Alpha Opportunity Fund,3 the corresponding Predecessor Funds of which were series of a common Corporation, Security Equity Fund; (ii) Large Cap Value Fund, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Large

  1 At a meeting of shareholders held on January 8, 2014, shareholders of Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”), a series of Security Equity Fund, approved the reorganization of Alpha Opportunity Fund to a corresponding new series of the Trust (the “Alpha Opportunity Fund Reorganization”). Due to certain outstanding transactions with Lehman Brothers International Europe (“LBIE”) and its administrator, the Alpha Opportunity Fund Reorganization was delayed pending the resolution of the LBIE matter. Alpha Opportunity Fund was reorganized into the Trust on September 24, 2014.
  2 Because the Alpha Opportunity Fund was not reorganized into the Trust until September 2014, at the time of the Board’s review of the investment advisory agreements Alpha Opportunity Fund was a series of the Security Equity Fund.
  3 At the time of the Board’s review of the investment advisory agreements, Security Investors served as investment manager to Alpha Opportunity Fund pursuant to an investment management agreement with Security Equity Fund. The investment management agreement with Security Investors transferred to the Trust upon the Alpha Opportunity Fund Reorganization.

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OTHER INFORMATION (Unaudited) (continued)
 

Cap Value Fund; (iii) StylePlus—Mid Growth, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Mid Cap Growth Fund; and (iv) Investment Grade Bond Fund, High Yield Fund and Municipal Income Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund. (The New Series identified in (i) through (iv) above are collectively referred to herein as the “SI-Advised Funds.”) Under the terms of the applicable investment management agreement between the Trust and Security Investors, Security Investors also is responsible for overseeing the activities of GPIM, an indirect subsidiary of Guggenheim Partners, with respect to its service as investment sub-adviser to Municipal Income Fund, pursuant to an investment sub-advisory agreement between Security Investors and GPIM (the “Sub-Advisory Agreement”).

GPIM serves as investment adviser with respect to each of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund (collectively, the “GPIM-Advised Funds” and together with the SI-Advised Funds, the “Funds” and individually, a “Fund”). In this connection, the Trust and GPIM have entered into three separate investment advisory agreements which group the GPIM-Advised Funds as follows: (i) Enhanced World Equity Fund, the corresponding Predecessor Fund of which was a series of Security Equity Fund; (ii) Floating Rate Strategies Fund, Macro Opportunities Fund and Total Return Bond Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund; and (iii) Limited Duration Fund, the corresponding Predecessor Fund of which was a series of Security Income Fund. (The investment management agreements pertaining to the SI-Advised Funds and the investment advisory agreements pertaining to the GPIM-Advised Funds are referred to herein together as the “Advisory Agreements” and, together with the Sub-Advisory Agreement, as the “Agreements.” In addition, unless the context indicates otherwise, GPIM, with respect to its service as investment adviser to the GPIM-Advised Funds, and Security Investors as to the SI-Advised Funds, are each referred to herein as the “Adviser” and together, the “Advisers.”) Under the supervision of the Board of Trustees of the Trust (the “Board” and the members of the Board individually, the “Trustees”), the Advisers regularly provide (or, as applicable, oversee the provision of) investment research, advice and supervision, a continuous investment program and direct the purchase and sale of securities and other investments for each Fund’s portfolio.

At a meeting held on November 11, 2013, in connection with other actions taken to pursue the Reorganizations, the Predecessor Board, including the Independent Directors, appointed each of the then-current investment manager/adviser for the Predecessor Funds to serve in such capacity to the corresponding New Series of the Trust (i.e., Security Investors and GPIM with respect to the SI-Advised Funds and the GPIM-Advised Funds, respectively). The Predecessor Board, including Independent Directors, also approved for the Trust, on behalf of the New Series, the investment advisory and investment management agreements then in effect with respect to the Predecessor Funds (i.e., the Advisory Agreements and the Sub-Advisory Agreement). The sole initial shareholder of the New Series subsequently approved the Advisory Agreements and the Sub-Advisory Agreement, which are identical to the agreements then in place with respect to each of the Predecessor Funds in all material respects, except for the name of the signatory and the applicable state law, and became effective January 27, 2014.

At meetings held in person on April 17, 2014 (the “April Meeting”) and on May 12, 2014, (the “May Meeting”), the members of the Contracts Review Committee of the Board (the “Committee”), consisting solely of the Trustees who are not “interested persons,” as defined by the 1940 Act, of the Trust (the “Independent Trustees”), met separately from Guggenheim to consider the renewal of the Advisory Agreements and the Sub-Advisory Agreement in connection with the Committee’s annual contract review schedule.4 As part of its review process, the Committee was represented by independent legal counsel to the Independent Trustees (“Independent Legal Counsel”). Independent Legal Counsel reviewed and discussed with the Committee various key aspects of the Trustees’ legal responsibilities relating to the proposed renewal of the Agreements and other principal contracts. In this connection, Independent Legal Counsel advised the Committee of: (i) the responsibilities of board members under applicable law; (ii) the standards for determining what constitutes an excessive fee as delineated by the courts and the factors the Trustees should consider in determining whether to approve the fee arrangements; and (iii) the disclosure requirements pertaining to these approvals, as required by the Securities and Exchange Commission. The Committee took into account various materials received from Guggenheim and Independent Legal Counsel. Recognizing that the evaluation process with respect to the services provided by each of the Advisers is an ongoing

  4 Since the corresponding Predecessor Fund of Enhanced World Equity Fund was subject to an investment management agreement approved by the Board of Directors of Security Equity Fund for an initial term of two years at an in-person meeting of the Board held on February 13, 2013, and because the Fund has a limited operating history, it was not included in the contract renewal process conducted in April and May 2014 (the “2014 Contract Renewal Process”). Similarly, Limited Duration Fund was not included in the 2014 Contract Renewal Process because the corresponding Predecessor Fund of Limited Duration Fund was subject to an investment management agreement approved by the Board of Directors of Security Income Fund for an initial term of two years at an in-person meeting of the Board held on November 11, 2013. Another recently launched series of the Trust, the Guggenheim Risk Managed Real Estate Fund (the “Risk Managed Real Estate Fund”) also was excluded from the 2014 Contract Renewal Process because the investment advisory agreement between GPIM and the Trust, on behalf of the Risk Managed Real Estate Fund, was approved by the Board of Trustees of the Trust for an initial term of two years at an in-person meeting of the Board held on February 12, 2014. Accordingly, references herein to the “Funds” should be understood as referring to all series of the Trust, except Enhanced World Equity Fund, Limited Duration Fund and Risk Managed Real Estate Fund. In addition, references to the “Funds” should be understood as including Alpha Opportunity Fund. Since the Alpha Opportunity Fund Reorganization was not effected as of the April Meeting or May Meeting, the individuals who serve as the Independent Trustees, in their capacity as the Independent Directors of Security Equity Fund, considered the renewal of the Investment Management Agreement between Security Investors and Security Equity Fund, with respect to Alpha Opportunity Fund. Accordingly, all references hereafter to the steps taken by the “Independent Trustees” and the “Committee,” including the materials reviewed and factors considered, also refer to such parties in their corresponding capacities with respect to Alpha Opportunity Fund. Likewise, all action taken with respect to the Trust’s Advisory Agreements includes the Investment Management Agreement regarding Alpha Opportunity Fund.

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OTHER INFORMATION (Unaudited) (continued)
 

one, the Committee also considered the variety of written materials, reports and oral presentations it received (and received by the full Board) throughout the year regarding performance and operating results of the Funds (which, as noted, reflects the accounting and performance histories of the Predecessor Funds).

In connection with the contract review process, FUSE Research Network LLC (“FUSE”), an independent, third party research provider, was engaged to prepare advisory contract renewal reports designed specifically to help boards of directors/trustees fulfill their advisory contract renewal responsibilities. The objective of the reports is to present the subject funds’ relative position regarding fees, expenses and total return performance, with peer group and universe comparisons. Guggenheim prepared a comprehensive presentation in response to a formal request for information sent by Independent Legal Counsel on behalf of the Committee. In addition, Guggenheim made a detailed presentation at the April Meeting, which addressed areas identified for discussion by the Committee Chair and Vice Chair and Independent Legal Counsel. Throughout the process, the Committee asked questions of management and requested certain additional information which Guggenheim provided following the April Meeting (collectively with the foregoing reports and materials, the “Contract Materials”).

Among other things, Guggenheim provided: (i) organizational charts and presentations, staffing reports and biographies of those key personnel of each Adviser providing services to the Funds; (ii) descriptions of various functions performed by Guggenheim for the Funds, such as portfolio trading practices, brokerage matters, trade allocation and best execution; (iii) information regarding each Adviser’s compliance and regulatory history, including its Form ADV; and (iv) information concerning the parent company and overall Guggenheim organization and strategic plans and goals, all to assist the Committee in assessing the nature, extent and quality of services provided by each of Security Investors and GPIM, respectively. In addition, Guggenheim’s response included information comparing the investment performance, advisory fees and total expenses of the Funds to other funds (including such information presented in the FUSE reports as well as supplemental information prepared by Guggenheim), charts showing revenues for Guggenheim by product line and each Fund, including a break-out of various expenses, a description of the expense allocation methodology and information about the profitability of the Funds to Guggenheim Investments (the investment management business of Guggenheim Partners), financial information for Guggenheim Investments (unaudited), and information about Guggenheim’s compliance and risk management programs.

Following an analysis and discussion of the factors identified below and in the exercise of its business judgment, the Committee concluded that it was in the best interests of the Funds to recommend that the Board approve the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.

Advisory Agreements

Nature, Extent and Quality of Services Provided by each Adviser: With respect to the nature, extent and quality of services currently provided by each Adviser, the Committee considered the information provided by Guggenheim concerning the education, experience, professional affiliations, area of responsibility and duties of all key personnel performing services for the Funds, including those personnel providing compliance oversight. In this connection, the Committee considered Guggenheim’s resources and related efforts to retain, attract and motivate capable personnel to serve the Funds and noted Guggenheim’s report on recent additions and departures in personnel who work on matters relating to the Funds or are significant to the operations of each Adviser. The Committee noted that on a regular basis the Board receives and reviews information from the Trust’s Chief Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. In addition, the Committee took into account the various compliance and risk management initiatives undertaken by Guggenheim, including, among other things, the hiring of a new Chief Risk Officer, Portfolio Management, responsible for implementing various initiatives related to the risks associated with the investment process, the organization’s risk management infrastructure and critical activities. The Committee also considered Guggenheim’s other initiatives intended to achieve greater enhancements and efficiencies in the organization’s ability to provide services to all of the registered investment companies for which Security Investors, GPIM or another Guggenheim affiliate serves as investment adviser/manager (including the Funds), such as efforts to streamline and simplify the organizational structure of Guggenheim’s advisory business, as reflected by the internal restructuring that consolidated the investment advisers, broker/dealers and other entities that comprise “Guggenheim Investments” under a new, single holding company, Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”). In this regard, the Committee considered that although the restructuring neither impacted the services rendered on a day-to-day basis to the Funds nor changed the ultimate ownership of the various Guggenheim entities involved, which, through GPIMH, continue to be indirect subsidiaries of Guggenheim Capital, LLC, Guggenheim stated that the restructuring will allow the financial statements of the various entities to be consolidated and audited, thus providing a clearer view of Guggenheim Investments’ business within the broader Guggenheim organization. Moreover, in connection with the Committee’s evaluation of the overall package of services provided by each Adviser, the Committee considered each Adviser’s administrative capabilities, including its role in monitoring and coordinating compliance responsibilities with the fund administrator, transfer agent, distributor, custodian and other service providers to the Funds.
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OTHER INFORMATION (Unaudited) (continued)
 

With respect to Guggenheim’s resources and the ability of each Adviser to carry out its responsibilities under the applicable Advisory Agreement, the Chief Financial Officer of Guggenheim Investments reviewed with the Committee certain unaudited financial information concerning GPIMH. (The Committee received the audited financial statements of GPIMH once available following the May Meeting.)

The Committee also considered the acceptability of the terms of each Advisory Agreement (including the scope of services required to be performed by each Adviser). Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of each Adviser’s quality of performance of its duties through Board meetings, discussions, and reports throughout the year, the Committee concluded that each Adviser and its personnel were qualified to serve the Funds in such capacity and may reasonably be expected to continue to provide a high quality of services under each Advisory Agreement with respect to the Funds.

Investment Performance: The Committee received for each Fund investment returns for the five-year, three-year, one-year and three-month periods ended December 31, 2013, as applicable. In addition, the Committee received a comparison of each Fund’s performance to the performance of a benchmark, a peer group of similar funds and a broader universe of funds identified by FUSE, in each case for the same periods and, with respect to performance universe rankings for each Fund as to the returns of Class A shares, also for the ten-year period ended December 31, 2013, as applicable. The Committee received from FUSE representatives and considered a description of the methodology employed by FUSE for identifying each Fund’s peer group and universe for performance and expense comparisons.

In seeking to evaluate Fund performance over a full market cycle, the Committee generally focused its attention first on five- and three-year performance rankings as compared to the relevant universe of funds, but also considered more recent performance periods, including the one-year period and, as deemed appropriate, the three-month period, for certain Funds such as for those Funds that were recently launched or had undergone recent changes in the composition of the portfolio management team and/or the investment strategies employed. In this connection, the Committee made the following observations:

  •   Alpha Opportunity Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 1st percentile for both periods. In light of the resignation of Mainstream Investment Advisors, LLC, effective, September 30, 2013, as the Fund’s sub-adviser for the domestic long/short sub-portfolio of the Fund, the Committee also considered more recent performance periods, including the one-year period and the three-month period. 5 In this connection, the Committee noted that Security Investors assumed investment management responsibility for the domestic long/short sub-portfolio as of September 30, 2013. The Committee observed that the Fund’s Class A shares outperformed the performance universe median for the one-year and three-month periods ended December 31, 2013, ranking in the 5th and 13th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund’s performance for the periods ended December 31, 2013 was comparable to the Fund’s benchmark, the S&P 500 Index, for the one- and three-year periods and better than the Fund’s benchmark for the five-year period, and lagged the benchmark for the three-month period. The Committee also considered the circumstances affecting the management of the Fund as a result of the Fund’s prime broker, Lehman Brothers International Europe (“LBIE”), being placed into administration on September 15, 2008. 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 such short sales. Until such time as the liability for short sales was settled and all restrictions were removed by LBIE and Lehman Brothers, Inc. (“LBI”), the Fund could not sell such restricted long positions and/or utilize the restricted cash balances to achieve the Fund’s investment objectives and/or meet Fund redemptions or other Fund obligations. In evaluating the services provided by the Adviser and the performance of the Fund, the Committee also considered Guggenheim’s efforts to resolve the issues with LBIE and LBI and to seek the release of the collateral by LBIE and LBI in conjunction with the potential settlement of LBIE’s claim. In addition, the Committee took into account information received from Guggenheim regarding the minimum assets required to manage the Fund’s assets consistent with the Fund’s investment objectives and the undertaking made by Guggenheim to assure adequate liquidity to meet Fund redemptions.
       
  •   Floating Rate Strategies Fund: The returns of the Class A shares exceeded the median of its performance universe in both the one-year and three- month periods, ranking in the 19th and 32nd percentile, respectively. The Fund, which commenced operations on November 30, 2011, also outperformed its benchmark, the Credit Suisse Leveraged Loan Index for the one-year and three-month periods, according to information provided by Guggenheim.

  5 Prior to September 30, 2013, Mainstream Investment Advisers, LLC (“Mainstream”) acted as sub-adviser to Alpha Opportunity Fund. Pursuant to an investment sub-advisory agreement, Mainstream furnished investment advisory services, supervised and arranged for the purchase and sale of securities on behalf of a portion of the assets of Alpha Opportunity Fund and provided for the compilation and maintenance of records pertaining to such investment advisory services, subject to the supervision of Security Investors and the Board of Directors of Security Equity Fund. Effective September 30, 2013, Mainstream resigned as sub-adviser to Alpha Opportunity Fund and Security Investors assumed all advisory obligations and responsibilities.

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OTHER INFORMATION (Unaudited) (continued)    

•  
High Yield Fund: While the returns of the Class A shares underperformed the median of its performance universe for the three-year period and ranked in the third quartile (72nd percentile), returns for the five-year period exceeded the performance universe median and ranked in the first quartile (4th percentile) and recent performance for the one-year period also ranked in the first quartile (3rd percentile). The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Corporate High Yield Index, for the five-year and one-year periods, but lagged the benchmark for the three-year period and that the current portfolio management team for the Fund began management in August 2012 and, since that time period, performance has ranked in the first quartile and has outperformed its benchmark. In light of the foregoing, the Committee focused, in particular, on the Fund’s recent performance, including the one-year and three-month periods ended December 31, 2013, and, with respect to the latter, noted that the FUSE report ranked the Fund in the first quartile (1st percentile).

•  
Investment Grade Bond Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 46th and 8th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, for the five-year and three-year periods and that the current portfolio manager began management in August 2012 and, since that time, performance has been in the 1st quartile. The Committee considered that the FUSE report listed the Fund’s performance for the one-year and three-month periods in the 1st percentile and 4th percentile, respectively.

•   Large Cap Value Fund: The returns of the Class A shares exceeded the median of the performance universe for the five-year period, but underperformed the median for the three-year and one-year periods and ranked in the 49th percentile, 79th percentile and 55th percentile for the five-, three- and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (18th percentile) for the year-to-date. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as part of its assessment of Fund performance and took into account the additional performance metrics provided by Guggenheim, including information that, as of December 31, 2013, the Fund ranked in the 25th percentile of its peer group since inception (July 1, 2005) based on gross returns.

•   Macro Opportunities Fund: The returns of the Fund’s Class A shares ranked in the 13th and 1st percentile of its performance universe for the one-year and three-month periods, respectively, and outperformed the performance universe median for each of these periods. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index, for the one-year and three-month periods ended December 31, 2013

•   Mid Cap Value Fund: The returns of the Class A shares underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 83rd, 67th and 79th percentile for the five-year, three-year and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (13th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as a part of its assessment of Fund performance and, in this regard, noted that the FUSE report listed the Fund’s performance for the ten-year period ended December 31, 2013 in the 1st quartile (11th percentile) and that, according to Guggenheim, the Fund outperformed its benchmark over the same period and since inception.

112 | THE GUGGENHEIM FUNDS ANNUAL REPORT

OTHER INFORMATION (Unaudited) (continued)    

•   Mid Cap Value Institutional: The Fund’s returns underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 69th, 80th and 83rd percentile for the five-year, three-year and one-year periods, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this connection, the Committee considered the presentation provided by the Fund’s portfolio management team at the April Meeting, as requested by the Committee. The Committee also took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap stocks.

•   Municipal Income Fund: The Committee considered that Security Investors does not directly manage the investment portfolio but has delegated such duties to GPIM. Based on the information provided and the review of the Fund’s investment performance, the Committee concluded that Security Investors had appropriately reviewed and monitored GPIM’s investment performance as Sub-Adviser to the Fund.

•   Small Cap Value Fund: The returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year and three-year periods, ranking in the 6th and 45th percentile, respectively. The Committee also considered information provided by Guggenheim stating that the Fund’s performance exceeded its benchmark, the Russell 2000 Value Index, for the five-year and three-year periods ended December 31, 2013. The Committee also noted supplemental information provided by the Fund’s portfolio management team indicating that since inception (August 1, 2008), the Fund has ranked in the 1st percentile of its peer group based on gross returns.

•   StylePlus—Large Core: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 78th and 93rd percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for the period from May 1, 2013 through December 31, 2013 was 16.86%, as compared to the 17.43% return of the Fund’s benchmark, the S&P 500 Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (25th percentile). Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date.

•   StylePlus—Mid Growth: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 70th and 78th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for period from May 1, 2013 through December 31, 2013 was 19.88%, as compared to the 19.97% return of the Fund’s benchmark, the Russell Mid Cap Growth Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 40th percentile. Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (22nd percentile) for the year-to-date.

•   Total Return Bond Fund: The returns of the Fund’s Class A shares ranked in the 1st quartile (the 3rd and 4th percentile, respectively) of its performance universe for the one-year and three-month periods, respectively. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, as well as the Fund’s peer group average, for the one-year and three-month periods ended December 31, 2013.

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OTHER INFORMATION (Unaudited) (continued)    

•   World Equity Income Fund: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 96th and 95th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team in August 2013. Thus, the Committee took into account that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (12th percentile) for the year-to-date and outperformed its benchmark, the MSCI World Index, over the same period.

After reviewing the foregoing and related factors, the Committee concluded, within the context of its overall conclusions regarding the Advisory Agreements, that: (i) each Fund’s performance was acceptable; or (ii) it was satisfied with Guggenheim’s responses and efforts relating to investment performance.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Investment Manager from its Relationship with the Funds: The Committee compared each Fund’s contractual advisory fee and total net expense ratio to the applicable peer group and compared each Fund’s total net expense ratio to its universe of funds for the various classes. The Committee also reviewed the median advisory fees and expense ratios, including expense ratio components (e.g., transfer agency fees, administration fees, other operating expenses, distribution fees and fee waivers/reimbursements) of the peer group of funds. In addition, the Committee considered each Fund’s advisory fee as compared to the advisory fee charged by the applicable Adviser to another fund with a similar investment objective and strategies, as applicable, noting that, in certain instances, the Adviser charges a lower advisory fee to other clients for which it provides comparable services. In this regard, the Committee considered Guggenheim’s explanation that lower fees are charged in certain instances due to numerous factors, including the scope of contract, types of investors, applicable regulation and legal structures, tax status, and for historical pricing reasons.

In further considering the comparative fee and expense data presented in the Contract Materials and addressed by Guggenheim, the Committee made the following observations:

•   Alpha Opportunity Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (39th percentile) and the asset weighted total net expense ratio is in the third quartile (72nd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Floating Rate Strategies Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (64th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (36th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   High Yield Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (41st percentile) and the asset weighted total net expense ratio is in the third quartile (63rd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Investment Grade Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is at the 51st percentile of its peer group and the asset weighted total net expense ratio is in the fourth quartile (88th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Large Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund and the asset weighted total net expense ratio are each below the peer group median (at the 30th and 19th percentile, respectively). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Macro Opportunities Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (89th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (65th percentile). The Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility. In this connection, the Committee noted that the Fund’s performance has been relatively strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Mid Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (85th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (72nd percentile). Although higher than median, the contractual advisory fee and the total net expense ratio for each class of shares was within a competitive range of the median of the peer group. For example, the Class A contractual advisory fee of 0.79% is 2 basis points above the peer group median and the total net expense ratio of 1.39% is 9 basis points above the peer group median.

114 | THE GUGGENHEIM FUNDS ANNUAL REPORT

OTHER INFORMATION (Unaudited) (continued)    

•   Mid Cap Value Institutional Fund: The contractual advisory fee percentile rank is in the first quartile (17th percentile) of its peer group and the total net expense ratio is in the third quartile (67th percentile) of its peer group.

•   Municipal Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (8th percentile) of its peer group and the asset weighted total net expense ratio is in the 55th percentile. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   Small Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (77th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (43rd percentile). The Committee also considered that the Fund’s long-term performance has been strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   StylePlus—Large Core: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (67th percentile) of its peer group and the asset weighted total net expense ratio is in the fourth quartile (92nd percentile). Although the total net expense ratio for each class is higher than its peer group median, the contractual advisory fee (0.75%), at four to five basis above the peer group median for each class, was deemed to be within a reasonable range

•   StylePlus—Mid Growth: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (23rd percentile) and the asset weighted total net expense ratio is in the fourth quartile (93rd percentile) of its peer group. The Committee noted Guggenheim’s statement that the Fund’s total net expense ratio is slightly higher but comparable to its peer group average.

•   Total Return Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (63rd percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (28th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

•   World Equity Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the peer group median (45th percentile) and the Fund’s asset weighted total net expense ratio is in the fourth quartile (88th percentile) of its peer group.

With respect to the costs of services provided and profits realized by Guggenheim from its relationship with the Funds, the Committee reviewed a profit and loss statement for each Fund setting forth the revenues received from gross advisory fees, the expenses incurred in providing services to the Funds, the pre-tax operating margin and profitability rate and each Fund’s average assets for the twelve months ended December 31, 2012 and December 31, 2013, and information with respect to Guggenheim’s allocation methodologies used in preparing the profitability data.

The Committee considered other benefits available to each Adviser because of its relationship with the Funds and noted that Security Investors and GPIM may be deemed to benefit from arrangements whereby an affiliate, Rydex Fund Services, LLC, receives fees for: (i) performing certain administrative functions and bookkeeping, accounting and pricing functions for the Funds pursuant to a Fund Accounting and Administration Agreement; and (ii) acting as transfer agent for the Funds and performing all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications, and acting as the dividend disbursing agent pursuant to a Transfer Agency Agreement. The Committee reviewed the compensation arrangements for the provision of the foregoing services. The Committee also noted Guggenheim’s statement that it may benefit from marketing synergies arising from offering a broad spectrum of products, including the Funds. Based on all of the information provided and its review, the Committee determined that Guggenheim’s profitability from its relationship with the Funds was not unreasonable.

Economies of Scale to be Realized: The Committee received and considered information regarding whether there have been economies of scale with respect to the management of the Funds as Fund assets grow, whether the Funds has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. In this connection, the Committee considered management’s view that Guggenheim continues to add system resources as required to develop its infrastructure in response to the growth in the firm’s assets and there is an opportunity to optimize economies of scale across the firm’s array of products and product lines. Therefore, although Guggenheim may be realizing economies of scale and efficiencies due to its growth, it is concurrently realizing new costs and expenses associated with investment in its infrastructure.

In addition, the Committee considered the size of the Funds and the competitiveness of and/or other determinations made regarding the current advisory fee for each Fund. The Committee also took into account Guggenheim’s statement that generally the Funds’ assets are not sufficiently large to warrant breakpoints,
    THE GUGGENHEIM FUNDS ANNUAL REPORT  |  115

OTHER INFORMATION (Unaudited) (continued)    

with only four Funds—Floating Rate Strategies Fund, Macro Opportunities Fund, Mid Cap Value Fund and Mid Cap Value Institutional Fund—having assets in excess of $500 million as of March 13, 2014. With respect to the four Funds noted, the Committee noted that none of the Funds had levels of profitability that were outliers and made the following observations:

•   Floating Rate Strategies Fund: The Adviser has entered into an expense limitation agreement with respect to the Fund. In addition, the Fund’s asset weighted total net expense ratio is below the peer group median (36th percentile).

•   Macro Opportunities Fund: The Fund is relatively new and the Adviser has entered into an expense limitation agreement with respect to the Fund. Although the contractual advisory fee is in the fourth quartile of its peer group, the total net expense ratio is competitive with the peer group median. In addition, as noted, the Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility.

•   Mid Cap Value Fund: The Fund’s contractual advisory fee is in line with the peer group median and the total net expense ratio is competitive with the peer group median.

•   Mid Cap Value Institutional Fund: The Fund’s contractual advisory fee ranks in the first quartile (17th percentile) of its peer group and the total net expense ratio is competitive with the peer group median.

The Committee determined that the advisory fee structure for the Funds was reasonable.

Sub-Advisory Agreement

Nature, Extent and Quality of Services Provided by the Sub-Adviser: With respect to the nature, extent and quality of services provided by GPIM (referred to in this discussion as the “Sub-Adviser”), the Committee considered the qualifications, experience and skills of the Sub-Adviser’s portfolio management and other key personnel and information from the Sub-Adviser describing the scope of its services to Municipal Income Fund. The Committee also considered the information provided by the Sub-Adviser concerning the Sub-Adviser’s investment practices and techniques, risk management processes, compliance policies and procedures, brokerage allocation, best execution and trade allocation, among other things. With respect to Guggenheim’s resources and the Sub-Adviser’s ability to carry out its responsibilities under the Sub-Advisory Agreement, the Committee recalled the review of certain unaudited financial information concerning GPIMH by the Chief Financial Officer of Guggenheim Investments.

The Committee also considered the acceptability of the terms of the Sub-Advisory Agreement. Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of the Sub-Adviser’s quality of performance of its duties through Board meetings, discussions and reports throughout the year, the Committee concluded that the Sub-Adviser and its personnel were qualified to serve Municipal Income Fund in such capacity and may reasonably be expected to continue to provide a high quality of services under the Sub-Advisory Agreement.

Investment Performance: The Committee considered that the returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year period and underperformed the median for the three-year period and ranked in the 1st percentile and 82nd percentile, respectively. The Committee took into account information provided by Guggenheim stating that the Fund’s performance for the periods ended December 31, 2013 outperformed the Fund’s benchmark, the Barclays Capital U.S. Municipal Long Bond Index, for the one-year and three-month periods, lagged the benchmark for the three-year period and outperformed the benchmark for the five-year period. In light of the foregoing, the Committee also noted that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (9th percentile). In addition, the Committee considered Guggenheim’s statement that the Fund was converted from a closed-end fund in January 2012 and since the conversion has outperformed its benchmark.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Sub-Adviser from its Relationship with the Fund: The Committee reviewed the level of sub-advisory fees payable to GPIM, noting that the fees would be paid by Security Investors and do not impact the fees paid by the Fund. The Committee also compared the sub-advisory fee paid by the Adviser to the Sub-Adviser to the fees charged by the Sub-Adviser to other clients including other registered investment companies.

Economies of Scale to be Realized: The Committee recognized that, because the Sub-Adviser’s fees would be paid by the Adviser and not the Fund, the analysis of economies of scale was more appropriate in the context of the Committee’s consideration of the applicable Advisory Agreement, which was separately considered. (See “Advisory Agreements – Economies of Scale to be Realized” above.)
116 | THE GUGGENHEIM FUNDS ANNUAL REPORT

OTHER INFORMATION (Unaudited) (concluded)    

Overall Conclusions

Based on the foregoing, the Committee determined that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other benefits received and that the continuation of the Agreements is in the best interests of each Fund. In reaching this conclusion, no single factor was determinative and each Committee member, in the exercise of his business judgment, may attribute different weights to different factors. At the May Meeting, the Committee, constituting all of the Independent Trustees, recommended the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 117

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)    

Name, Address*
and Year of Birth		   Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years		   Number of
Portfolios in
Fund Complex
Overseen		   Other Directorships
Held by Trustees
 
 
 
 
 
INDEPENDENT TRUSTEES
Randall C. Barnes
(1951)		    
Trustee		    
Since 2014		    
Current: Private Investor (2001-present).

Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990).		    
92		    
Current: Trustee, Purpose, Inc.
(2014-present).
Donald A. Chubb, Jr.
(1946)		   Trustee and Vice Chairman of the Board   Since 1994   Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc.(1997-present).   88   None.
Jerry B. Farley
(1946)		   Trustee and Vice Chairman of the Audit Committee   Since 2005   Current: President, Washburn University (1997-present).   88   Current: Westar Energy, Inc. (2004-present); Core First Bank & Trust (2000-present).
Roman Friedrich III
(1946)		   Trustee and Chairman of the Contracts Review Committee   Since 2014   Current: Founder and President, Roman Friedrich & Company (1998-present).   88   Current: Zincore Metals, Inc. (2009-present).
            Former: Senior Managing Director, MLV & Co. LLC (2010-2011).       Former: Mercator Minerals Ltd. (2013-2014); First. Americas Gold Corp.(2012-2014); Blue Sky Uranium Corp. (2011-2012); Axiom Gold and Silver Corp. (2011-2012); Stratagold Corp.(2003-2009); GFM Resources Ltd. (2005-2010).
Robert B. Karn III
(1942)		   Trustee and Chairman of the Audit Committee   Since 2014   Current: Consultant (1998-present).

Former: Arthur Andersen (1965-1997) and Managing Partner, Financial and Economic Consulting, St. Louis office (1987-1997).		   88   Current: Peabody Energy Company (2003-present); GP Natural Resource Partners, LLC (2002- present).
Ronald A. Nyberg
(1953)		   Trustee and Chairman of the Nominating and Governance Committee   Since 2014   Current: Partner, Nyberg & Cassioppi, LLC (2000-present).   94   Current: Edward-Elmhurst Healthcare System (2012-present).
            Former: Executive Vice President, Committee General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999).        
Maynard F. Oliverius
(1943)		   Trustee and Vice Chairman of the Contracts Review Committee   Since 1998   Retired.

Former: President and CEO, Stormont-Vail HealthCare (1996-2012).		   88   None.
Ronald E. Toupin, Jr.
(1958)		   Trustee and Chairman of the Board   Since 2014   Current: Portfolio Consultant (2010-present).   91   Former: Bennett Group of Funds (2011-2013).
            Former: Vice President, Manager and Portfolio Manager, Nuveen Asset Management (1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999);Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999).        
INTERESTED TRUSTEE                    
Donald C. Cacciapaglia***
(1951)		 President, Chief Executive Officer and Trustee   Since 2012   Current: President and CEO, certain other funds in the Fund Complex (2012-present); Vice Chairman, Guggenheim Investments (2010-present).

Former: Chairman and CEO, Channel Capital Group, Inc. (2002-2010).		   220   Current: Delaware Life (2013-present); Guggenheim Life and Annuity Company (2011-present); Paragon Life Insurance Company of Indiana (2011-present).
                     

*   The business address of each Trustee is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850
**   Each Trustee serves an indefinite term, until his successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.
***   This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager.

118 | THE GUGGENHEIM FUNDS ANNUAL REPORT

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)    

Name, Address*
and Year of Birth		     Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years
   
 
 
OFFICERS
Joseph M. Arruda
(1966)		      
Assistant Treasurer		    
Since 2010		    
Current: Assistant Treasurer, certain other funds in the Fund Complex (2006-present); Vice President, Security Investors, LLC (2010-present); CFO and Manager, Guggenheim Specialized Products, LLC (2009-present).

Former: Vice President, Security Global Investors, LLC (2010-2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010).
 
William H. Belden, III
(1965)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (2006-present); Managing Director, Guggenheim Funds Investment Advisors, LLC (2005-present).

Former: Vice President of Management, Northern Trust Global Investments (1999-2005).
 
Mark J. Furjanic
(1959)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2005-present); Assistant Treasurer, certain other funds in the Fund Complex (2008-present).

Former: Senior Manager, Ernst & Young LLP (1999-2005).
 
James Howley
(1972)		     Assistant Treasurer   Since 2014   Current: Director, Guggenheim Investments (2004-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2006-present).

Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004).
 
Amy J. Lee
(1961)		     Vice President and
Chief Legal Officer		   Since 1987
(Secretary) Since 2007
(Vice President)		   Current: Chief Legal Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).

Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012).
 
Mark E. Mathiasen
(1978)		     Secretary   Since 2014   Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
 
Michael P. Megaris
(1984)		     Assistant Secretary   Since 2014   Current: Assistant Secretary, certain other funds in the Fund Complex (April 2014-present); Associate, Guggenheim Investments (2012-present).

Former: J.D., University of Kansas School of Law (2009-2012).
 
Elisabeth Miller
(1968)		     Chief Compliance Officer   Since 2012   Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Vice President, Guggenheim Funds Distributors, LLC (March 2014-present).

Former: CCO, Guggenheim Distributors, LLC (2009-March 2014); Senior Manager, Security Investors, LLC (2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009).
 
Alison Santay
(1974)		     AML Officer   Since 2013   Current: AML Officer, certain other funds in the Fund Complex (2010-present); Director and AML Officer, Rydex Fund Services, LLC (2010-present); AML Officer, Security Investors, LLC (2010-present); Director, Shareholder Risk and Compliance, Rydex Fund Services, LLC (2004-present).

Former: AML Officer, Guggenheim Distributors, LLC (2013-March 2014).
 
Kimberly Scott
(1974)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2012-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2012-present).

Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009).
 
Bryan Stone
(1979)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (April 2014-present); Director, Guggenheim Investments (2013-present).

Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
 
John L. Sullivan
(1955)		     Chief Financial Officer and Treasurer   Since 2014   Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).

Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex (2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
               

*   The business address of each officer is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
**   Each officer serves an indefinite term, until his or her successor is duly elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation

    THE GUGGENHEIM FUNDS ANNUAL REPORT | 119

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)    

Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).

Our Commitment to You

When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.

The Information We Collect About You

In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).

How We Handle Your Personal Information

As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.

Opt Out Provisions

We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.

How We Protect Privacy Online

Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.

How We Safeguard Your Personal Information

We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
120 | THE GUGGENHEIM FUNDS ANNUAL REPORT

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded)    

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 | 121


 

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9.30.2014

Guggenheim Funds Annual Report

Fundamental Alpha
 
Guggenheim Mid Cap Value Fund
 

  SBMCV-ANN-0914x0915 guggenheiminvestments.com  

 
 

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This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.

Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604


TABLE OF CONTENTS    
 
     
DEAR SHAREHOLDER   2
     
ECONOMIC AND MARKET OVERVIEW   3
     
ABOUT SHAREHOLDERS’ FUND EXPENSES   4
     
MID CAP VALUE FUND   6
     
NOTES TO FINANCIAL STATEMENTS   15
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   21
     
OTHER INFORMATION   22
     
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS   33
     
GUGGENHEIM INVESTMENTS PRIVACY POLICIES   35

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  1

September 30, 2014
 

Dear Shareholder:

Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for the Mid Cap Value Fund (the “Fund”) for the year ended September 30, 2014.

The Investment Adviser is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.

Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds 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 the Fund.

We are committed to providing innovative investment solutions and appreciate the trust you place in us.

Sincerely,

Donald C. Cacciapaglia
President
October 31, 2014

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.

Mid Cap Value Fund may not be suitable for all investors. • An investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. • The intrinsic value of the underlying stocks may never be realized, or the stock may decline in value. • Investments in small to mid- sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies.

 
2  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

ECONOMIC AND MARKET OVERVIEW (Unaudited) September 30, 2014
 

Despite market volatility rising in October, for the year ended September 30, data on everything from hiring to housing conveys that the U.S. economy is firing on all cylinders. Overcoming a first-quarter weather-related soft patch, second-quarter GDP was revised upward to 4.6%, led by business investment. Durable goods orders surged over the summer and consumer confidence was at multi-year highs, despite a lower reading for the last part of the period. With tailwinds for economic growth gathering, we could see a strong third quarter GDP reading.

September’s addition of 248,000 non-farm payroll jobs was, on the surface, at least a strong figure and certainly not something to be discounted. However, investor optimism about the report, which also showed the unemployment rate falling to 5.9%—its lowest level since 2008—masked the fact that average hourly earnings were unchanged. Economic data late in the period included disappointing factory orders, poor construction spending, and weaker-than-expected ISM manufacturing data. The most recent decline in the U.S. Conference Board Consumer Confidence Index was worrisome.

The U.S. economy is certainly doing well enough to suggest higher interest rates ahead. With quantitative easing ending in the U.S. in October 2014 and the Fed preparing investors for a higher federal funds rate, the stage is set for U.S. interest rates to move higher. However, our view is that, despite a strengthening U.S. economy, the greater risk is that interest rates head lower in the near term.

Following the “taper tantrum” last year, before rates were able to reach historical norms, the average rate on a 30-year mortgage spiked almost a full percentage point in two months—the sharpest rise since the late 1990s—resulting in an abrupt housing slowdown, which slowed the U.S. economy materially.

In addition, U.S. Treasury yields are still materially higher than those in any other developed market. The spread between 10-year U.S. Treasuries and comparable German bunds reached 157 basis points in September, its widest level since 1999, and the spread between 10-year Treasuries and 10-year Japanese government bonds was recently 189 basis points. With developments in the Middle East increasingly troubling and turbulence continuing elsewhere from Ukraine to Hong Kong, the relative price value of U.S. government bonds versus other safe haven investments should continue to be a factor keeping U.S. interest rates low.

International economic data remain weak. Euro zone economic confidence is falling as the entire region continues to battle below-target inflation. At the start of September, the European Central Bank cut interest rates and signaled their intent to launch a program to purchase asset-backed securities and covered bonds to stimulate the dismal economy. In Japan, retail sales fell month-over-month in August, while industrial production falters.

Economic data around the world confirms our view that central banks are likely to renew efforts to force liquidity into the global financial system, which in turn further supports our positive outlook for risk assets. However, positive returns are unlikely without volatility. While markets continue to rally, gains are becoming more grudging. The upward momentum in U.S. stocks has deteriorated meaningfully while credit spreads, specifically high-yield spreads, have widened significantly over the past number of weeks. While the bull market trend remains intact, as the appreciation in risk assets continues it becomes more likely that this ageing advance will, at some point, experience a correction.

For the year ended September 30, 2014, the return of the Standard & Poor’s 500® Index* (“S&P 500”) was 19.73%. The Barclays U.S. Aggregate Bond Index* returned 3.96% for the year, while the Barclays U.S. Corporate High Yield Index* returned 7.20%. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* returned 0.05%. The MSCI World Index* returned 12.22%, while the MSCI Emerging Markets Index* returned 4.30%.

The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.

*Index Definitions:

The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.

BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.

Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Barclays U.S. Corporate High Yield Index covers the universe of dollar denominated, fixed rate, non-investment grade debt, taxable corporate debt.

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 World Index (Net) is calculated with net dividends reinvested. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

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.

S&P 500® Index is a market-weighted stock market index comprised of the stocks of 500 U.S. corporations; the index is owned and maintained by Standard & Poor’s.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  3

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 March 31, 2014 and ending September 30, 2014.

The following tables illustrate a Fund’s costs in two ways:

Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”

Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.

 
4  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)  
 

                    Beginning     Ending     Expenses  
    Expense   Fund   Account Value     Account Value     Paid During  
    Ratio1   Return   March 31, 2014     September 30, 2014     Period2  
 
Table 1. Based on actual Fund return3                                        
Mid Cap Value Fund                                        

A-Class

     1.39 %     (4.53 %)     $1,000.00       $954.70       $ 6.81  

B-Class

     2.25 %     (4.93 %)     1,000.00       950.70       11.00  

C-Class

     2.13 %     (4.89 %)     1,000.00       951.10       10.42  
 
Table 2. Based on hypothetical 5% return (before expenses)                                        
Mid Cap Value Fund                                        

A-Class

     1.39 %     5.00 %     $1,000.00       $1,018.10       $ 7.03  

B-Class

     2.25 %     5.00 %     1,000.00       1,013.79       11.36  

C-Class

     2.13 %     5.00 %     1,000.00       1,014.39       10.76  

1  Annualized and excludes expenses of the underlying funds in which the Fund invests.
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 183/365 (to reflect the one-half year period).
3 Actual cumulative return at net asset value for the period March 31, 2014 to September 30, 2014.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  5

MANAGER’S COMMENTARY (Unaudited)  
 

To Our Shareholder:

Guggenheim Mid Cap Value Fund (the “Fund”) is managed by a team of seasoned professionals led by James Schier, CFA, Portfolio Manager. In the following paragraphs, he discusses performance of the Fund for the fiscal year ended September 30, 2014.

For the year ended September 30, 2014, the Guggenheim Mid Cap Value Fund returned 5.52%1, compared with the 9.98% return of its benchmark, the Russell 2500 Value Index.

Strategy and Market Overview

Our investment approach focuses on understanding how companies make money and how easily they can improve returns, maintain existing high levels of profitability or benefit from change that occurs within the industries in which they operate. In today’s rapid-fire environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline is a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.

Performance Review

Stock selection in Energy sector was the leading contributor to performance. Even though the Fund has an overweighting in the Energy sector, the overweight detracted from return, since the sector provided the least performance in the benchmark amid a general commodities selloff.

Within the Energy sector, Whiting Petroleum Corp. was a leading individual contributor for the year. The company has exposure to two of the most productive shale fields in the U.S. and announced during the period that it would acquire Kodiak Oil and Gas Corp. It benefited from solid execution and favorable industry dynamics. Over the past several quarters, the Fund has also been slowly shifting its energy focus from almost exclusively exploration and production (E&P) shale players to more of a balance between E&P companies and service companies. The land grab for shale properties has matured, and the subsequent development of those fields should increase business for services firms.

Stock selection in the Information Technology sector was the second most important contributor to Fund return. One tech holding, Computer Sciences Corp., was the leading individual contributing stock for the year. It’s in the technology services and outsourcing business and made solid progress in repositioning for growth and improved execution. Another contributor for the year, RF Micro Devices, Inc., remains responsive to the substantial operating leverage and synergy from its merger with TriQuint Semiconductor, Inc. in the period.

Hurting Fund performance for the year was stock selection in Financials, Materials and Industrials.

A leading individual detractor in the Financials sector was Ocwen Financial Corp., a mortgage servicing company. It was down as a result of a delay in a proposed purchase of a large servicing portfolio and an investigation of the company’s servicing practices and intercompany relationships by the New York Director of Financial Services.

Stock selection within the Materials sector was also unfavorable. The position hurting most was Coeur Mining, Inc., which has suffered due to the weak pricing environment for precious metals and the general selloff in commodities. We continue to hold on to this name because we see it as a good diversifier with attractive assets and potential buoyancy coming from slowing global growth and economic uncertainty.

Stock selection in Industrials was another detractor. We have a significant overweight to the Industrials sector, and one holding was a large booster to performance: Quanta Services, Inc., in the engineering and construction sector. We like the prospects of this company as the U.S. faces the need to upgrade infrastructure.

 
6  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

MANAGER’S COMMENTARY (Unaudited) (concluded)  
 

Portfolio Positioning

The largest relative sector exposures for the year were an underweight in Financials and Utilities and an overweight in Industrials.

Within Financials, REITs (real estate investment trusts) continue to perform well, and the strategy’s underweighting in this industry has been a difficult bias to overcome. Over the period, the Fund also reduced its exposure to the reinsurance market, which has been under pressure as participants outside the industry have entered to provide capital in the search for yield.

The portfolio’s underweight to Utilities was a positive contributor during the period. We have been overweight this sector in the past, but currently view valuations as unattractive. Within the sector, we like companies that have meaningful exposure to non-regulated businesses, such as MDU Resources Group, Inc., and Black Hills Corp.

The overweight to Industrials detracted from performance over the year. This is a large and eclectic sector in which we have diverse holdings. We believe the portfolio is well positioned to benefit from the growing cap-ex and construction environment tied to infrastructure renewal and reindustrialization in the U.S.

Portfolio and Market Outlook

For the most part, the market behaved in a very defensive manner over the past year. The best performing areas have been larger companies, REITs and utilities. Of late, the strengthening of the dollar, primarily from concerns about global (non-U.S.) growth, has only added to the hesitancy of the market. Even if the global economy were to prove disappointing, the low returns offered by insignificant fixed income investment opportunities (the 10-year U.S. government bond yields around 2.5%) should continue to make equities an attractive alternative for incremental investment dollars.

Our portfolios tend to reflect a bias toward companies with balance sheet quality. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.

Performance displayed represents past performance which is no guarantee of future results.

1 Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares.

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  |  7

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

MID CAP VALUE FUND

OBJECTIVE:    Seeks long-term growth of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*

Inception Dates:
 
A-Class   May 1, 1997
B-Class   May 1, 1997
C-Class   January 29, 1999

Ten Largest Holdings (% of Total Net Assets)
 
Hanover Insurance Group, Inc.   4.2 %
Computer Sciences Corp.   2.7 %
Covanta Holding Corp.   2.6 %
Bunge Ltd.   2.1 %
Cameco Corp.   2.0 %
Reinsurance Group of America, Inc. — Class A   2.0 %
Owens-Illinois, Inc.   1.9 %
Orbital Sciences Corp.   1.9 %
Superior Energy Services, Inc.   1.8 %
Northern Trust Corp.   1.8 %
 
Top Ten Total   23.0 %
 

"Ten Largest Holdings" exclude any temporary cash or derivative investments.

Average Annual Returns*
Periods Ended September 30, 2014

    1 Year   5 Year   10 Year
A-Class Shares   5.52 %   11.59 %   10.04 %
 
A-Class Shares with sales charge†   0.52 %   10.27 %   9.39 %
 
B-Class Shares   4.62 %   10.69 %   9.37 %
 
B-Class Shares with CDSC‡   –0.21 %   10.42 %   9.37 %
 
C-Class Shares   4.74 %   10.76 %   9.23 %
 
C-Class Shares with CDSCƒ   3.77 %   10.76 %   9.23 %
 
Russell 2500 Value Index   9.88 %   15.16 %   8.65 %
 

     
*   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.
†   Effective February 22, 2011, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the 5 Year and 10 Year average annual returns (based on subscriptions made prior to February 22, 2011), and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after February 22, 2011.
‡   Fund returns include a CDSC of up to 5% if redeemed within 5 years of purchase.
ƒ   Fund returns include a CDSC of 1% if redeemed within 12 months of purchase.
     

 
8  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

SCHEDULE OF INVESTMENTS   September 30, 2014
 
MID CAP VALUE FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 97.6%              
               
FINANCIAL - 25.9%              

Hanover Insurance Group, Inc.

     844,640   $ 51,877,788  

Reinsurance Group of America, Inc. — Class A

     308,354     24,708,406  

Northern Trust Corp.

     316,120     21,505,644  

American Financial Group, Inc.

     334,910     19,387,940  

WR Berkley Corp.

     292,410     13,977,198  

Endurance Specialty Holdings Ltd.

     244,580     13,495,924  

Alexandria Real Estate Equities, Inc.

     160,060     11,804,425  

BioMed Realty Trust, Inc.

     574,910     11,613,182  

Starwood Property Trust, Inc.

     528,750     11,611,350  

SVB Financial Group*

     94,420     10,583,538  

Popular, Inc.*

     347,330     10,223,659  

Wintrust Financial Corp.

     211,420     9,444,132  

FirstMerit Corp.

     513,402     9,035,875  

Home Loan Servicing Solutions Ltd.

     423,227     8,968,180  

First Niagara Financial Group, Inc.

     1,064,300     8,865,619  

City National Corp.

     111,290     8,421,314  

Zions Bancorporation

     288,250     8,376,545  

Huntington Bancshares, Inc.

     709,170     6,900,224  

First Midwest Bancorp, Inc.

     412,938     6,644,172  

Employers Holdings, Inc.

     338,460     6,515,355  

Symetra Financial Corp.

     268,120     6,255,240  

Eaton Vance Corp.

     164,040     6,189,229  

Hancock Holding Co.

     191,520     6,138,216  

Redwood Trust, Inc.

     263,753     4,373,025  

Lexington Realty Trust

     400,285     3,918,790  

Ocwen Financial Corp.*

     140,593     3,680,725  

Blackhawk Network Holdings, Inc.*

     111,760     3,621,024  

Radian Group, Inc.

     216,360     3,085,294  

Argo Group International Holdings Ltd.

     60,480     3,042,749  

StanCorp Financial Group, Inc.

     47,712     3,014,444  
             
Total Financial           317,279,206  
             
               
INDUSTRIAL - 15.8%              

Covanta Holding Corp.

     1,509,980     32,041,776  

Owens-Illinois, Inc.*

     900,950     23,469,748  

Orbital Sciences Corp.*

     837,900     23,293,620  

Sonoco Products Co.

     538,350     21,151,772  

URS Corp.

     270,940     15,608,853  

Aegion Corp. — Class A*

     575,501     12,804,897  

FLIR Systems, Inc.

     390,380     12,234,509  

Rock-Tenn Co. — Class A

     250,980     11,941,628  

Gentex Corp.

     371,110     9,934,615  

Berry Plastics Group, Inc.*

     381,500     9,629,060  

Huntington Ingalls Industries, Inc.

     60,210     6,274,484  

General Cable Corp.

     350,026     5,278,392  

ArcBest Corp.

     89,310     3,331,263  

UTI Worldwide, Inc.*

     149,757     1,591,917  

Advanced Energy Industries, Inc.*

     68,150     1,280,539  

II-VI, Inc.*

     100,290     1,180,413  

Sanmina Corp.*

     53,890     1,124,145  

AZZ, Inc.

     18,604     777,089  

Thermoenergy Corp.*

     1,028,200     5,141  
             
Total Industrial           192,953,861  
             
               
CONSUMER, NON-CYCLICAL - 15.1%              

Bunge Ltd.

     298,650     25,155,289  

Quanta Services, Inc.*

     538,930     19,557,770  

Hormel Foods Corp.

     374,660     19,253,777  

Navigant Consulting, Inc.*

     1,247,302     17,349,970  

DeVry Education Group, Inc.

     394,150     16,873,562  

MEDNAX, Inc.*

     268,542     14,721,472  

Kindred Healthcare, Inc.

     728,516     14,133,210  

Hologic, Inc.*

     577,511     14,050,843  

ICF International, Inc.*

     358,960     11,052,378  

Ingredion, Inc.

     144,250     10,932,708  

Towers Watson & Co. — Class A

     59,231     5,893,485  

Emergent Biosolutions, Inc.*

     200,500     4,272,655  

Universal Health Services, Inc. — Class B

     39,990     4,178,955  

Globus Medical, Inc. — Class A*

     167,450     3,293,742  

Grand Canyon Education, Inc.*

     76,620     3,123,797  

Alere, Inc.*

     36,710     1,423,614  
             
Total Consumer, Non-cyclical           185,267,227  
             
               
TECHNOLOGY - 9.5%              

Computer Sciences Corp.

     542,900     33,198,334  

IXYS Corp.1

     2,012,549     21,131,764  

Maxwell Technologies, Inc.*,1

     1,704,971     14,867,347  

Allscripts Healthcare Solutions, Inc.*

     647,050     8,680,176  

Teradyne, Inc.

     343,010     6,650,964  

KEYW Holding Corp.*

     588,630     6,516,134  

Take-Two Interactive Software, Inc.*

     279,550     6,449,219  

Diebold, Inc.

     172,230     6,083,164  

Semtech Corp.*

     132,850     3,606,877  

IPG Photonics Corp.*

     47,660     3,278,055  

iGATE Corp.*

     87,590     3,216,305  

ManTech International Corp. — Class A

     109,510     2,951,295  
             
Total Technology           116,629,634  
             
               
UTILITIES - 7.5%              

Pinnacle West Capital Corp.

     343,330     18,759,551  

AGL Resources, Inc.

     364,800     18,728,832  

UGI Corp.

     506,757     17,275,346  

Westar Energy, Inc.

     358,570     12,234,408  

Great Plains Energy, Inc.

     406,127     9,816,090  

Black Hills Corp.

     189,080     9,053,150  

Avista Corp.

     101,490     3,098,490  

MDU Resources Group, Inc.

     99,028     2,753,969  
             
Total Utilities           91,719,836  
             
               
CONSUMER, CYCLICAL - 7.4%              

Brown Shoe Company, Inc.

     771,195     20,922,521  

Chico’s FAS, Inc.

     819,150     12,098,846  

Oshkosh Corp.

     248,060     10,951,849  

DR Horton, Inc.

     454,560     9,327,571  

Foot Locker, Inc.

     122,340     6,808,221  

Wendy’s Co.

     785,690     6,489,799  

Ryland Group, Inc.

     170,730     5,675,065  

United Stationers, Inc.

     150,582     5,657,366  

Ascena Retail Group, Inc.*

     375,270     4,991,091  

Visteon Corp.*

     43,680     4,247,880  

WESCO International, Inc.*

     43,447     3,400,162  
             
Total Consumer, Cyclical           90,570,371  
             

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  9

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 
MID CAP VALUE FUND    

      SHARES     VALUE  
 
               
ENERGY - 7.1%              

Superior Energy Services, Inc.

     681,730   $ 22,408,465  

Whiting Petroleum Corp.*

     220,792     17,122,420  

Oasis Petroleum, Inc.*

     318,610     13,321,084  

Patterson-UTI Energy, Inc.

     338,800     11,021,164  

Resolute Energy Corp.*

     1,507,360     9,451,147  

Sanchez Energy Corp.*

     334,524     8,784,600  

Denbury Resources, Inc.

     283,430     4,259,953  
             
Total Energy           86,368,833  
             
               
BASIC MATERIALS - 5.3%              

Cameco Corp.

     1,415,860     25,004,088  

Landec Corp.*

     946,613     11,596,009  

Royal Gold, Inc.

     163,668     10,628,600  

Olin Corp.

     341,109     8,613,002  

Coeur Mining, Inc.*

     1,084,798     5,380,598  

Allied Nevada Gold Corp.*

     899,730     2,978,106  
             
Total Basic Materials           64,200,403  
             
               
COMMUNICATIONS - 4.0%              

DigitalGlobe, Inc.*

     703,367     20,045,960  

Scholastic Corp.

     353,560     11,427,059  

Finisar Corp.*

     625,910     10,408,883  

Liquidity Services, Inc.*

     503,210     6,919,138  
             
Total Communications           48,801,040  
             
Total Common Stocks              

(Cost $1,004,003,926)

           1,193,790,411  
             
               
CONVERTIBLE PREFERRED STOCKS††† - 0.0%              

Thermoenergy Corp. *,2,3

     858,334     12,532  
             
Total Convertible Preferred Stocks              

(Cost $819,654)

           12,532  
             
               
SHORT TERM INVESTMENTS† - 2.9%              

Dreyfus Treasury Prime

              

Cash Management Fund

     35,546,192     35,546,192  
             
Total Short Term Investments              

(Cost $35,546,192)

           35,546,192  
             

      FACE        
      AMOUNT        
             
               
CONVERTIBLE BONDS†† - 0.1%              
INDUSTRIAL - 0.1%              

DryShips, Inc.

              

5.00% due 12/01/14

   $ 1,275,000     1,260,656  
             
Total Convertible Bonds              

(Cost $1,247,778)

           1,260,656  
             
Total Investments - 100.6%              

(Cost $1,041,617,550)

         $ 1,230,609,791  
             
Other Assets & Liabilities, net - (0.6)%           (7,605,061 )
             
Total Net Assets - 100.0%         $ 1,223,004,730  

*   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   Affiliated issuer— See Note 9.
2   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.
3   Illiquid security.

 
10  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

  MID CAP VALUE FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014

ASSETS:      
Investments in unaffiliated issuers, at value      

(cost $1,005,028,701)

 $ 1,194,610,680  
Investments in affiliated issuers, at value      

(cost $36,588,849)

   35,999,111  
     
Total investments      

(cost $1,041,617,550)

   1,230,609,791  
Cash   13,507  
Prepaid expenses   41,842  
Receivables:      

Securities sold

   4,246,393  

Dividends

   2,034,992  

Fund shares sold

   736,575  

Interest

   21,236  

Foreign taxes reclaim

   13,049  
     
Total assets   1,237,717,385  
     
LIABILITIES:      
Payable for:      

Securities purchased

   10,708,056  

Fund shares redeemed

   2,054,674  

Management fees

   823,071  

Distribution and service fees

   393,792  

Transfer agent/maintenance fees

   108,869  

Fund accounting/administration fees

   99,049  

Trustees’ fees*

   6,174  

Miscellaneous

   518,970  
     
Total liabilities   14,712,655  
     
NET ASSETS $ 1,223,004,730  
     
NET ASSETS CONSIST OF:      
Paid in capital $ 893,628,626  
Accumulated net investment loss   (926,867 )
Accumulated net realized gain on investments   141,310,730  
Net unrealized appreciation on investments   188,992,241  
     
Net assets $ 1,223,004,730  
     
A-CLASS:      
Net assets $ 1,017,208,014  
Capital shares outstanding   26,960,100  
Net asset value per share   $37.73  
     
Maximum offering price per share      

(Net asset value divided by 95.25%)

   $39.61  
     
B-CLASS:      
Net assets $ 12,854,226  
Capital shares outstanding   430,373  
Net asset value per share   $29.87  
     
C-CLASS:      
Net assets $ 192,942,490  
Capital shares outstanding   6,196,072  
Net asset value per share   $31.14  
     

STATEMENT OF OPERATIONS
 
Year Ended September 30, 2014

INVESTMENT INCOME:        
Dividends from securities of unaffiliated issuers        

(net of foreign withholding tax of $81,956)

   $ 17,845,835  
Interest     978,566  
Dividends from securities of affiliated issuers     255,282  
       

Total investment income

     19,079,683  
       
EXPENSES:        
Management fees     10,232,505  
Transfer agent/maintenance fees        

A-Class

     1,776,839  

B-Class

     44,724  

C-Class

     312,354  
Distribution and service fees:        

A-Class

     2,661,929  

B-Class

     171,523  

C-Class

     2,157,437  
Fund accounting/administration fees     1,232,767  
Trustees’ fees*     121,062  
Custodian fees     19,845  
Tax expense     32  
Miscellaneous     1,023,659  
       

Total expenses

     19,754,676  
       
Net investment income     (674,993 )
       
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments in unaffiliated issuers

     181,395,564  

Investments in affiliated issuers

     656,350  

Options written

     997,471  
       
Net realized gain     183,049,385  
       
Net change in unrealized appreciation (depreciation) on:        
Investments in unaffiliated issuers     (113,588,750 )
Investments in affiliated issuers     1,015,934  
Options written     (84,247 )
       
Net change in unrealized appreciation (depreciation)     (112,657,063 )
       
Net realized and unrealized gain     70,392,322  
       
Net increase in net assets        

resulting from operations

   $ 69,717,329  
       
         

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  11

  MID CAP VALUE FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
    Year Ended       Year Ended  
  September 30,     September 30,  
    2014       2013  
               
 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:              
Net investment income (loss) $ (674,993 )   $ (331,094 )
Net realized gain on investments   183,049,385       97,541,779  
Net change in unrealized appreciation (depreciation) on investments   (112,657,063 )     197,430,576  
 
Net increase in net assets resulting from operations   69,717,329       294,641,261  
 
               
DISTRIBUTIONS TO SHAREHOLDERS FROM:              
Net realized gains              

A-Class

   (66,154,623 )     (92,674,750 )

B-Class

   (1,531,403 )     (2,844,203 )

C-Class

   (16,551,729 )     (22,741,115 )
 
Total distributions to shareholders   (84,237,755 )     (118,260,068 )
 
CAPITAL SHARE TRANSACTIONS:              
Proceeds from sale of shares              

A-Class

   212,574,766       196,756,789  

B-Class

   89,153       437,407  

C-Class

   26,075,051       29,825,646  
Distributions reinvested              

A-Class

   60,093,834       83,496,316  

B-Class

   1,462,878       2,720,726  

C-Class

   12,947,243       16,692,864  
Cost of shares redeemed              

A-Class

   (285,246,325 )     (292,306,316 )

B-Class

   (8,904,634 )     (8,971,838 )

C-Class

   (60,608,402 )     (44,208,482 )
 
Net decrease from capital share transactions   (41,516,436 )     (15,556,888 )
 
Net increase (decrease) in net assets   (56,036,862 )     160,824,305  
               
NET ASSETS:              

Beginning of year

   1,279,041,592       1,118,217,287  
 

End of year

 $ 1,223,004,730     $ 1,279,041,592  
 
Accumulated net investment loss at end of year $ (926,867 )   $ (752,180 )
 
               
CAPITAL SHARE ACTIVITY:              
Shares sold              

A-Class

   5,437,655       5,636,342  

B-Class

   2,867       15,688  

C-Class

   808,772       1,023,309  
Shares issued from reinvestment of distributions              

A-Class

   1,617,164       2,764,774  

B-Class

   49,371       110,419  

C-Class

   419,548       652,575  
Shares redeemed              

A-Class

   (7,320,216 )     (8,501,344 )

B-Class

   (286,983 )     (319,547 )

C-Class

   (1,870,843 )     (1,532,165 )
 
Net decrease in shares   (1,142,665 )     (149,949 )
 

 
12  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

  MID CAP VALUE FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
A-Class   2014     2013     2012     2011     2010  
 
Per Share Data                              
Net asset value, beginning of period   $38.15     $33.05     $27.13     $29.55     $26.58  
 
Income (loss) from investment operations:                              
Net investment income (loss)a   .03     .04     (.07 )   (.03 )   .11  
Net gain (loss) on investments (realized and unrealized)   2.04     8.59     6.54     (2.31 )   2.90  
     
Total from investment operations   2.07     8.63     6.47     (2.34 )   3.01  
 
Less distributions from:                              
Net investment income   —     —     —     (.08 )   (.04 )
Net realized gains   (2.49 )   (3.53 )   (.55 )   —     —  
     
Total distributions   (2.49 )   (3.53 )   (.55 )   (.08 )   (.04 )
 
Net asset value, end of period   $37.73     $38.15     $33.05     $27.13     $29.55  
     
 
Total Returnb   5.52 %   28.93 %   24.13 %   (7.98 %)   11.32 %
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)   $1,017,208     $1,038,762     $903,221     $973,467     $1,056,655  
 
Ratios to average net assets:                              
Net investment income (loss)   0.08 %   0.11 %   (0.22 %)   (0.10 %)   0.38 %
Total expensesc   1.39 %   1.39 %   1.46 %   1.32 %   1.37 %
 
Portfolio turnover rate   35 %   23 %   19 %   28 %   23 %
                               
    Year Ended     Year Ended     Year Ended     Year Ended     Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
B-Class   2014     2013     2012     2011     2010  
 
Per Share Data                              
Net asset value, beginning of period   $30.95     $27.66     $22.99     $25.17     $22.78  
 
Income (loss) from investment operations:                              
Net investment income (loss)a   (.25 )   (.19 )   (.29 )   (.24 )   (.09 )
Net gain (loss) on investments (realized and unrealized)   1.66     7.01     5.51     (1.94 )   2.48  
     
Total from investment operations   1.41     6.82     5.22     (2.18 )   2.39  
 
Less distributions from:                              
Net realized gains   (2.49 )   (3.53 )   (.55 )   —     —  
     
Total distributions   (2.49 )   (3.53 )   (.55 )   —     —  
 
Net asset value, end of period   $29.87     $30.95     $27.66     $22.99     $25.17  
     
 
Total Returnb   4.62 %   27.93 %   23.02 %   (8.66 %)   10.49 %
 
Ratios/Supplemental Data                              
Net assets, end of period (in thousands)   $12,854     $20,584     $23,747     $27,960     $42,321  
 
Ratios to average net assets:                              
Net investment income (loss)   (0.80 %)   (0.67 %)   (1.09 %)   (0.86 %)   (0.40 %)
Total expensesc   2.23 %   2.16 %   2.33 %   2.07 %   2.12 %
 
Portfolio turnover rate   35 %   23 %   19 %   28 %   23 %

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  13


  MID CAP VALUE FUND

FINANCIAL HIGHLIGHTS (concluded)
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

      Year Ended       Year Ended       Year Ended       Year Ended       Year Ended  
    September 30,     September 30,     September 30,     September 30,     September 30,  
C-Class     2014       2013       2012       2011       2010  
 
Per Share Data                                        
Net asset value, beginning of period     $32.13       $28.57       $23.68       $25.93       $23.47  
 
Income (loss) from investment operations:                                        
Net investment income (loss)a     (.21 )     (.18 )     (.25 )     (.24 )     (.09 )
Net gain (loss) on investments (realized and unrealized)     1.71       7.27       5.69       (2.01 )     2.55  
     
Total from investment operations     1.50       7.09       5.44       (2.25 )     2.46  
 
Less distributions from:                                        
Net realized gains     (2.49 )     (3.53 )     (.55 )     —       —  
     
Total distributions     (2.49 )     (3.53 )     (.55 )     —       —  
 
Net asset value, end of period     $31.14       $32.13       $28.57       $23.68       $25.93  
     
 
Total Returnb     4.74 %     27.98 %     23.28 %     (8.68 %)     10.48 %
 
Ratios/Supplemental Data                                        
Net assets, end of period (in thousands)     $192,942       $219,695       $191,249       $188,745       $193,986  
 
Ratios to average net assets:                                        
Net investment income (loss)     (0.65 %)     (0.62 %)     (0.92 %)     (0.85 %)     (0.37 %)
Total expensesc     2.12 %     2.12 %     2.17 %     2.07 %     2.12 %
 
Portfolio turnover rate     35 %     23 %     19 %     28 %     23 %

a
Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b Total return does not reflect the impact of any applicable sales charges.
c Does not include expenses of the underlying funds in which the Fund invests.

 
14  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

NOTES TO FINANCIAL STATEMENTS
 

1. Organization, and Significant Accounting Policies Organization

Guggenheim Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.

The Trust offers a combination of four separate classes of shares, A-Class shares, B-Class shares, C-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. Prior to February 22, 2011, the maximum sales charge was 5.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”), if shares are redeemed within 12 months of purchase. B-Class shares were offered without a front-end sales charge, but were subject to a CDSC of up to 5% for five years and convert to A-Class shares after eight years. Effective January 4, 2010, subscriptions for B-Class shares are no longer accepted. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a CDSC. At September 30, 2014, the Trust consisted of eighteen Funds.

This report covers the Mid Cap Value Fund (the “Fund”) while the other funds are in separate reports. Only A-Class, B-Class and C-Class shares had been issued by the Fund.

The Fund was previously a series (the “Predecessor Fund”) of Security Equity Fund, a different registered open-end investment company, which was organized as a Kansas corporation. In January 2014, at a special meeting of shareholders, the shareholders of the Predecessor Fund approved the reorganization of the Predecessor Fund with and into the Fund, a corresponding “shell” series of the Trust. The Fund succeeded to the accounting and performance history of the Predecessor Fund. Any such historical information provided for the Fund that relates to periods prior to January 28, 2014, therefore, is that of the Predecessor Fund.

Guggenheim Investments (“GI”) provides advisory services, and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.

Significant Accounting Policies
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.

The NAV of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.

A. The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-today responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Fund’s securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Fund’s officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.

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 a given day, the security is valued at the closing bid price on that day.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  15

NOTES TO FINANCIAL STATEMENTS (continued)
 

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 are valued at amortized cost, which approximates market value.

Open-end investment companies (“Mutual Funds”) are valued at their NAV as of the close of business, on the valuation date.

Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value.” Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).

B. The Fund 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 Fund 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 Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities before the settlement date.

C. Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.

When the Fund writes (sells) an option, an amount equal to the premium received is entered in that 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 a written option expires, or if the 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).

D. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from REITs is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.

E. Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.

F. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.

G. Under the fee arrangement with the custodian, the Fund 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 September 30, 2014, there were no earnings credits received.

 
16  |  THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

The Fund may leave cash overnight in its cash account with the custodian. Periodically, the Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate.

H. Under the Fund’s organizational documents, its Trustees and Officers 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 Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

2. Financial Instruments

As part of its investment strategy, the Fund utilizes derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statement of Assets and Liabilities.

An option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security (put option) or the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security (call option) at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid. The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a 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 may be an imperfect correlation between the movement in prices of options and the underlying securities and 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 derivative instruments, the Fund is required to maintain collateral in various forms. The Fund uses, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to the Fund.

The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.

3. Fees and Other Transactions with Affiliates

Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at 1.00% of the average daily net assets of $200 million or less and 0.75% of the average daily net assets of the Fund in excess of $200 million.

RFS provides transfer agent services to the Fund for fees calculated at the rates below, which are assessed to the applicable class of the Fund. For these services, RFS receives the following:

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

RFS also acts as the administrative agent for the Fund, and as such performs administrative functions and the bookkeeping, accounting and pricing functions for the Fund. For these services, RFS receives 0.095% of the average daily net assets of the Fund. The minimum annual charge for fund accounting/administrative fees is $25,000.

RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.

The Fund has adopted Distribution Plans related to the offering of A-Class, B-Class and C-Class shares pursuant to Rule 12b-1 under the 1940 Act. The plans provide for payments at an annual rate of 0.25% of the average daily net assets of the Fund’s A-Class shares and 1.00% of the average daily net assets of the Fund’s B-Class and C-Class shares.

For the year ended September 30, 2014, GFD retained sales charges of $121,109 relating to sales of A-Class shares of the Trust.

Certain trustees and officers of the Trust are also officers of GI, RFS and GFD.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  17


NOTES TO FINANCIAL STATEMENTS (continued)
 

4. Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

The following table summarizes the inputs used to value the Fund’s net assets at September 30, 2014:

    Level 1     Level 2   Level 3    
    Investments     Investments   Investments    
    In Securities     In Securities   In Securities   Total
 
Assets                  
Mid Cap Value Fund   $1,229,336,603     $1,260,656   $12,532   $1,230,609,791

For the year ended September 30, 2014, there were no transfers between levels.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

5. Derivative Investment Holdings Categorized by Risk Exposure
U.S. GAAP requires disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.

The Fund utilized options to minimally hedge the Fund’s portfolio, to maintain exposure to the equity markets, create liquidity and to achieve leveraged exposure. As of September 30, 2014, the Fund did not hold any derivatives.

The following is a summary of the location of derivative investments on the Fund’s Statement of Operations for the year ended September 30, 2014:

Derivative Investment Type   Location of Gain (Loss) on Derivatives
 
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 Fund’s realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statement of Operations categorized by primary risk exposure for the year ended September 30, 2014:

Realized Gain (Loss) on Derivative Investments Recognized on the Statement of Operations
    Options    
    Written Equity    
Fund   Contracts   Total
 
Mid Cap Value Fund   $997,471   $997,471

Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statement of Operations
    Options      
    Written Equity      
Fund   Contracts     Total
 
Mid Cap Value Fund   $(84,247)     $(84,247)

 
18  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

NOTES TO FINANCIAL STATEMENTS (continued)
 

6. Federal Income Tax Information
The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.

Tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

The RIC Modernization Act of 2010 was signed into law on December 22, 2010, and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Fund was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010. However, the Fund did not incur or carryforward any capital loss for year ended September 30, 2014.

One of the more prominent changes addresses capital loss carryforwards. The Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred 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.

The tax character of distributions paid during the year ended September 30, 2014 was as follows:

    Ordinary        Long-Term        Total
Fund   Income   Capital Gain   Distribution
 
Mid Cap Value Fund   $4,082,954   $80,154,801   $84,237,755

The tax character of distributions paid during the year ended September 30, 2013 was as follows:

    Ordinary        Long-Term        Total
Fund   Income   Capital Gain   Distribution
 
Mid Cap Value Fund   $       —   $118,260,068   $118,260,068

Note: For federal income tax purposes, short term capital gain distributions are treated as ordinary income distributions.

The tax character of distributable earnings/(accumulated losses) at September 30, 2014 was as follows:

      Undistributed     Undistributed   Accumulated     Net Unrealized     Total
      Ordinary     Long-Term   Capital and     Appreciation/     Accumulated
Fund     Income     Capital Gain   Other Losses     (Depreciation)*     Earnings/(Deficit)
 
Mid Cap Value Fund     $2,905,838          $138,943,044        $ —          $187,527,222          $329,376,104

* Any differences between book-basis and tax-basis unrealized appreciation (depreciation) are attributable primarily to the tax deferral of wash sale losses, the differences between book and tax basis passive foreign investment companies.

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 losses due to wash sales, reclassifications due to real estate investment trusts (REITs), the “mark-to-market” of certain passive foreign investment companies (PFICs) for tax purposes, and utilization of earnings and profits on shareholder redemptions. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise.

On the Statement of Assets and Liabilities the following adjustments were made for permanent book/tax differences:

        Undistributed   Accumulated Net
        Net Investment   Realized
Fund   Paid-In Capital   Income   Gain (Loss)
 
Mid Cap Value Fund   $18,205,582   $500,306   $(18,705,888)

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  19


NOTES TO FINANCIAL STATEMENTS (concluded)
 

At September 30, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:

 

            Tax     Tax       Net   Net Unrealized
      Tax     Unrealized     Unrealized       Unrealized   Gain (Loss)
Fund     Cost     Gain     Loss       Gain/(Loss)   Derivatives
 
Mid Cap Value Fund     $1,043,082,569         $265,465,021         $(77,937,799)           $187,527,222       $ —

7. Securities Transactions
For the year ended September 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:

Fund   Purchases   Sales
 
Mid Cap Value Fund   $446,785,478   $579,114,136

8. Options Written
Information as to options written by the Fund during the year ended September 30, 2014, and options outstanding at period end is provided below:

Written Call Options

    Number of     Premium  
Mid Cap Value Fund   contracts     amount  
 
Balance at September 30, 2013   1,154     $ 390,057  
Options Written   1,597       391,534  
Options terminated in closing purchase transactions   —       —  
Options expired   (2,751 )     (781,591 )
Options exercised   —       —  
 
Balance at September 30, 2014   —     $ —  
 
               
Written Put Options              
    Number of     Premium  
Mid Cap Value Fund   contracts     amount  
 
Balance at September 30, 2013   —     $ —  
Options Written   1,609       215,880  
Options terminated in closing purchase transactions   —       —  
Options expired   (1,609 )     (215,880 )
Options exercised   —       —  
 
Balance at September 30, 2014   —     $ —  
 

9. 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 September 30, 2014 in which the portfolio company is an “affiliated person” are as follows:

    Value             Value   Shares   Investment   Realized
Affiliated issuers by Fund   09/30/13   Additions   Reductions   09/30/14   09/30/14   Income   Gain
 
Mid Cap Value Fund                              

IXYS Corp.

   $20,615,574       $ —       $1,113,533       $21,131,764       2,012,549       $255,282       $656,350

Maxwell Technologies, Inc.

   15,481,137     —   —   14,867,347   1,704,971   —   —
 
    $36,096,711   $ —   $1,113,533   $35,999,111   3,717,520   $255,282   $656,350

10. Other Liabilities
The Fund wrote put option contracts through Lehman Brothers Inc., (“LBI”) that were exercised prior to the option contracts’ expiration and prior to the bankruptcy filing by LBI, during September, 2008. However, these transactions have not settled and the securities have not been delivered to the Fund as of September 30, 2014.

Although the ultimate resolution of these transactions is uncertain, the Fund has recorded a liability on its books equal to the difference between the strike price on the put options and the market price of the underlying security on the exercise date. The amount of the liability recorded by the Fund as of September 30, 2014, was $473,594.
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

The Board of Trustees and Shareholders
of Guggenheim Funds Trust

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Guggenheim Mid Cap Value Fund (one of the series constituting the Guggenheim Funds Trust) (the “Fund”) as of September 30, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Guggenheim Mid Cap Value Fund (one of the series constituting Guggenheim Funds Trust) at September 30, 2014, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

McLean, Virginia
November 25, 2014

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  21


OTHER INFORMATION (Unaudited)
 

Tax Information

This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.

Of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following fund had the corresponding percentage qualify for the dividends received deduction for corporations:

Fund   % Qualifying
 
Mid Cap Value Fund   100.00%

Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:

Fund   % Qualifying
 
Mid Cap Value Fund   100.00%

Additionally, of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following fund had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:

Fund   % Qualifying       % STCG Qualifying
 
Mid Cap Value Fund   0.00%   100.00%

With respect to the taxable year ended September 30, 2014, the Fund hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:

        LT Capital Gain
    LT Capital Gains   Using Proceeds from
Fund   Dividends   Shareholder Redemptions
 
Mid Cap Value Fund   $80,154,801       $18,551,329

In January 2015, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by you in the calendar year 2014.

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 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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
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OTHER INFORMATION (Unaudited) (continued)
 

Office Locations
The offices of Guggenheim Investments can be found in the following locations:

330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)

Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850

9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210

Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds was consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD serves as the Funds’ distributor.

GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.

The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.

Guggenheim Funds Trust
Guggenheim Funds Trust (the “Trust”), which was organized as a Delaware statutory trust on November 8, 2013, is registered with the Securities and Exchange Commission (“SEC”) as an investment company. The Trust is an open-end management investment company that, upon the demand of the investor, must redeem its shares and pay the investor the next calculated NAV. The Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”), Guggenheim Large Cap Value Fund (“Large Cap Value Fund”), Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”), Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional Fund”), Guggenheim Small Cap Value Fund (“Small Cap Value Fund”), Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core Fund”), Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth Fund”) and Guggenheim World Equity Income Fund (“World Equity Income Fund”) (collectively, the “Funds”) were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund (the “Predecessor Corporations”), different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at special meetings of shareholders, the shareholders of each Predecessor Fund approved the reorganization of each Predecessor Fund with and into a corresponding “shell” series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any such historical information provided for a series of the Trust that relates to periods prior to January 28, 2014, therefore, is that of the corresponding Predecessor Fund.

Effective January 28, 2014, the Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”), Guggenheim High Yield Fund (“High Yield Fund”), Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”), Guggenheim Limited Duration Fund (“Limited Duration Fund”), Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”), Guggenheim Municipal Income Fund (“Municipal Income Fund”), and Guggenheim Total Return Bond Fund (“Total Return Bond Fund”), which were series of Security Income Fund, a Kansas corporation, reorganized with and into corresponding series of Guggenheim Funds Trust, a Delaware Statutory Trust (each, a “Reorganization”). Upon completion of each Reorganization, the respective share classes of each Fund assumed the performance, financial and other historical information of those of the corresponding predecessor fund.

 
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OTHER INFORMATION (Unaudited) (continued)
 

At a meeting of shareholders held on January 8, 2014, shareholders of the Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”) approved the reorganization of the Fund from a Kansas corporation to a Delaware statutory trust. After the close of business on September 23, 2014, the Fund, which is a series Security Equity Fund, a Kansas corporation, will reorganize with and into a corresponding “shell” fund (the “New Fund”), which is a series of Guggenheim Funds Trust, a Delaware statutory trust. Upon completion of the Reorganization, shareholders of the Fund will own shares of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the New Fund will assume the performance, financial and other historical information of that of the Fund. Once the Reorganization is completed, the Fund will no longer be offered as a series of Security Equity Fund.

Report of the Guggenheim Funds Trust Contracts Review Committee
Guggenheim Funds Trust (the “Trust”) was organized as a Delaware statutory trust on November 8, 2013, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Effective January 28, 2014, the Trust is the successor of all of the existing and active series of Security Equity Fund (except for Guggenheim Alpha Opportunity Fund),1 Security Large Cap Value Fund, Security Mid Cap Growth Fund and Security Income Fund, each, a Kansas corporation (collectively, the “Corporations”), following the reorganization of each series of the Corporations with and into a corresponding “shell” series of the Trust (the “Reorganizations”). The Reorganizations, which were approved by the Boards of Directors of the Corporations (collectively, the “Board of Directors” or the “Predecessor Board” and the members of the Board of Directors individually, “Directors”), including the Directors who are not “interested persons,” as defined by the 1940 Act, of the Corporations (the “Independent Directors”), and by shareholders, were intended to, among other things, take advantage of various benefits available to registered investment companies organized as Delaware statutory trusts, including, but not limited to, Delaware’s comprehensive body of law related to investment companies which may reduce legal uncertainty and risk.

The Trust includes the following series (the “New Series”), each of which assumed the accounting and performance histories of the corresponding predecessor fund (a “Predecessor Fund” and collectively, the “Predecessor Funds”):

•  Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”)2   •  Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”)
•  Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”)   •  Guggenheim High Yield Fund (“High Yield Fund”)
•  Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”)   •  Guggenheim Large Cap Value Fund (“Large Cap Value Fund”)
•  Guggenheim Limited Duration Fund (“Limited Duration Fund”)   •  Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”)
•  Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional”)   •  Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”)
•  Guggenheim Municipal Income Fund (“Municipal Income Fund”)   •  Guggenheim Small Cap Value Fund (“Small Cap Value Fund”)
•  Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth”)   •  Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core”)
•  Guggenheim Total Return Bond Fund (“Total Return Bond Fund”)   •  Guggenheim World Equity Income Fund (“World Equity Income Fund”)

With the exception of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund, Security Investors, LLC, also known as Guggenheim Investments (“Security Investors”) and an indirect subsidiary of Guggenheim Partners, LLC, a global diversified financial services firm (“Guggenheim Partners”), serves as investment manager to each series of the Trust. (Guggenheim Partners, Security Investors, Guggenheim Partners Investment Management, LLC (“GPIM”) and their affiliates may be referred to herein collectively as “Guggenheim.”) In this connection, the Trust and Security Investors have entered into four separate investment management agreements which group the New Series of the Trust to correspond with the Predecessor Funds that were series of a common Corporation: (i) Mid Cap Value Fund, Mid Cap Value Institutional, Small Cap Value Fund, StylePlus—Large Core Fund, World Equity Income Fund and Alpha Opportunity Fund,3 the corresponding Predecessor Funds of which were series of a common Corporation, Security Equity Fund; (ii) Large Cap Value Fund, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Large Cap Value Fund; (iii) StylePlus—Mid Growth, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Mid Cap Growth Fund; and (iv) Investment Grade Bond Fund, High Yield Fund and Municipal Income Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund. (The New Series identified in (i) through (iv) above are collectively referred to herein as the “SI-Advised Funds.”)

1   At a meeting of shareholders held on January 8, 2014, shareholders of Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”), a series of Security Equity Fund, approved the reorganization of Alpha Opportunity Fund to a corresponding new series of the Trust (the “Alpha Opportunity Fund Reorganization”). Due to certain outstanding transactions with Lehman Brothers International Europe (“LBIE”) and its administrator, the Alpha Opportunity Fund Reorganization was delayed pending the resolution of the LBIE matter. Alpha Opportunity Fund was reorganized into the Trust on September 24, 2014.
2   Because the Alpha Opportunity Fund was not reorganized into the Trust until September 2014, at the time of the Board’s review of the investment advisory agreements Alpha Opportunity Fund was a series of the Security Equity Fund.
3   At the time of the Board’s review of the investment advisory agreements, Security Investors served as investment manager to Alpha Opportunity Fund pursuant to an investment management agreement with Security Equity Fund. The investment management agreement with Security Investors transferred to the Trust upon the Alpha Opportunity Fund Reorganization.

 
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OTHER INFORMATION (Unaudited) (continued)
 

Under the terms of the applicable investment management agreement between the Trust and Security Investors, Security Investors also is responsible for overseeing the activities of GPIM, an indirect subsidiary of Guggenheim Partners, with respect to its service as investment sub-adviser to Municipal Income Fund, pursuant to an investment sub-advisory agreement between Security Investors and GPIM (the “Sub-Advisory Agreement”).

GPIM serves as investment adviser with respect to each of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund (collectively, the “GPIM-Advised Funds” and together with the SI-Advised Funds, the “Funds” and individually, a “Fund”). In this connection, the Trust and GPIM have entered into three separate investment advisory agreements which group the GPIM-Advised Funds as follows: (i) Enhanced World Equity Fund, the corresponding Predecessor Fund of which was a series of Security Equity Fund; (ii) Floating Rate Strategies Fund, Macro Opportunities Fund and Total Return Bond Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund; and (iii) Limited Duration Fund, the corresponding Predecessor Fund of which was a series of Security Income Fund. (The investment management agreements pertaining to the SI-Advised Funds and the investment advisory agreements pertaining to the GPIM-Advised Funds are referred to herein together as the “Advisory Agreements” and, together with the Sub-Advisory Agreement, as the “Agreements.” In addition, unless the context indicates otherwise, GPIM, with respect to its service as investment adviser to the GPIM-Advised Funds, and Security Investors as to the SI-Advised Funds, are each referred to herein as the “Adviser” and together, the “Advisers.”) Under the supervision of the Board of Trustees of the Trust (the “Board” and the members of the Board individually, the “Trustees”), the Advisers regularly provide (or, as applicable, oversee the provision of) investment research, advice and supervision, a continuous investment program and direct the purchase and sale of securities and other investments for each Fund’s portfolio.

At a meeting held on November 11, 2013, in connection with other actions taken to pursue the Reorganizations, the Predecessor Board, including the Independent Directors, appointed each of the then-current investment manager/adviser for the Predecessor Funds to serve in such capacity to the corresponding New Series of the Trust (i.e., Security Investors and GPIM with respect to the SI-Advised Funds and the GPIM-Advised Funds, respectively). The Predecessor Board, including the Independent Directors, also approved for the Trust, on behalf of the New Series, the investment advisory and investment management agreements then in effect with respect to the Predecessor Funds (i.e., the Advisory Agreements and the Sub-Advisory Agreement). The sole initial shareholder of the New Series subsequently approved the Advisory Agreements and the Sub-Advisory Agreement, which are identical to the agreements then in place with respect to each of the Predecessor Funds in all material respects, except for the name of the signatory and the applicable state law, and became effective January 27, 2014.

At meetings held in person on April 17, 2014 (the “April Meeting”) and on May 12, 2014, (the “May Meeting”), the members of the Contracts Review Committee of the Board (the “Committee”), consisting solely of the Trustees who are not “interested persons,” as defined by the 1940 Act, of the Trust (the “Independent Trustees”), met separately from Guggenheim to consider the renewal of the Advisory Agreements and the Sub-Advisory Agreement in connection with the Committee’s annual contract review schedule.4 As part of its review process, the Committee was represented by independent legal counsel to the Independent Trustees (“Independent Legal Counsel”). Independent Legal Counsel reviewed and discussed with the Committee various key aspects of the Trustees’ legal responsibilities relating to the proposed renewal of the Agreements and other principal contracts. In this connection, Independent Legal Counsel advised the Committee of: (i) the responsibilities of board members under applicable law; (ii) the standards for determining what constitutes an excessive fee as delineated by the courts and the factors the Trustees should consider in determining whether to approve the fee arrangements; and (iii) the disclosure requirements pertaining to these approvals, as required by the Securities and Exchange Commission. The Committee took into account various materials received from Guggenheim and Independent Legal Counsel. Recognizing that the evaluation process with respect to the services provided by each of the Advisers is an ongoing one, the Committee also considered the variety of written materials, reports and oral presentations it received (and received by the full Board) throughout the year regarding performance and operating results of the Funds (which, as noted, reflects the accounting and performance histories of the Predecessor Funds).

In connection with the contract review process, FUSE Research Network LLC (“FUSE”), an independent, third party research provider, was engaged to prepare advisory contract renewal reports designed specifically to help boards of directors/trustees fulfill their advisory contract renewal responsibilities. The objective of the reports is to present the subject funds’ relative position regarding fees, expenses and total return performance, with peer group and universe comparisons. Guggenheim prepared a comprehensive presentation in response to a formal request for information sent by Independent Legal Counsel on behalf of the Committee. In addition, Guggenheim made a detailed presentation at the April Meeting, which addressed areas identified for discussion by the Committee Chair

4   Since the corresponding Predecessor Fund of Enhanced World Equity Fund was subject to an investment management agreement approved by the Board of Directors of Security Equity Fund for an initial term of two years at an in-person meeting of the Board held on February 13, 2013 and because the Fund has a limited operating history, it was not included in the contract renewal process conducted in April and May 2014. Accordingly, references herein to the “Funds” should be understood as referring to all series of the Trust, excluding Enhanced World Equity Fund. In addition, references to the “Funds” should be understood as including Alpha Opportunity Fund. Since the Alpha Opportunity Fund Reorganization was not effected as of the April Meeting or May Meeting, the individuals who serve as the Independent Trustees, in their capacity as the Independent Directors of Security Equity Fund, considered the renewal of the Investment Management Agreement between Security Investors and Security Equity Fund, with respect to Alpha Opportunity Fund. Accordingly, all references hereafter to the steps taken by the “Independent Trustees” and the “Committee,” including the materials reviewed and factors considered, also refer to such parties in their corresponding capacities with respect to Alpha Opportunity Fund. Likewise, all action taken with respect to the Trust’s Advisory Agreements includes the Investment Management Agreement regarding Alpha Opportunity Fund.

 
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OTHER INFORMATION (Unaudited) (continued)
 

and Vice Chair and Independent Legal Counsel. Throughout the process, the Committee asked questions of management and requested certain additional information which Guggenheim provided following the April Meeting (collectively with the foregoing reports and materials, the “Contract Materials”).

Among other things, Guggenheim provided: (i) organizational charts and presentations, staffing reports and biographies of those key personnel of each Adviser providing services to the Funds; (ii) descriptions of various functions performed by Guggenheim for the Funds, such as portfolio trading practices, brokerage matters, trade allocation and best execution; (iii) information regarding each Adviser’s compliance and regulatory history, including its Form ADV; and (iv) information concerning the parent company and overall Guggenheim organization and strategic plans and goals, all to assist the Committee in assessing the nature, extent and quality of services provided by each of Security Investors and GPIM, respectively. In addition, Guggenheim’s response included information comparing the investment performance, advisory fees and total expenses of the Funds to other funds (including such information presented in the FUSE reports as well as supplemental information prepared by Guggenheim), charts showing revenues for Guggenheim by product line and each Fund, including a break-out of various expenses, a description of the expense allocation methodology and information about the profitability of the Funds to Guggenheim Investments (the investment management business of Guggenheim Partners), financial information for Guggenheim Investments (unaudited), and information about Guggenheim’s compliance and risk management programs.

Following an analysis and discussion of the factors identified below and in the exercise of its business judgment, the Committee concluded that it was in the best interests of the Funds to recommend that the Board approve the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.

Advisory Agreements
Nature, Extent and Quality of Services Provided by each Adviser: With respect to the nature, extent and quality of services currently provided by each Adviser, the Committee considered the information provided by Guggenheim concerning the education, experience, professional affiliations, area of responsibility and duties of all key personnel performing services for the Funds, including those personnel providing compliance oversight. In this connection, the Committee considered Guggenheim’s resources and related efforts to retain, attract and motivate capable personnel to serve the Funds and noted Guggenheim’s report on recent additions and departures in personnel who work on matters relating to the Funds or are significant to the operations of each Adviser. The Committee noted that on a regular basis the Board receives and reviews information from the Trust’s Chief Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. In addition, the Committee took into account the various compliance and risk management initiatives undertaken by Guggenheim, including, among other things, the hiring of a new Chief Risk Officer, Portfolio Management, responsible for implementing various initiatives related to the risks associated with the investment process, the organization’s risk management infrastructure and critical activities. The Committee also considered Guggenheim’s other initiatives intended to achieve greater enhancements and efficiencies in the organization’s ability to provide services to all of the registered investment companies for which Security Investors, GPIM or another Guggenheim affiliate serves as investment adviser/manager (including the Funds), such as efforts to streamline and simplify the organizational structure of Guggenheim’s advisory business, as reflected by the internal restructuring that consolidated the investment advisers, broker/dealers and other entities that comprise “Guggenheim Investments” under a new, single holding company, Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”). In this regard, the Committee considered that although the restructuring neither impacted the services rendered on a day-to-day basis to the Funds nor changed the ultimate ownership of the various Guggenheim entities involved, which, through GPIMH, continue to be indirect subsidiaries of Guggenheim Capital, LLC, Guggenheim stated that the restructuring will allow the financial statements of the various entities to be consolidated and audited, thus providing a clearer view of Guggenheim Investments’ business within the broader Guggenheim organization. Moreover, in connection with the Committee’s evaluation of the overall package of services provided by each Adviser, the Committee considered each Adviser’s administrative capabilities, including its role in monitoring and coordinating compliance responsibilities with the fund administrator, transfer agent, distributor, custodian and other service providers to the Funds.

With respect to Guggenheim’s resources and the ability of each Adviser to carry out its responsibilities under the applicable Advisory Agreement, the Chief Financial Officer of Guggenheim Investments reviewed with the Committee certain unaudited financial information concerning GPIMH. (The Committee received the audited financial statements of GPIMH once available following the May Meeting.)

The Committee also considered the acceptability of the terms of each Advisory Agreement (including the scope of services required to be performed by each Adviser). Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of each Adviser’s quality of performance of its duties through Board meetings, discussions, and reports throughout the year, the Committee concluded that each Adviser and its personnel were qualified to serve the Funds in such capacity and may reasonably be expected to continue to provide a high quality of services under each Advisory Agreement with respect to the Funds.
26 | THE GUGGENHEIM FUNDS ANNUAL REPORT

OTHER INFORMATION (Unaudited) (continued)
 

Investment Performance: The Committee received for each Fund investment returns for the five-year, three-year, one-year and three-month periods ended December 31, 2013, as applicable. In addition, the Committee received a comparison of each Fund’s performance to the performance of a benchmark, a peer group of similar funds and a broader universe of funds identified by FUSE, in each case for the same periods and, with respect to performance universe rankings for each Fund as to the returns of Class A shares, also for the ten-year period ended December 31, 2013, as applicable. The Committee received from FUSE representatives and considered a description of the methodology employed by FUSE for identifying each Fund’s peer group and universe for performance and expense comparisons.

In seeking to evaluate Fund performance over a full market cycle, the Committee generally focused its attention first on five- and three-year performance rankings as compared to the relevant universe of funds, but also considered more recent performance periods, including the one-year period and, as deemed appropriate, the three-month period, for certain Funds such as for those Funds that were recently launched or had undergone recent changes in the composition of the portfolio management team and/or the investment strategies employed. In this connection, the Committee made the following observations:

  •    Alpha Opportunity Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 1st percentile for both periods. In light of the resignation of Mainstream Investment Advisors, LLC, effective, September 30, 2013, as the Fund’s sub- adviser for the domestic long/short sub-portfolio of the Fund, the Committee also considered more recent performance periods, including the one-year period and the three-month period.5 In this connection, the Committee noted that Security Investors assumed investment management responsibility for the domestic long/short sub-portfolio as of September 30, 2013. The Committee observed that the Fund’s Class A shares outperformed the performance universe median for the one-year and three-month periods ended December 31, 2013, ranking in the 5th and 13th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund’s performance for the periods ended December 31, 2013 was comparable to the Fund’s benchmark, the S&P 500 Index, for the one- and three-year periods and better than the Fund’s benchmark for the five-year period, and lagged the benchmark for the three-month period. The Committee also considered the circumstances affecting the management of the Fund as a result of the Fund’s prime broker, Lehman Brothers International Europe (“LBIE”), being placed into administration on September 15, 2008. 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 such short sales. Until such time as the liability for short sales was settled and all restrictions were removed by LBIE and Lehman Brothers, Inc. (“LBI”), the Fund could not sell such restricted long positions and/or utilize the restricted cash balances to achieve the Fund’s investment objectives and/or meet Fund redemptions or other Fund obligations. In evaluating the services provided by the Adviser and the performance of the Fund, the Committee also considered Guggenheim’s efforts to resolve the issues with LBIE and LBI and to seek the release of the collateral by LBIE and LBI in conjunction with the potential settlement of LBIE’s claim. In addition, the Committee took into account information received from Guggenheim regarding the minimum assets required to manage the Fund’s assets consistent with the Fund’s investment objectives and the undertaking made by Guggenheim to assure adequate liquidity to meet Fund redemptions.
       
  •    Floating Rate Strategies Fund: The returns of the Class A shares exceeded the median of its performance universe in both the one-year and three- month periods, ranking in the 19th and 32nd percentile, respectively. The Fund, which commenced operations on November 30, 2011, also outperformed its benchmark, the Credit Suisse Leveraged Loan Index for the one-year and three-month periods, according to information provided by Guggenheim.
       
  •    High Yield Fund: While the returns of the Class A shares underperformed the median of its performance universe for the three-year period and ranked in the third quartile (72nd percentile), returns for the five-year period exceeded the performance universe median and ranked in the first quartile (4th percentile) and recent performance for the one-year period also ranked in the first quartile (3rd percentile). The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Corporate High Yield Index, for the five- year and one-year periods, but lagged the benchmark for the three-year period and that the current portfolio management team for the Fund began management in August 2012 and, since that time period, performance has ranked in the first quartile and has outperformed its benchmark. In light of the foregoing, the Committee focused, in particular, on the Fund’s recent performance, including the one-year and three-month periods ended December 31, 2013, and, with respect to the latter, noted that the FUSE report ranked the Fund in the first quartile (1st percentile).
       
  •    Investment Grade Bond Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 46th and 8th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, for the five-year and three-year periods and that the current portfolio manager began
       
5   Prior to September 30, 2013, Mainstream Investment Advisers, LLC (“Mainstream”) acted as sub-adviser to Alpha Opportunity Fund. Pursuant to an investment sub-advisory agreement, Mainstream furnished investment advisory services, supervised and arranged for the purchase and sale of securities on behalf of a portion of the assets of Alpha Opportunity Fund and provided for the compilation and maintenance of records pertaining to such investment advisory services, subject to the supervision of Security Investors and the Board of Directors of Security Equity Fund. Effective September 30, 2013, Mainstream resigned as sub-adviser to Alpha Opportunity Fund and Security Investors assumed all advisory obligations and responsibilities.

 
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OTHER INFORMATION (Unaudited) (continued)
 

      management in August 2012 and, since that time, performance has been in the 1st quartile. The Committee considered that the FUSE report listed the Fund’s performance for the one-year and three-month periods in the 1st percentile and 4th percentile, respectively.
       
  •    Large Cap Value Fund: The returns of the Class A shares exceeded the median of the performance universe for the five-year period, but underperformed the median for the three-year and one-year periods and ranked in the 49th percentile, 79th percentile and 55th percentile for the five-, three- and one- year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (18th percentile) for the year-to-date. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as part of its assessment of Fund performance and took into account the additional performance metrics provided by Guggenheim, including information that, as of December 31, 2013, the Fund ranked in the 25th percentile of its peer group since inception (July 1, 2005) based on gross returns.
       
  •    Macro Opportunities Fund: The returns of the Fund’s Class A shares ranked in the 13th and 1st percentile of its performance universe for the one-year and three-month periods, respectively, and outperformed the performance universe median for each of these periods. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index, for the one-year and three-month periods ended December 31, 2013.
       
  •    Mid Cap Value Fund: The returns of the Class A shares underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 83rd, 67th and 79th percentile for the five-year, three-year and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (13th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as a part of its assessment of Fund performance and, in this regard, noted that the FUSE report listed the Fund’s performance for the ten-year period ended December 31, 2013 in the 1st quartile (11th percentile) and that, according to Guggenheim, the Fund outperformed its benchmark over the same period and since inception.
       
  •    Mid Cap Value Institutional: The Fund’s returns underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 69th, 80th and 83rd percentile for the five-year, three-year and one-year periods, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this connection, the Committee considered the presentation provided by the Fund’s portfolio management team at the April Meeting, as requested by the Committee. The Committee also took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap stocks.

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OTHER INFORMATION (Unaudited) (continued)
 

  •    Municipal Income Fund: The Committee considered that Security Investors does not directly manage the investment portfolio but has delegated such duties to GPIM. Based on the information provided and the review of the Fund’s investment performance, the Committee concluded that Security Investors had appropriately reviewed and monitored GPIM’s investment performance as Sub-Adviser to the Fund.
       
  •    Small Cap Value Fund: The returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year and three-year periods, ranking in the 6th and 45th percentile, respectively. The Committee also considered information provided by Guggenheim stating that the Fund’s performance exceeded its benchmark, the Russell 2000 Value Index, for the five-year and three-year periods ended December 31, 2013. The Committee also noted supplemental information provided by the Fund’s portfolio management team indicating that since inception (August 1, 2008), the Fund has ranked in the 1st percentile of its peer group based on gross returns.
       
  •    StylePlus—Large Core: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 78th and 93rd percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for the period from May 1, 2013 through December 31, 2013 was 16.86%, as compared to the 17.43% return of the Fund’s benchmark, the S&P 500 Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (25th percentile). Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date.
       
  •    StylePlus—Mid Growth: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 70th and 78th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for period from May 1, 2013 through December 31, 2013 was 19.88%, as compared to the 19.97% return of the Fund’s benchmark, the Russell Mid Cap Growth Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 40th percentile. Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (22nd percentile) for the year-to-date.
       
  •    Total Return Bond Fund: The returns of the Fund’s Class A shares ranked in the 1st quartile (the 3rd and 4th percentile, respectively) of its performance universe for the one-year and three-month periods, respectively. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, as well as the Fund’s peer group average, for the one-year and three-month periods ended December 31, 2013.
       
  •    World Equity Income Fund: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 96th and 95th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team in August 2013. Thus, the Committee took into account that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (12th percentile) for the year-to-date and outperformed its benchmark, the MSCI World Index, over the same period.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  29


OTHER INFORMATION (Unaudited) (continued)
 

After reviewing the foregoing and related factors, the Committee concluded, within the context of its overall conclusions regarding the Advisory Agreements, that: (i) each Fund’s performance was acceptable; or (ii) it was satisfied with Guggenheim’s responses and efforts relating to investment performance.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Investment Manager from its Relationship with the Funds: The Committee compared each Fund’s contractual advisory fee and total net expense ratio to the applicable peer group and compared each Fund’s total net expense ratio to its universe of funds for the various classes. The Committee also reviewed the median advisory fees and expense ratios, including expense ratio components (e.g., transfer agency fees, administration fees, other operating expenses, distribution fees and fee waivers/reimbursements) of the peer group of funds. In addition, the Committee considered each Fund’s advisory fee as compared to the advisory fee charged by the applicable Adviser to another fund with a similar investment objective and strategies, as applicable, noting that, in certain instances, the Adviser charges a lower advisory fee to other clients for which it provides comparable services. In this regard, the Committee considered Guggenheim’s explanation that lower fees are charged in certain instances due to numerous factors, including the scope of contract, types of investors, applicable regulation and legal structures, tax status, and for historical pricing reasons.

In further considering the comparative fee and expense data presented in the Contract Materials and addressed by Guggenheim, the Committee made the following observations:

  •    Alpha Opportunity Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (39th percentile) and the asset weighted total net expense ratio is in the third quartile (72nd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    Floating Rate Strategies Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (64th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (36th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    High Yield Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (41st percentile) and the asset weighted total net expense ratio is in the third quartile (63rd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    Investment Grade Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is at the 51st percentile of its peer group and the asset weighted total net expense ratio is in the fourth quartile (88th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    Large Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund and the asset weighted total net expense ratio are each below the peer group median (at the 30th and 19th percentile, respectively). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    Macro Opportunities Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (89th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (65th percentile). The Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic fiexibility. In this connection, the Committee noted that the Fund’s performance has been relatively strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    Mid Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (85th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (72nd percentile). Although higher than median, the contractual advisory fee and the total net expense ratio for each class of shares was within a competitive range of the median of the peer group. For example, the Class A contractual advisory fee of 0.79% is 2 basis points above the peer group median and the total net expense ratio of 1.39% is 9 basis points above the peer group median.
       
  •    Mid Cap Value Institutional Fund: The contractual advisory fee percentile rank is in the first quartile (17th percentile) of its peer group and the total net expense ratio is in the third quartile (67th percentile) of its peer group.
       
  •    Municipal Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (8th percentile) of its peer group and the asset weighted total net expense ratio is in the 55th percentile. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

30 | THE GUGGENHEIM FUNDS ANNUAL REPORT


OTHER INFORMATION (Unaudited) (continued)
 

  •    Small Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (77th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (43rd percentile). The Committee also considered that the Fund’s long-term performance has been strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    StylePlus—Large Core: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (67th percentile) of its peer group and the asset weighted total net expense ratio is in the fourth quartile (92nd percentile). Although the total net expense ratio for each class is higher than its peer group median, the contractual advisory fee (0.75%), at four to five basis above the peer group median for each class, was deemed to be within a reasonable range.
       
  •    StylePlus—Mid Growth: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (23rd percentile) and the asset weighted total net expense ratio is in the fourth quartile (93rd percentile) of its peer group. The Committee noted Guggenheim’s statement that the Fund’s total net expense ratio is slightly higher but comparable to its peer group average.
         
  •    Total Return Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (63rd percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (28th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •    World Equity Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the peer group median (45th percentile) and the Fund’s asset weighted total net expense ratio is in the fourth quartile (88th percentile) of its peer group.
       

With respect to the costs of services provided and profits realized by Guggenheim from its relationship with the Funds, the Committee reviewed a profit and loss statement for each Fund setting forth the revenues received from gross advisory fees, the expenses incurred in providing services to the Funds, the pre-tax operating margin and profitability rate and each Fund’s average assets for the twelve months ended December 31, 2012 and December 31, 2013, and information with respect to Guggenheim’s allocation methodologies used in preparing the profitability data.

The Committee considered other benefits available to each Adviser because of its relationship with the Funds and noted that Security Investors and GPIM may be deemed to benefit from arrangements whereby an affiliate, Rydex Fund Services, LLC, receives fees for: (i) performing certain administrative functions and bookkeeping, accounting and pricing functions for the Funds pursuant to a Fund Accounting and Administration Agreement; and (ii) acting as transfer agent for the Funds and performing all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications, and acting as the dividend disbursing agent pursuant to a Transfer Agency Agreement. The Committee reviewed the compensation arrangements for the provision of the foregoing services. The Committee also noted Guggenheim’s statement that it may benefit from marketing synergies arising from offering a broad spectrum of products, including the Funds. Based on all of the information provided and its review, the Committee determined that Guggenheim’s profitability from its relationship with the Funds was not unreasonable.

Economies of Scale to be Realized: The Committee received and considered information regarding whether there have been economies of scale with respect to the management of the Funds as Fund assets grow, whether the Funds has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. In this connection, the Committee considered management’s view that Guggenheim continues to add system resources as required to develop its infrastructure in response to the growth in the firm’s assets and there is an opportunity to optimize economies of scale across the firm’s array of products and product lines. Therefore, although Guggenheim may be realizing economies of scale and efficiencies due to its growth, it is concurrently realizing new costs and expenses associated with investment in its infrastructure.

In addition, the Committee considered the size of the Funds and the competitiveness of and/or other determinations made regarding the current advisory fee for each Fund. The Committee also took into account Guggenheim’s statement that generally the Funds’ assets are not sufficiently large to warrant breakpoints, with only four Funds—Floating Rate Strategies Fund, Macro Opportunities Fund, Mid Cap Value Fund and Mid Cap Value Institutional Fund—having assets in excess of $500 million as of March 13, 2014. With respect to the four Funds noted, the Committee noted that none of the Funds had levels of profitability that were outliers and made the following observations:

  •    Floating Rate Strategies Fund: The Adviser has entered into an expense limitation agreement with respect to the Fund. In addition, the Fund’s asset weighted total net expense ratio is below the peer group median (36th percentile).

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  31


OTHER INFORMATION (Unaudited) (concluded)
 

  •    Macro Opportunities Fund: The Fund is relatively new and the Adviser has entered into an expense limitation agreement with respect to the Fund. Although the contractual advisory fee is in the fourth quartile of its peer group, the total net expense ratio is competitive with the peer group median. In addition, as noted, the Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic fiexibility.
       
  •    Mid Cap Value Fund: The Fund’s contractual advisory fee is in line with the peer group median and the total net expense ratio is competitive with the peer group median.
       
  •    Mid Cap Value Institutional Fund: The Fund’s contractual advisory fee ranks in the first quartile (17th percentile) of its peer group and the total net expense ratio is competitive with the peer group median.
       
      The Committee determined that the advisory fee structure for the Funds was reasonable.

Sub-Advisory Agreement

Nature, Extent and Quality of Services Provided by the Sub-Adviser: With respect to the nature, extent and quality of services provided by GPIM (referred to in this discussion as the “Sub-Adviser”), the Committee considered the qualifications, experience and skills of the Sub-Adviser’s portfolio management and other key personnel and information from the Sub-Adviser describing the scope of its services to Municipal Income Fund. The Committee also considered the information provided by the Sub-Adviser concerning the Sub-Adviser’s investment practices and techniques, risk management processes, compliance policies and procedures, brokerage allocation, best execution and trade allocation, among other things. With respect to Guggenheim’s resources and the Sub-Adviser’s ability to carry out its responsibilities under the Sub-Advisory Agreement, the Committee recalled the review of certain unaudited financial information concerning GPIMH by the Chief Financial Officer of Guggenheim Investments.

The Committee also considered the acceptability of the terms of the Sub-Advisory Agreement. Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of the Sub-Adviser’s quality of performance of its duties through Board meetings, discussions and reports throughout the year, the Committee concluded that the Sub-Adviser and its personnel were qualified to serve Municipal Income Fund in such capacity and may reasonably be expected to continue to provide a high quality of services under the Sub-Advisory Agreement.

Investment Performance: The Committee considered that the returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year period and underperformed the median for the three-year period and ranked in the 1st percentile and 82nd percentile, respectively. The Committee took into account information provided by Guggenheim stating that the Fund’s performance for the periods ended December 31, 2013 outperformed the Fund’s benchmark, the Barclays Capital U.S. Municipal Long Bond Index, for the one-year and three-month periods, lagged the benchmark for the three-year period and outperformed the benchmark for the five-year period. In light of the foregoing, the Committee also noted that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (9th percentile). In addition, the Committee considered Guggenheim’s statement that the Fund was converted from a closed-end fund in January 2012 and since the conversion has outperformed its benchmark.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Sub-Adviser from its Relationship with the Fund: The Committee reviewed the level of sub-advisory fees payable to GPIM, noting that the fees would be paid by Security Investors and do not impact the fees paid by the Fund. The Committee also compared the sub-advisory fee paid by the Adviser to the Sub-Adviser to the fees charged by the Sub-Adviser to other clients including other registered investment companies.

Economies of Scale to be Realized: The Committee recognized that, because the Sub-Adviser’s fees would be paid by the Adviser and not the Fund, the analysis of economies of scale was more appropriate in the context of the Committee’s consideration of the applicable Advisory Agreement, which was separately considered. (See “Advisory Agreements – Economies of Scale to be Realized” above.)

Overall Conclusions

Based on the foregoing, the Committee determined that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other benefits received and that the continuation of the Agreements is in the best interests of each Fund. In reaching this conclusion, no single factor was determinative and each Committee member, in the exercise of his business judgment, may attribute different weights to different factors. At the May Meeting, the Committee, constituting all of the Independent Trustees, recommended the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.
32 | THE GUGGENHEIM FUNDS ANNUAL REPORT

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
 

        Term of Office       Number of Portfolios in    
Name, Address*
and Year of Birth		   Position(s) Held
with the Trust		   and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years		   Fund Complex
Overseen		   Other Directorships
Held by Trustees
 
 
 
 
 
INDEPENDENT TRUSTEES                    
 
Randall C. Barnes
(1951)		   Trustee    Since 2014   Current: Private Investor (2001-present).

Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990).		   92   Current: Trustee, Purpose, Inc.
(2014-present).
 
Donald A. Chubb, Jr.
(1946)		   Trustee and Vice Chairman of the Board   Since 1994   Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc.(1997-present).   88   None.
 
Jerry B. Farley
(1946)		   Trustee and Vice Chairman of the Audit Committee   Since 2005   Current: President, Washburn University(1997-present).   88   Current: Westar Energy, Inc. (2004-present);Core First Bank & Trust(2000-present).
 
Roman Friedrich III
(1946)		   Trustee and Chairman of the Contracts Review Committee   Since 2014   Current: Founder and President, Roman Friedrich & Company (1998-present).   88   Current: Zincore Metals, Inc. (2009-present).
            Former: Senior Managing Director, MLV & Co. LLC (2010-2011).       Former: Mercator Minerals Ltd. (2013-2014); First. Americas Gold Corp.(2012-2014); Blue Sky Uranium Corp. (2011-2012);Axiom Gold and Silver Corp. (2011-2012);Stratagold Corp.(2003-2009); GFM Resources Ltd. (2005-2010).
 
Robert B. Karn III
(1942)		   Trustee and Chairman of the Audit Committee   Since 2014   Current: Consultant (1998-present).

Former: Arthur Andersen (1965-1997) and Managing Partner, Financial and Economic Consulting, St. Louis office (1987-1997).		   88   Current: Peabody Energy Company (2003-present);GP Natural Resource Partners, LLC (2002- present).
 
Ronald A. Nyberg
(1953)		   Trustee and Chairman of the Nominating and Governance Committee   Since 2014   Current: Partner, Nyberg & Cassioppi, LLC(2000-present).

Former: Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999).		   94   Current: Edward-Elmhurst Healthcare System(2012-present).
 
Maynard F. Oliverius
(1943)		   Trustee and Vice Chairman of the Contracts Review Committee   Since 1998   Retired.

Former: President and CEO, Stormont-Vail HealthCare (1996-2012).		   88   None.
 
Ronald E. Toupin, Jr.
(1958)		   Trustee and Chairman of the Board   Since 2014   Current: Portfolio Consultant (2010-present).   91   Former: Bennett Group of Funds (2011-2013).
            Former: Vice President, Manager and Portfolio Manager, Nuveen Asset Management(1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999);Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999).        
INTERESTED TRUSTEE                    
 
Donald C. Cacciapaglia***   
(1951)		 President, Chief Executive Officer and Trustee   Since 2012   Current: President and CEO, certain other funds in the Fund Complex (2012-present); Vice Chairman, Guggenheim Investments(2010-present).

Former: Chairman and CEO, Channel Capital Group, Inc. (2002-2010).		   220   Current: Delaware Life(2013-present); Guggenheim Life and Annuity Company(2011-present); Paragon Life Insurance Company of Indiana(2011-present).
                     

*   The business address of each Trustee is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850
**   Each Trustee serves an indefinite term, until his successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.
***   This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  33

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)
 

Name, Address*
and Year of Birth		     Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years
   
 
 
OFFICERS              
               
Joseph M. Arruda
(1966)		     Assistant Treasurer   Since 2010   Current: Assistant Treasurer, certain other funds in the Fund Complex (2006-present); Vice President, Security Investors, LLC (2010-present); CFO and Manager, Guggenheim Specialized Products, LLC (2009-present).

Former: Vice President, Security Global Investors, LLC (2010-2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010).
 
William H. Belden, III
(1965)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (2006-present); Managing Director, Guggenheim Funds Investment Advisors, LLC (2005-present).

Former: Vice President of Management, Northern Trust Global Investments (1999-2005).
 
Mark J. Furjanic
(1959)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2005-present); Assistant Treasurer, certain other funds in the Fund Complex (2008-present).

Former: Senior Manager, Ernst & Young LLP (1999-2005).
 
James Howley
(1972)		     Assistant Treasurer   Since 2014   Current: Director, Guggenheim Investments (2004-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2006-present).

Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004).
 
Amy J. Lee
(1961)		     Vice President and
Chief Legal Officer		   Since 1987
(Secretary) Since 2007
(Vice President)		   Current: Chief Legal Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).

Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012).
 
Mark E. Mathiasen
(1978)		     Secretary   Since 2014   Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
 
Michael P. Megaris
(1984)		     Assistant Secretary   Since 2014   Current: Assistant Secretary, certain other funds in the Fund Complex (April 2014-present); Associate, Guggenheim Investments (2012-present).

Former: J.D., University of Kansas School of Law (2009-2012).
 
Elisabeth Miller
(1968)		     Chief Compliance Officer   Since 2012   Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Vice President, Guggenheim Funds Distributors, LLC (March 2014-present).

Former: CCO, Guggenheim Distributors, LLC (2009-March 2014); Senior Manager, Security Investors, LLC(2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009).
 
Alison Santay
(1974)		     AML Officer   Since 2013   Current: AML Officer, certain other funds in the Fund Complex (2010-present); Director and AML Officer, Rydex Fund Services, LLC (2010-present); AML Officer, Security Investors, LLC (2010-present); Director, Shareholder Risk and Compliance, Rydex Fund Services, LLC (2004-present).

Former: AML Officer, Guggenheim Distributors, LLC (2013-March 2014).
 
Kimberly Scott
(1974)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2012-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2012-present).

Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009).
 
Bryan Stone
(1979)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (April 2014-present); Director, Guggenheim Investments (2013-present).

Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
 
John L. Sullivan
(1955)		     Chief Financial Officer and Treasurer   Since 2014   Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex(2010-present); Senior Managing Director, Guggenheim Investments (2010-present).

Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex(2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
               

*   The business address of each officer is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
**   Each officer serves an indefinite term, until his or her successor is duly elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation

34 | THE GUGGENHEIM FUNDS ANNUAL REPORT


GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)
 

Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).

Our Commitment to You
When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.

The Information We Collect About You
In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).

How We Handle Your Personal Information
As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.

Opt Out Provisions
We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.

How We Protect Privacy Online
Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.

How We Safeguard Your Personal Information
We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  35

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded)
 

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.
36 | THE GUGGENHEIM FUNDS ANNUAL REPORT


 

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9.30.2014

Guggenheim Funds Annual Report

Fundamental Alpha
Guggenheim Mid Cap Value Institutional Fund

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TABLE OF CONTENTS

DEAR SHAREHOLDER

     2
       

ECONOMIC AND MARKET OVERVIEW

     3
       

ABOUT SHAREHOLDERS’ FUND EXPENSES

     4
       

MID CAP VALUE INSTITUTIONAL FUND

     6
       

NOTES TO FINANCIAL STATEMENTS

     14
       

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     20
       

OTHER INFORMATION

     21
       

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS

     32
       

GUGGENHEIM INVESTMENTS PRIVACY POLICIES

     34

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  1

Dear Shareholder:

Security Investors, LLC (the “Investment Adviser”) is pleased to present the annual shareholder report for the Mid Cap Value Institutional Fund (the “Fund”) for the year ended September 30, 2014.

The Investment Adviser is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, a global, diversified financial services firm.

Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds 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 the Fund.

We are committed to providing innovative investment solutions and appreciate the trust you place in us.

Sincerely,

Donald C. Cacciapaglia
President
October 31, 2014

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.

Mid Cap Value Institutional Fund may not be suitable for all investors. • An investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. • The intrinsic value of the underlying stocks may never be realized, or the stock may decline in value. • Investments in small to mid- sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies.

 
2  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

ECONOMIC AND MARKET OVERVIEW (Unaudited) September 30, 2014
 

Despite market volatility rising in October, for the year ending September 30, data on everything from hiring to housing conveys that the U.S. economy is firing on all cylinders. Overcoming a first-quarter weather-related soft patch, second-quarter GDP was revised upward to 4.6%, led by business investment. Durable goods orders surged over the summer and consumer confidence was at multi-year highs, despite a lower reading for the last part of the period. With tailwinds for economic growth gathering, we could see a strong third quarter GDP reading.

September’s addition of 248,000 non-farm payroll jobs was, on the surface, at least a strong figure and certainly not something to be discounted. However, investor optimism about the report, which also showed the unemployment rate falling to 5.9%—its lowest level since 2008—masked the fact that average hourly earnings were unchanged. Economic data late in the period included disappointing factory orders, poor construction spending, and weaker-than-expected ISM manufacturing data. The most recent decline in the U.S. Conference Board Consumer Confidence Index was worrisome.

The U.S. economy is certainly doing well enough to suggest higher interest rates ahead. With quantitative easing ending in the U.S. in October 2014 and the Fed preparing investors for a higher federal funds rate, the stage is set for U.S. interest rates to move higher. However, our view is that, despite a strengthening U.S. economy, the greater risk is that interest rates head lower in the near term.

Following the “taper tantrum” last year, before rates were able to reach historical norms, the average rate on a 30-year mortgage spiked almost a full percentage point in two months—the sharpest rise since the late 1990s—resulting in an abrupt housing slowdown, which slowed the U.S. economy materially.

In addition, U.S. Treasury yields are still materially higher than those in any other developed market. The spread between 10-year U.S. Treasuries and comparable German bunds reached 157 basis points in September, its widest level since 1999, and the spread between 10-year Treasuries and 10-year Japanese government bonds was recently 189 basis points. With developments in the Middle East increasingly troubling and turbulence continuing elsewhere from Ukraine to Hong Kong, the relative price value of U.S. government bonds versus other safe haven investments should continue to be a factor keeping U.S. interest rates low.

International economic data remain weak. Euro zone economic confidence is falling as the entire region continues to battle below-target inflation. At the start of September, the European Central Bank cut interest rates and signaled their intent to launch a program to purchase asset-backed securities and covered bonds to stimulate the dismal economy. In Japan, retail sales fell month-over-month in August, while industrial production falters.

Economic data around the world confirms our view that central banks are likely to renew efforts to force liquidity into the global financial system, which in turn further supports our positive outlook for risk assets. However, positive returns are unlikely without volatility. While markets continue to rally, gains are becoming more grudging. The upward momentum in U.S. stocks has deteriorated meaningfully while credit spreads, specifically high-yield spreads, have widened significantly over the past number of weeks. While the bull market trend remains intact, as the appreciation in risk assets continues it becomes more likely that this ageing advance will, at some point, experience a correction.

For the year ended September 30, 2014, the return of the Standard & Poor’s 500® Index* (“S&P 500”) was 19.73%. The Barclays U.S. Aggregate Bond Index* returned 3.96% for the year, while the Barclays U.S. Corporate High Yield Index* returned 7.20%. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* returned 0.05%. The MSCI World Index* returned 12.22%, while the MSCI Emerging Markets Index* returned 4.30%.

The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.

*Index Definitions:

The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.

BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.

Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Barclays U.S. Corporate High Yield Index covers the universe of dollar denominated, fixed rate, non-investment grade debt, taxable corporate debt.

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 World Index (Net) is calculated with net dividends reinvested. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

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.

S&P 500® Index is a market-weighted stock market index comprised of the stocks of 500 U.S. corporations; the index is owned and maintained by Standard & Poor’s.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  3

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 March 31, 2014 and ending September 30, 2014.

The following tables illustrate a Fund’s costs in two ways:

Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”

Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.

 
4  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)  
 

                    Beginning   Ending   Expenses
        Expense     Fund     Account Value   Account Value   Paid During
        Ratio1     Return     March 31, 2014   September 30, 2014   Period2
 

Table 1. Based on actual Fund return3

                                  

Mid Cap Value Institutional Fund

       1.05 %   (4.37 )%     $1,000.00     $956.30     $5.15
 

Table 2. Based on hypothetical 5% return (before expenses)

                                  

Mid Cap Value Institutional Fund

       1.05 %   5.00 %     $1,000.00     $1,019.80     $5.32

1   Annualized and excludes expenses of the underlying funds in which the Fund invests.
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 183/365 (to reflect the one-half year period).
3   Actual cumulative return at net asset value for the period March 31, 2014 to September 30, 2014.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  5

MANAGER’S COMMENTARY (Unaudited) September 30, 2014
 

To Our Shareholders:

Guggenheim Mid Cap Value Institutional Fund (the “Fund”) is managed by a team of seasoned professionals led by James Schier, CFA, Portfolio Manager. In the following paragraphs, he discusses performance of the Fund for the fiscal year ended September 30, 2014.

For the year ended September 30, 2014, the Guggenheim Mid Cap Value Institutional Fund returned 5.53%1, compared with the 9.88% return of its benchmark, the Russell 2500 Value Index.

Strategy and Market Overview

Our investment approach focuses on understanding how companies make money and how easily they can improve returns, maintain existing high levels of profitability or benefit from change that occurs within the industries in which they operate. In today’s rapid-fire environment marked by very sharp and quick, but constrained volatility, our long-term orientation and discipline is a competitive advantage. This should become especially critical when the environment of indiscriminant valuation expansion subsides, and fundamentals once again become a more dominant factor in the market.

Performance Review

Stock selection in Energy sector was the leading contributor to performance. Even though the Fund has an overweighting in the Energy sector, the overweight detracted from return, since the sector provided the least performance in the benchmark amid a general commodities selloff.

Within the Energy sector, Whiting Petroleum Corp. was a leading individual contributor for the year. The company has exposure to two of the most productive shale fields in the U.S. and announced during the period that it would acquire Kodiak Oil and Gas Corp. It benefited from solid execution and favorable industry dynamics. Over the past several quarters, the Fund has also been slowly shifting its energy focus from almost exclusively exploration and production (E&P) shale players to more of a balance between E&P companies and service companies. The land grab for shale properties has matured, and the subsequent development of those fields should increase business for services firms.

Stock selection in the Information Technology sector was the second most important contributor to Fund return. One tech holding, Computer Sciences Corp., was the leading individual contributing stock for the year. It’s in the technology services and outsourcing business and made solid progress in repositioning for growth and improved execution. Another contributor for the year, RF Micro Devices, Inc., remains responsive to the substantial operating leverage and synergy from its merger with TriQuint Semiconductor, Inc. in the period.

Hurting Fund performance for the year was stock selection in Financials, Materials and Industrials.

A leading individual detractor in the Financials sector was Ocwen Financial Corp., a mortgage servicing company. It was down as a result of a delay in a proposed purchase of a large servicing portfolio and an investigation of the company’s servicing practices and intercompany relationships by the New York Director of Financial Services.

Stock selection within the Materials sector was also unfavorable. The position hurting most was Coeur Mining, Inc., which has suffered due to the weak pricing environment for precious metals and the general selloff in commodities. We continue to hold on to this name because we see it as a good diversifier with attractive assets and potential buoyancy coming from slowing global growth and economic uncertainty.

Stock selection in Industrials was another detractor. We have a significant overweight to the Industrials sector, and one holding was a large booster to performance: Quanta Services, Inc., in the engineering and construction sector. We like the prospects of this company as the U.S. faces the need to upgrade infrastructure.

 
6  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

MANAGER’S COMMENTARY (Unaudited) (concluded) September 30, 2014
 

Portfolio Positioning

The largest relative sector exposures for the year were an underweight in Financials and Utilities and an overweight in Industrials.

Within Financials, REITs (real estate investment trusts) continue to perform well, and the strategy’s underweighting in this industry has been a difficult bias to overcome. Over the period, the Fund also reduced its exposure to the reinsurance market, which has been under pressure as participants outside the industry have entered to provide capital in the search for yield.

The portfolio’s underweight to Utilities was a positive contributor during the period. We have been overweight this sector in the past, but currently view valuations as unattractive. Within the sector, we like companies that have meaningful exposure to non-regulated businesses, such as MDU Resources Group, Inc., and Black Hills Corp.

The overweight to Industrials detracted from performance over the year. This is a large and eclectic sector in which we have diverse holdings. We believe the portfolio is well positioned to benefit from the growing cap-ex and construction environment tied to infrastructure renewal and reindustrialization in the U.S.

Portfolio and Market Outlook

For the most part, the market behaved in a very defensive manner over the past year. The best performing areas have been larger companies, REITs and utilities. Of late, the strengthening of the dollar, primarily from concerns about global (non-U.S.) growth, has only added to the hesitancy of the market. Even if the global economy were to prove disappointing, the low returns offered by insignificant fixed income investment opportunities (the 10-year U.S. government bond yields around 2.5%) should continue to make equities an attractive alternative for incremental investment dollars.

Our portfolios tend to reflect a bias toward companies with balance sheet quality. We continue to find niche companies with what we believe to be attractive growth opportunities, and, as such, are constructive on the outlook.

Performance displayed represents past performance which is no guarantee of future results.
1 Performance figures do not reflect taxes that a shareholder would pay on distributions or the redemption of shares.

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  |  7

PERFORMANCE REPORT AND FUND PROFILE (Unaudited) September 30, 2014
 

MID CAP VALUE INSTITUTIONAL FUND

OBJECTIVE:    Seeks long-term growth of capital.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Cumulative Fund Performance*


Inception Date:
 
July 11, 2008
       
Ten Largest Holdings (% of Total Net Assets)
 

Hanover Insurance Group, Inc.

   4.2 %

Computer Sciences Corp.

   2.7 %

Covanta Holding Corp.

   2.6 %

Bunge Ltd.

   2.0 %

Orbital Sciences Corp.

   2.0 %

Reinsurance Group of America, Inc. — Class A

   2.0 %

Superior Energy Services, Inc.

   2.0 %

Cameco Corp.

   2.0 %

Northern Trust Corp.

   1.9 %

Owens-Illinois, Inc.

   1.9 %
 
Top Ten Total   23.3 %
 

“Ten Largest Holdings” exclude any temporary cash or derivative investments.

Average Annual Returns*
Periods Ended September 30, 2014

                  Since
                  Inception
      1 Year     5 Year     (07/11/08)
 
 

Mid Cap Value Institutional Fund

   5.53%     11.80%     11.46%
 
 

Russell 2500 Value Index

   9.88%     15.16%     10.89%
 

*   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.

 
8  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

SCHEDULE OF INVESTMENTS   September 30, 2014
 
MID CAP VALUE INSTITUTIONAL FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 95.8%              
               
FINANCIAL - 25.5%              

Hanover Insurance Group, Inc.

     407,223   $ 25,011,637  

Reinsurance Group of America, Inc. — Class A

     148,733     11,917,975  

Northern Trust Corp.

     167,370     11,386,181  

American Financial Group, Inc.

     161,230     9,333,605  

WR Berkley Corp.

     139,770     6,681,006  

Endurance Specialty Holdings Ltd.

     117,780     6,499,100  

Alexandria Real Estate Equities, Inc.

     77,170     5,691,288  

BioMed Realty Trust, Inc.

     277,180     5,599,036  

Starwood Property Trust, Inc.

     247,770     5,441,030  

Popular, Inc.*

     175,920     5,178,205  

Wintrust Financial Corp.

     102,750     4,589,843  

SVB Financial Group*

     40,730     4,565,425  

Home Loan Servicing Solutions Ltd.

     201,820     4,276,566  

FirstMerit Corp.

     241,765     4,255,064  

First Niagara Financial Group, Inc.

     499,510     4,160,918  

City National Corp.

     51,810     3,920,463  

Zions Bancorporation

     124,370     3,614,192  

Huntington Bancshares, Inc.

     347,910     3,385,164  

First Midwest Bancorp, Inc.

     198,559     3,194,814  

Employers Holdings, Inc.

     165,394     3,183,835  

Symetra Financial Corp.

     130,670     3,048,531  

Eaton Vance Corp.

     79,510     2,999,912  

Hancock Holding Co.

     89,580     2,871,039  

Lexington Realty Trust

     193,090     1,890,351  

Blackhawk Network Holdings, Inc.*

     54,870     1,777,788  

Ocwen Financial Corp.*

     67,785     1,774,611  

Redwood Trust, Inc.

     101,306     1,679,653  

Radian Group, Inc.

     104,750     1,493,735  

Argo Group International Holdings Ltd.

     29,660     1,492,195  

StanCorp Financial Group, Inc.

     23,093     1,459,016  
             
Total Financial           152,372,178  
             
               
INDUSTRIAL - 15.4%              

Covanta Holding Corp.

     728,020     15,448,584  

Orbital Sciences Corp.*

     432,098     12,012,324  

Owens-Illinois, Inc.*

     434,370     11,315,339  

Sonoco Products Co.

     265,606     10,435,659  

Aegion Corp. — Class A*

     271,015     6,030,084  

FLIR Systems, Inc.

     187,020     5,861,207  

Rock-Tenn Co. — Class A

     121,000     5,757,180  

URS Corp.

     98,427     5,670,379  

Gentex Corp.

     178,920     4,789,688  

Berry Plastics Group, Inc.*

     184,210     4,649,460  

Huntington Ingalls Industries, Inc.

     29,150     3,037,722  

General Cable Corp.

     165,988     2,503,099  

ArcBest Corp.

     43,710     1,630,383  

UTI Worldwide, Inc.*

     72,501     770,686  

Advanced Energy Industries, Inc.*

     32,850     617,252  

II-VI, Inc.*

     48,350     569,080  

Sanmina Corp.*

     25,980     541,943  

AZZ, Inc.

     8,272     345,521  
             
Total Industrial           91,985,590  
             
               
CONSUMER, NON-CYCLICAL - 14.7%              

Bunge Ltd.

     144,050     12,133,332  

Quanta Services, Inc.*

     263,260     9,553,705  

Hormel Foods Corp.

     174,510     8,968,069  

Navigant Consulting, Inc.*

     598,610     8,326,665  

DeVry Education Group, Inc.

     192,833     8,255,180  

MEDNAX, Inc.*

     127,606     6,995,361  

Kindred Healthcare, Inc.

     336,752     6,532,989  

Hologic, Inc.*

     254,072     6,181,572  

ICF International, Inc.*

     171,165     5,270,170  

Ingredion, Inc.

     66,610     5,048,372  

Towers Watson & Co. — Class A

     27,361     2,722,420  

Emergent Biosolutions, Inc.*

     96,810     2,063,021  

Universal Health Services, Inc. — Class B

     17,910     1,871,595  

Globus Medical, Inc. — Class A*

     81,960     1,612,153  

Grand Canyon Education, Inc.*

     36,950     1,506,452  

Alere, Inc.*

     17,313     671,398  
             
Total Consumer, Non-cyclical           87,712,454  
             
               
TECHNOLOGY - 9.3%              

Computer Sciences Corp.

     261,880     16,013,961  

IXYS Corp.

     919,109     9,650,645  

Maxwell Technologies, Inc.*

     815,951     7,115,093  

Allscripts Healthcare Solutions, Inc.*

     318,200     4,268,653  

Teradyne, Inc.

     161,420     3,129,934  

Take-Two Interactive Software, Inc.*

     134,840     3,110,759  

KEYW Holding Corp.*

     275,670     3,051,667  

Diebold, Inc.

     80,750     2,852,090  

Semtech Corp.*

     63,440     1,722,396  

IPG Photonics Corp.*

     22,990     1,581,252  

iGATE Corp.*

     42,870     1,574,186  

ManTech International Corp. — Class A

     53,700     1,447,215  
             
Total Technology           55,517,851  
             
               
CONSUMER, CYCLICAL - 7.6%              

Brown Shoe Company, Inc.

     382,938     10,389,107  

Chico’s FAS, Inc.

     391,700     5,785,409  

Oshkosh Corp.

     118,640     5,237,956  

DR Horton, Inc.

     222,930     4,574,524  

Foot Locker, Inc.

     60,070     3,342,896  

Wendy’s Co.

     378,990     3,130,457  

Ryland Group, Inc.

     83,560     2,777,534  

United Stationers, Inc.

     67,006     2,517,416  

Ascena Retail Group, Inc.*

     186,530     2,480,849  

Visteon Corp.*

     21,060     2,048,085  

WESCO International, Inc.*

     20,894     1,635,164  

Cabela’s, Inc.*

     26,194     1,542,827  
             
Total Consumer, Cyclical           45,462,224  
             
               
UTILITIES - 7.3%              

AGL Resources, Inc.

     176,610     9,067,157  

Pinnacle West Capital Corp.

     165,610     9,048,931  

UGI Corp.

     237,853     8,108,409  

Westar Energy, Inc.

     171,390     5,847,827  

Great Plains Energy, Inc.

     188,955     4,567,042  

Black Hills Corp.

     91,159     4,364,693  

Avista Corp.

     48,960     1,494,749  

MDU Resources Group, Inc.

     46,677     1,298,087  
             
Total Utilities           43,796,895  
             

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  9

SCHEDULE OF INVESTMENTS (concluded)   September 30, 2014
 
MID CAP VALUE INSTITUTIONAL FUND    

      SHARES     VALUE  
 
               
ENERGY - 7.1%              

Superior Energy Services, Inc.

     358,800   $ 11,793,756  

Whiting Petroleum Corp.*

     105,561     8,186,255  

Oasis Petroleum, Inc.*

     149,510     6,251,013  

Patterson-UTI Energy, Inc.

     175,690     5,715,196  

Resolute Energy Corp.*

     741,910     4,651,776  

Sanchez Energy Corp.*

     158,557     4,163,707  

Denbury Resources, Inc.

     136,640     2,053,699  

HydroGen Corp.*,†††,2

     1,265,700     1  
             
Total Energy           42,815,403  
             
               
BASIC MATERIALS - 5.1%              

Cameco Corp.

     667,520     11,788,402  

Landec Corp.*

     462,290     5,663,053  

Royal Gold, Inc.

     78,908     5,124,286  

Olin Corp.

     155,694     3,931,274  

Coeur Mining, Inc.*

     489,941     2,430,107  

Allied Nevada Gold Corp.*

     422,810     1,399,501  
             
Total Basic Materials           30,336,623  
             
               
COMMUNICATIONS - 3.9%              

DigitalGlobe, Inc.*

     343,031     9,776,383  

Scholastic Corp.

     166,890     5,393,885  

Finisar Corp.*

     307,790     5,118,548  

Liquidity Services, Inc.*

     238,470     3,278,963  
             
Total Communications           23,567,779  
             
Total Common Stocks              

(Cost $492,170,854)

           573,566,997  
             
               
CONVERTIBLE PREFERRED STOCKS††† - 0.0%              

Thermoenergy Corp.*,1,3

     793,750     11,589  
             
Total Convertible Preferred Stocks              

(Cost $757,980)

           11,589  
             
               
SHORT TERM INVESTMENTS† - 4.2%              

Dreyfus Treasury Prime

              

Cash Management Fund

     24,983,810     24,983,810  
             
Total Short Term Investments              

(Cost $24,983,810)

           24,983,810  
             

      FACE
AMOUNT		        
             
               
CONVERTIBLE BONDS†† - 0.4%              
INDUSTRIAL - 0.4%              

DryShips, Inc.

              

5.00% due 12/01/14

   $ 2,725,000     2,694,344  
             
Total Convertible Bonds              

(Cost $2,670,528)

           2,694,344  
             
Total Investments - 100.5%              

(Cost $520,583,172)

         $ 601,256,740  
             
Other Assets & Liabilities, net - (0.5)%           (3,156,103 )
             
Total Net Assets - 100.0%         $ 598,100,637  

*   Non-income producing security.
†   Value determined based on Level 1 inputs, unless otherwise 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   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   Affiliated issuers — See Note 9.
3   Illiquid security.

 
10  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

  MID CAP VALUE INSTITUTIONAL FUND

STATEMENT OF ASSETS AND LIABILITIES
 
September 30, 2014        
         

ASSETS:

        

Investments in unaffiliated issuers, at value

        

(cost $520,580,641)

     $ 601,256,739

Investments in affiliated issuers, at value

        

(cost $2,531)

       1
       

Total investments

        

(cost $520,583,172)

       601,256,740

Prepaid expenses

       23,607

Cash

       6,084

Receivables:

        

Securities sold

       1,969,639

Dividends

       967,878

Fund shares sold

       470,139

Interest

       45,417

Foreign taxes reclaim

       5,835
       

Total assets

       604,745,339
       
 

LIABILITIES:

        

Payable for:

        

Securities purchased

       5,184,036

Fund shares redeemed

       954,892

Management fees

       381,132

Fund accounting/administration fees

       48,276

Transfer agent/maintenance fees

       22,227

Trustees’ fees*

       2,300

Miscellaneous

       51,839
       

Total liabilities

       6,644,702
       

NET ASSETS

     $ 598,100,637
       
         

NET ASSETS CONSIST OF:

        

Paid in capital

     $ 457,585,054

Undistributed net investment income

       2,150,653

Accumulated net realized gain on investments

       57,691,362

Net unrealized appreciation on investments

       80,673,568
       

Net assets

     $ 598,100,637

Capital shares outstanding

       46,284,330

Net asset value per share

       $12.92
       

STATEMENT OF OPERATIONS
 
Year Ended September 30, 2014
           

INVESTMENT INCOME:

          
Dividends (net of foreign withholding tax of $38,430) from unaffiliated issuers     $ 8,448,294  

Interest

       550,923  
         

Total investment income

       8,999,217  
         
 

EXPENSES:

          

Management fees

       4,596,679  

Transfer agent/maintenance fees

       659,284  

Fund accounting/administration fees

       582,239  

Trustees’ fees*

       62,012  

Tax expense

       16,368  

Custodian fees

       8,787  

Miscellaneous

       522,630  
         

Total expenses

       6,447,999  
         

Net investment income

       2,551,218  
         
 

NET REALIZED AND UNREALIZED GAIN (LOSS):

          

Net realized gain (loss) on:

          

Investments in unaffiliated issuers

       73,185,836  

Options written

       449,896  
         

Net realized gain

       73,635,732  
         

Net change in unrealized appreciation (depreciation) on:

          

Investments in unaffiliated issuers

       (43,785,893 )

Investments in affiliated issuers

       (8,859 )

Options written

       (37,743 )
         

Net change in unrealized appreciation (depreciation)

       (43,832,495 )
         

Net realized and unrealized gain

       29,803,237  
         

Net increase in net assets resulting from operations

     $ 32,354,455  
         

* Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  11

  MID CAP VALUE INSTITUTIONAL FUND

STATEMENTS OF CHANGES IN NET ASSETS
 
  Year Ended       Year Ended  
  September 30,       September 30,  
  2014       2013  
 
                 
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:                
Net investment income $ 2,551,218       $ 2,693,163  
Net realized gain on investments   73,635,732         41,121,749  
Net change in unrealized appreciation (depreciation) on investments   (43,832,495 )       88,465,578  
 
Net increase in net assets resulting from operations   32,354,455         132,280,490  
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM:                
Net investment income   (3,106,999 )       (1,542,680 )
Net realized gains   (35,348,105 )       (46,688,296 )
 
Total distributions to shareholders   (38,455,104 )       (48,230,976 )
 
                 
CAPITAL SHARE TRANSACTIONS:                
Proceeds from sale of shares   164,229,754         136,201,875  
Distributions reinvested   23,335,832         27,245,300  
Cost of shares redeemed   (154,829,343 )       (166,772,360 )
 
Net increase (decrease) from capital share transactions   32,736,243         (3,325,185 )
 
Net increase in net assets   26,635,594         80,724,329  
                 
NET ASSETS:                

Beginning of year

   571,465,043         490,740,714  
 

End of year

 $ 598,100,637       $ 571,465,043  
 
Undistributed net investment income at end of year $ 2,150,653       $ 3,072,708  
 
                 
CAPITAL SHARE ACTIVITY:                
Shares sold   12,370,911         11,673,620  
Shares issued from reinvestment of distributions   1,834,578         2,629,855  
Shares redeemed   (11,576,179 )       (14,131,954 )
 
Net increase in shares   2,629,310         171,521  
 

 
12  |  THE GUGGENHEIM FUNDS ANNUAL REPORT SEE NOTES TO FINANCIAL STATEMENTS.

  MID CAP VALUE INSTITUTIONAL FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

    Year Ended       Year Ended       Year Ended       Year Ended       Year Ended  
    September 30,       September 30,       September 30,       September 30,       September 30,  
Institutional Class   2014       2013       2012       2011       2010  
 
Per Share Data                                                          
Net asset value, beginning of period       $13.09           $11.29           $9.97           $11.34           $10.49  
 
Income (loss) from investment operations:                                                          
Net investment income (loss)a       .06           .06           .03           .04           .08  
Net gain (loss) on investments (realized and unrealized)       .65           2.90           2.30           (.87 )         1.13  
       
Total from investment operations       .71           2.96           2.33           (.83 )         1.21  
 
Less distributions from:                                                          
Net investment income       (.07 )         (.04 )         (.04 )         (.06 )         (.01 )
Net realized gains       (.81 )         (1.12 )         (.97 )         (.48 )         (.35 )
       
Total distributions       (.88 )         (1.16 )         (1.01 )         (.54 )         (.36 )
 
Net asset value, end of period       $12.92           $13.09           $11.29           $9.97           $11.34  
       
                                                           
 
Total Returnc       5.53 %         28.89 %         24.96 %         (8.05 %)         11.76 %
 
Ratios/Supplemental Data                                                          
Net assets, end of period (in thousands)     $ 598,101         $ 571,465         $ 490,741         $ 472,266         $ 514,447  
 
Ratios to average net assets:                                                          
Net investment income (loss)       0.42 %         0.51 %         0.30 %         0.34 %         0.78 %
Total expensesd       1.05 %         1.01 %         1.01 %         0.98 %         0.95 %
Net expenses       1.05 %         1.01 %         0.98 %b         0.90 %b         0.90 %b
 
Portfolio turnover rate       41 %         24 %         33 %         38 %         20 %

a   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
b   Net expense information reflects the expense ratios after expense waives and reimbursements, as applicable.
c   Total return does not reflect the impact of any applicable sales charges and has not been annualized.
d   Does not include expenses of the underlying funds in which the fund invests.

 
SEE NOTES TO FINANCIAL STATEMENTS. THE GUGGENHEIM FUNDS ANNUAL REPORT  |  13


NOTES TO FINANCIAL STATEMENTS
 

1. Organization and Significant Accounting Policies

Organization

Guggenheim Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.

The Trust offers a combination of four separate classes of shares, A-Class shares, B-Class shares, C-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. Prior to February 22, 2011, the maximum sales charge was 5.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”), if shares are redeemed within 12 months of purchase. B-Class shares were offered without a front-end sales charge, but were subject to a CDSC of up to 5% for five years and convert to A-Class shares after eight years. Effective January 4, 2010, subscriptions for B-Class shares are no longer accepted. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a CDSC. At September 30, 2014, the Trust consisted of eighteen Funds.

This report covers the Mid Cap Value Institutional Fund (the “Fund”) while the other funds are contained in separate reports. The Fund was previously a series (“Predecessor Fund”) of Security Equity Fund, a different registered open-end investment company, which was organized as a Kansas corporation. In January 2014, at a special meeting of shareholders, the shareholders of the Predecessor Fund approved the reorganization of the Predecessor Fund with and into the Fund, a corresponding “shell” series of the Trust. The Fund succeeded to the accounting and performance history of the Predecessor Fund. Any such historical information provided for the Fund that relates to periods prior to January 28, 2014, therefore, is that of the Predecessor Fund.

Guggenheim Investments (“GI”) provides advisory services, and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.

Significant Accounting Policies

The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.

The NAV of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.

A. The Board of Trustees of the Fund (the “Board”) has adopted policies and procedures for the valuation of the Fund’s investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Fund’s securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Fund’s officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.

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 a given day, the security is valued at the closing bid price on that day.

Open-end investment companies (“Mutual Funds”) are valued at their NAV as of the close of business, on the valuation date.


 
14  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

NOTES TO FINANCIAL STATEMENTS (continued)
 

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 are valued at amortized cost, which approximates market value.

Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; and (ii) obtaining other information and considerations, including current values in related markets.

B. The Fund 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 Fund 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 Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities before the settlement date.

C. Upon the purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund upon exercise increases by the premium originally paid.

When the Fund writes (sells) an option, an amount equal to the premium received is entered in that 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 a written option expires, or if the 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).

D. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from REITs is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.

E. Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.

F. Under the fee arrangement with the custodian, the Fund 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 September 30, 2014, there were no earnings credits received.

The Fund may leave cash overnight in its cash account with the custodian. Periodically, the Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate.

G. Under the Fund’s organizational documents, its Trustees and Officers 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 Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

2. Financial Instruments

As part of its investment strategy, the Fund utilizes derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of the amounts recognized in the Statement of Assets and Liabilities.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  15

NOTES TO FINANCIAL STATEMENTS (continued)
 

An option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security (put option) or the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security (call option) at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid. The risk in writing a call option is that a Fund may incur a loss if the market price of the underlying security increases and the option is exercised. The risk in writing a 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 may be an imperfect correlation between the movement in prices of options and the underlying securities and 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 derivative instruments, the Fund is required to maintain collateral in various forms. The Fund uses, where appropriate, depending on the financial instrument utilized and the broker involved, margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or the repurchase agreements allocated to the Fund.

The Trust has established counterparty credit guidelines and enters into transactions only with financial institutions of investment grade or better. The Trust monitors the counterparty credit risk.

3. Fees and Other Transactions with Affiliates

Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at an annualized rate of 0.75% of the average daily net assets of the Fund.

RFS provides transfer agent services to the Fund for fees calculated at the rates below, which are assessed to the applicable class of the Fund. For these services, RFS receives the following:

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

† Not subject to Fund during first twelve months of operations.

RFS also acts as the administrative agent for the Fund, and as such performs administrative functions and the bookkeeping, accounting and pricing functions for the Fund. For these services, RFS receives 0.095% of the average daily net assets of the Fund. The minimum annual charge for fund accounting/administrative fees is $25,000.

RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.

Certain trustees and officers of the Trust are also officers of GI, RFS and GFD.

4. Fair Value Measurement

In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

 
16  |  THE GUGGENHEIM FUNDS ANNUAL REPORT


NOTES TO FINANCIAL STATEMENTS (continued)
 

The following table summarizes the inputs used to value the Fund’s net assets at September 30, 2014:

      Level 1       Level 2       Level 3          
      Investments       Investments       Investments          
      In Securities       In Securities       In Securities       Total
 
Assets                                      
Mid Cap Value Institutional Fund       $598,550,806         $2,694,344         $11,590         $601,256,740

Financial assets and liabilities categorized as Level 2 consist of fixed income investments. Independent pricing services are used to value a majority of the Fund’s investments. When values are not available from a pricing service, they may be computed by the Fund’s investment adviser or an affiliate. In any event, values may be determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information and analysis.

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in the investment’s valuation changes. The Fund recognizes transfers between the levels as of the beginning of the period.

For the year ended September 30, 2014, there were no transfers between levels.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

5. Derivative Investment Holdings Categorized by Risk Exposure

U.S. GAAP requires disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.

The Fund utilized options to minimally hedge the Fund’s portfolio to maintain exposure to the equity markets, create liquidity and to achieve leveraged exposure. As of September 30, 2014, the Fund did not hold any derivatives.

The following is a summary of the location of derivative investments on the Fund’s Statement of Operations for the year ended September 30, 2014:

Derivative Investment Type   Location of Gain (Loss) on Derivatives
 
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 Fund’s realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized on the Statement of Operations categorized by primary risk exposure for the year ended September 30, 2014:

Realized Gain (Loss) on Derivative Investments Recognized on the Statement of Operations
 
      Options            
      Written Equity            
Fund     Contracts       Total  
 
Mid Cap Value Institutional Fund       $449,896         $449,896  
                     
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statement of Operations
 
      Options            
      Written Equity            
Fund     Contracts       Total  
 
Mid Cap Value Institutional Fund       $(37,743 )       $(37,743 )

6. Federal Income Tax Information

The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.

Tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken, or to be taken, on Federal income tax returns for all open

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  17


NOTES TO FINANCIAL STATEMENTS (continued)
 

tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

The RIC Modernization Act of 2010 was signed into law on December 22, 2010, and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Fund was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010. However, the Fund did not incur or carryforward any capital losses for the year ended September 30, 2014.

One of the more prominent changes addresses capital loss carryforwards. The Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred 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.

The tax character of distributions paid during the year ended September 30, 2014 was as follows:

    Ordinary   Long-Term   Total
Fund   Income   Capital Gain   Distributions
 
Mid Cap Value Institutional Fund   $6,118,621   $32,336,483   $38,455,104

The tax character of distributions paid during the year ended September 30, 2013 was as follows:

      Ordinary     Long-Term     Total
Fund     Income     Capital Gain     Distributions
 
Mid Cap Value Institutional Fund       $2,656,847       $45,574,129       $48,230,976

Note: For federal income tax purposes, short term capital gain distributions are treated as ordinary income distributions.

The tax character of distributable earnings/(accumulated losses) at September 30, 2014 was as follows:

    Undistributed     Undistributed     Accumulated     Net Unrealized     Total
    Ordinary     Long-Term     Capital and     Appreciation/     Accumulated
Fund   Income     Capital Gain     Other Losses     (Depreciation)*     Earnings
 
Mid Cap Value Institutional Fund     $5,649,717             $54,797,145             $              —             $80,068,721             $140,515,583

* Any differences between book-basis and tax-basis unrealized appreciation (depreciation) are attributable primarily to the tax deferral of wash sale losses, the differences between book and tax basis passive foreign investment companies

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 losses due to wash sales, reclassifications due to real estate investment trusts (REIT), the “mark-to -market” of certain passive foreign investment companies (PFICs) for tax purposes, and utilization of earnings and profits on shareholder redemptions. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise.

On the Statement of Assets and Liabilities the following adjustments were made for permanent book/tax differences:

              Undistributed       Accumulated Net  
              Net Investment       Realized  
      Paid-In Capital     Income       (Loss)  
 
Mid Cap Value Institutional Fund       $7,660,840       $(366,274 )       $(7,294,566 )

At September 30, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:

              Tax     Tax       Net
      Tax     Unrealized     Unrealized       Unrealized
Fund     Cost     Gain     Loss       Gain/(Loss)
 
Mid Cap Value Institutional Fund       $521,188,019       $116,681,240       $(36,612,519 )       $80,068,721

 
18  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  

NOTES TO FINANCIAL STATEMENTS (concluded)
 

7. Securities Transactions

For the year ended September 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:

Fund       Purchases       Sales
 
Mid Cap Value Institutional Fund       $240,596,720       $254,616,857

8. Options Written

Information as to options written by the Fund during the year ended September 30, 2014, and options outstanding at period end is provided below:

Written Call Options                
  Number of       Premium  
Mid Cap Value Institutional Fund contracts       amount  
 
Balance at September 30, 2013   517       $ 174,748  
Options Written   731         179,216  
Options terminated in closing purchase transactions   —         —  
Options expired   (1,248 )       (353,964 )
Options exercised   —         —  
 
Balance at September 30, 2014   —       $ —  
                 
Written Put Options                
  Number of       Premium  
Mid Cap Value Institutional Fund contracts       amount  
 
Balance at September 30, 2013   —       $ —  
Options Written   715         95,933  
Options terminated in closing purchase transactions   —         —  
Options expired   (715 )       (95,933 )
Options exercised   —         —  
 
Balance at September 30, 2014   —       $ —  

9. 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 September 30, 2014 in which the portfolio company is an “affiliated person” are as follows:

          Value                     Value       Shares     Investment
Fund   Security     09/30/13     Additions     Reductions     09/30/14       09/30/14     Income
 
Mid Cap Value Institutional Fund   Common Stock:                                                
    HydroGen Corp.     $ 8,860     $ —     $ —     $ 1       1,265,700     $ —
 
    Total     $ 8,860     $ —     $ —     $ 1       1,265,700     $ —

10. Other Liabilities

The Fund wrote put option contracts through Lehman Brothers Inc., (“LBI”) that were exercised prior to the option contracts’ expiration and prior to the bankruptcy filing by LBI, during September, 2008. However, these transactions have not settled and the securities have not been delivered to the Fund as of September 30, 2014.

Although the ultimate resolution of these transactions is uncertain, the Fund has recorded a liability on its books equal to the difference between the strike price on the put options and the market price of the underlying security on the exercise date. The amount of the liability recorded by the Fund as of September 30, 2014 was $15,940.


 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  19


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

The Board of Trustees and Shareholders
of Guggenheim Funds Trust

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Guggenheim Mid Cap Value Institutional Fund (one of the series constituting the Guggenheim Funds Trust) (the “Fund”) as of September 30, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Guggenheim Mid Cap Value Institutional Fund (one of the series constituting the Guggenheim Funds Trust) at September 30, 2014, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.


McLean, Virginia
November 25, 2014
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT


OTHER INFORMATION (Unaudited)
 

Tax Information

This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.

Of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following fund had the corresponding percentages qualify for the dividends received deduction for corporations:

Fund   % Qualifying
 
Mid Cap Value Institutional Fund   100.00 %

Additionally, the following amounts of taxable ordinary income dividends paid during the fiscal year qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003:

Fund   % Qualifying
 
Mid Cap Value Institutional Fund   100.00 %

Additionally, of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2014, the following fund had the corresponding percentages qualify as interest related dividends and qualified short-term capital gains as permitted by IRC Section 871(k)(1) and IRC Section 871(k)(2), respectively:

Fund   % Qualifying   % STCG Qualifying
 
Mid Cap Value Institutional Fund   0.00 %   100.00 %

With respect to the taxable year ended September 30, 2014, the Fund hereby designates as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year.

              LT Capital Gain
      LT Capital Gains       Using Proceeds from
Fund     Dividends       Shareholder Redemptions
 
Mid Cap Value Institutional Fund     $32,336,483       $7,660,840

In January 2015, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by you in the calendar year 2014.

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 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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules Information

The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  21


OTHER INFORMATION (Unaudited) (continued)
 

Office Locations

The offices of Guggenheim Investments can be found in the following locations:

330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)

Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850

9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210

Distributor change
Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds was consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD serves as the Funds’ distributor.

GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.

The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.

Guggenheim Funds Trust
Guggenheim Funds Trust (the “Trust”), which was organized as a Delaware statutory trust on November 8, 2013, is registered with the Securities and Exchange Commission (“SEC”) as an investment company. The Trust is an open-end management investment company that, upon the demand of the investor, must redeem its shares and pay the investor the next calculated NAV. The Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”), Guggenheim Large Cap Value Fund (“Large Cap Value Fund”), Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”), Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional Fund”), Guggenheim Small Cap Value Fund (“Small Cap Value Fund”), Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core Fund”), Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth Fund”) and Guggenheim World Equity Income Fund (“World Equity Income Fund”) (collectively, the “Funds”) were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund (the “Predecessor Corporations”), different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at special meetings of shareholders, the shareholders of each Predecessor Fund approved the reorganization of each Predecessor Fund with and into a corresponding “shell” series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any such historical information provided for a series of the Trust that relates to periods prior to January 28, 2014, therefore, is that of the corresponding Predecessor Fund.

Effective January 28, 2014, the Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”), Guggenheim High Yield Fund (“High Yield Fund”), Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”), Guggenheim Limited Duration Fund (“Limited Duration Fund”), Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”), Guggenheim Municipal Income Fund (“Municipal Income Fund”), and Guggenheim Total Return Bond Fund (“Total Return Bond Fund”), which were series of Security Income Fund, a Kansas corporation, reorganized with and into corresponding series of Guggenheim Funds Trust, a Delaware Statutory Trust (each, a “Reorganization”). Upon completion of each Reorganization, the respective share classes of each Fund assumed the performance, financial and other historical information of those of the corresponding predecessor fund.
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT


OTHER INFORMATION (Unaudited) (continued)
 

At a meeting of shareholders held on January 8, 2014, shareholders of the Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”) approved the reorganization of the Fund from a Kansas corporation to a Delaware statutory trust. After the close of business on September 23, 2014, the Fund, which is a series of Security Equity Fund, a Kansas corporation, will reorganize with and into a corresponding “shell” fund (the “New Fund”), which is a series of Guggenheim Funds Trust, a Delaware statutory trust. Upon completion of the Reorganization, shareholders of the Fund will own shares of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the New Fund will assume the performance, financial and other historical information of that of the Fund. Once the Reorganization is completed, the Fund will no longer be offered as a series of Security Equity Fund.

Report of the Guggenheim Funds Trust Contracts Review Committee

Guggenheim Funds Trust (the “Trust”) was organized as a Delaware statutory trust on November 8, 2013, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). Effective January 28, 2014, the Trust is the successor of all of the existing and active series of Security Equity Fund (except for Guggenheim Alpha Opportunity Fund),1 Security Large Cap Value Fund, Security Mid Cap Growth Fund and Security Income Fund, each, a Kansas corporation (collectively, the “Corporations”), following the reorganization of each series of the Corporations with and into a corresponding “shell” series of the Trust (the “Reorganizations”). The Reorganizations, which were approved by the Boards of Directors of the Corporations (collectively, the “Board of Directors” or the “Predecessor Board” and the members of the Board of Directors individually, “Directors”), including the Directors who are not “interested persons,” as defined by the 1940 Act, of the Corporations (the “Independent Directors”), and by shareholders, were intended to, among other things, take advantage of various benefits available to registered investment companies organized as Delaware statutory trusts, including, but not limited to, Delaware’s comprehensive body of law related to investment companies which may reduce legal uncertainty and risk.

The Trust includes the following series (the “New Series”), each of which assumed the accounting and performance histories of the corresponding predecessor fund (a “Predecessor Fund” and collectively, the “Predecessor Funds”):

  •   Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”)2   •   Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”)
  •   Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”)   •   Guggenheim High Yield Fund (“High Yield Fund”)
  •   Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”)   •   Guggenheim Large Cap Value Fund (“Large Cap Value Fund”)
  •   Guggenheim Limited Duration Fund (“Limited Duration Fund”)   •   Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”)
  •   Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional”)   •   Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”)
  •   Guggenheim Municipal Income Fund (“Municipal Income Fund”)   •   Guggenheim Small Cap Value Fund (“Small Cap Value Fund”)
  •   Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth”)   •   Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core”)
  •   Guggenheim Total Return Bond Fund (“Total Return Bond Fund”)   •   Guggenheim World Equity Income Fund (“World Equity Income Fund”)

With the exception of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund, Security Investors, LLC, also known as Guggenheim Investments (“Security Investors”) and an indirect subsidiary of Guggenheim Partners, LLC, a global diversified financial services firm (“Guggenheim Partners”), serves as investment manager to each series of the Trust. (Guggenheim Partners, Security Investors, Guggenheim Partners Investment Management, LLC (“GPIM”) and their affiliates may be referred to herein collectively as “Guggenheim.”) In this connection, the Trust and Security Investors have entered into four separate investment management agreements which group the New Series of the Trust to correspond with the Predecessor Funds that were series of a common Corporation: (i) Mid Cap Value Fund, Mid Cap Value Institutional, Small Cap Value Fund, StylePlus —Large Core Fund, World Equity Income Fund and Alpha Opportunity Fund,3 the corresponding Predecessor Funds of which were series of a common Corporation, Security Equity Fund; (ii) Large Cap Value Fund, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Large Cap Value Fund; (iii) StylePlus —Mid Growth, the corresponding Predecessor Fund of which was the sole series of a Corporation, Security Mid Cap Growth Fund; and (iv) Investment Grade Bond Fund, High Yield Fund and Municipal Income Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund. (The New Series identified in (i) through (iv) above are collectively referred to herein as the “SI-Advised Funds.”)

  1   At a meeting of shareholders held on January 8, 2014, shareholders of Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”), a series of Security Equity Fund, approved the reorganization of Alpha Opportunity Fund to a corresponding new series of the Trust (the “Alpha Opportunity Fund Reorganization”). Due to certain outstanding transactions with Lehman Brothers International Europe (“LBIE”) and its administrator, the Alpha Opportunity Fund Reorganization was delayed pending the resolution of the LBIE matter. Alpha Opportunity Fund was reorganized into the Trust on September 24, 2014.
  2   Because the Alpha Opportunity Fund was not reorganized into the Trust until September 2014, at the time of the Board’s review of the investment advisory agreements Alpha Opportunity Fund was a series of the Security Equity Fund.
  3   At the time of the Board’s review of the investment advisory agreements, Security Investors served as investment manager to Alpha Opportunity Fund pursuant to an investment management agreement with Security Equity Fund. The investment management agreement with Security Investors transferred to the Trust upon the Alpha Opportunity Fund Reorganization.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  23


OTHER INFORMATION (Unaudited) (continued)
 

Under the terms of the applicable investment management agreement between the Trust and Security Investors, Security Investors also is responsible for overseeing the activities of GPIM, an indirect subsidiary of Guggenheim Partners, with respect to its service as investment sub-adviser to Municipal Income Fund, pursuant to an investment sub-advisory agreement between Security Investors and GPIM (the “Sub-Advisory Agreement”).

GPIM serves as investment adviser with respect to each of Enhanced World Equity Fund, Floating Rate Strategies Fund, Limited Duration Fund, Macro Opportunities Fund and Total Return Bond Fund (collectively, the “GPIM-Advised Funds” and together with the SI-Advised Funds, the “Funds” and individually, a “Fund”). In this connection, the Trust and GPIM have entered into three separate investment advisory agreements which group the GPIM-Advised Funds as follows: (i) Enhanced World Equity Fund, the corresponding Predecessor Fund of which was a series of Security Equity Fund; (ii) Floating Rate Strategies Fund, Macro Opportunities Fund and Total Return Bond Fund, the corresponding Predecessor Funds of which were series of a common Corporation, Security Income Fund; and (iii) Limited Duration Fund, the corresponding Predecessor Fund of which was a series of Security Income Fund. (The investment management agreements pertaining to the SI-Advised Funds and the investment advisory agreements pertaining to the GPIM-Advised Funds are referred to herein together as the “Advisory Agreements” and, together with the Sub-Advisory Agreement, as the “Agreements.” In addition, unless the context indicates otherwise, GPIM, with respect to its service as investment adviser to the GPIM-Advised Funds, and Security Investors as to the SI-Advised Funds, are each referred to herein as the “Adviser” and together, the “Advisers.”) Under the supervision of the Board of Trustees of the Trust (the “Board” and the members of the Board individually, the “Trustees”), the Advisers regularly provide (or, as applicable, oversee the provision of) investment research, advice and supervision, a continuous investment program and direct the purchase and sale of securities and other investments for each Fund’s portfolio.

At a meeting held on November 11, 2013, in connection with other actions taken to pursue the Reorganizations, the Predecessor Board, including the Independent Directors, appointed each of the then-current investment manager/adviser for the Predecessor Funds to serve in such capacity to the corresponding New Series of the Trust (i.e., Security Investors and GPIM with respect to the SI-Advised Funds and the GPIM-Advised Funds, respectively). The Predecessor Board, including the Independent Directors, also approved for the Trust, on behalf of the New Series, the investment advisory and investment management agreements then in effect with respect to the Predecessor Funds (i.e., the Advisory Agreements and the Sub-Advisory Agreement). The sole initial shareholder of the New Series subsequently approved the Advisory Agreements and the Sub-Advisory Agreement, which are identical to the agreements then in place with respect to each of the Predecessor Funds in all material respects, except for the name of the signatory and the applicable state law, and became effective January 27, 2014.

At meetings held in person on April 17, 2014 (the “April Meeting”) and on May 12, 2014, (the “May Meeting”), the members of the Contracts Review Committee of the Board (the “Committee”), consisting solely of the Trustees who are not “interested persons,” as defined by the 1940 Act, of the Trust (the “Independent Trustees”), met separately from Guggenheim to consider the renewal of the Advisory Agreements and the Sub-Advisory Agreement in connection with the Committee’s annual contract review schedule.4 As part of its review process, the Committee was represented by independent legal counsel to the Independent Trustees (“Independent Legal Counsel”). Independent Legal Counsel reviewed and discussed with the Committee various key aspects of the Trustees’ legal responsibilities relating to the proposed renewal of the Agreements and other principal contracts. In this connection, Independent Legal Counsel advised the Committee of: (i) the responsibilities of board members under applicable law; (ii) the standards for determining what constitutes an excessive fee as delineated by the courts and the factors the Trustees should consider in determining whether to approve the fee arrangements; and (iii) the disclosure requirements pertaining to these approvals, as required by the Securities and Exchange Commission. The Committee took into account various materials received from Guggenheim and Independent Legal Counsel. Recognizing that the evaluation process with respect to the services provided by each of the Advisers is an ongoing one, the Committee also considered the variety of written materials, reports and oral presentations it received (and received by the full Board) throughout the year regarding performance and operating results of the Funds (which, as noted, reflects the accounting and performance histories of the Predecessor Funds).

  4   Since the corresponding Predecessor Fund of Enhanced World Equity Fund was subject to an investment management agreement approved by the Board of Directors of Security Equity Fund for an initial term of two years at an in-person meeting of the Board held on February 13, 2013, and because the Fund has a limited operating history, it was not included in the contract renewal process conducted in April and May 2014 (the “2014 Contract Renewal Process”). Similarly, Limited Duration Fund was not included in the 2014 Contract Renewal Process because the corresponding Predecessor Fund of Limited Duration Fund was subject to an investment management agreement approved by the Board of Directors of Security Income Fund for an initial term of two years at an in-person meeting of the Board held on November 11, 2013. Another recently launched series of the Trust, the Guggenheim Risk Managed Real Estate Fund (the “Risk Managed Real Estate Fund”) also was excluded from the 2014 Contract Renewal Process because the investment advisory agreement between GPIM and the Trust, on behalf of the Risk Managed Real Estate Fund, was approved by the Board of Trustees of the Trust for an initial term of two years at an in-person meeting of the Board held on February 12, 2014. Accordingly, references herein to the “Funds” should be understood as referring to all series of the Trust, except Enhanced World Equity Fund, Limited Duration Fund and Risk Managed Real Estate Fund. In addition, references to the “Funds” should be understood as including Alpha Opportunity Fund. Since the Alpha Opportunity Fund Reorganization was not effected as of the April Meeting or May Meeting, the individuals who serve as the Independent Trustees, in their capacity as the Independent Directors of Security Equity Fund, considered the renewal of the Investment Management Agreement between Security Investors and Security Equity Fund, with respect to Alpha Opportunity Fund. Accordingly, all references hereafter to the steps taken by the “Independent Trustees” and the “Committee,” including the materials reviewed and factors considered, also refer to such parties in their corresponding capacities with respect to Alpha Opportunity Fund. Likewise, all action taken with respect to the Trust’s Advisory Agreements includes the Investment Management Agreement regarding Alpha Opportunity Fund.

 
24  |  THE GUGGENHEIM FUNDS ANNUAL REPORT  


OTHER INFORMATION (Unaudited) (continued)
 

In connection with the contract review process, FUSE Research Network LLC (“FUSE”), an independent, third party research provider, was engaged to prepare advisory contract renewal reports designed specifically to help boards of directors/trustees fulfill their advisory contract renewal responsibilities. The objective of the reports is to present the subject funds’ relative position regarding fees, expenses and total return performance, with peer group and universe comparisons. Guggenheim prepared a comprehensive presentation in response to a formal request for information sent by Independent Legal Counsel on behalf of the Committee. In addition, Guggenheim made a detailed presentation at the April Meeting, which addressed areas identified for discussion by the Committee Chair and Vice Chair and Independent Legal Counsel. Throughout the process, the Committee asked questions of management and requested certain additional information which Guggenheim provided following the April Meeting (collectively with the foregoing reports and materials, the “Contract Materials”).

Among other things, Guggenheim provided: (i) organizational charts and presentations, staffing reports and biographies of those key personnel of each Adviser providing services to the Funds; (ii) descriptions of various functions performed by Guggenheim for the Funds, such as portfolio trading practices, brokerage matters, trade allocation and best execution; (iii) information regarding each Adviser’s compliance and regulatory history, including its Form ADV; and (iv) information concerning the parent company and overall Guggenheim organization and strategic plans and goals, all to assist the Committee in assessing the nature, extent and quality of services provided by each of Security Investors and GPIM, respectively. In addition, Guggenheim’s response included information comparing the investment performance, advisory fees and total expenses of the Funds to other funds (including such information presented in the FUSE reports as well as supplemental information prepared by Guggenheim), charts showing revenues for Guggenheim by product line and each Fund, including a break-out of various expenses, a description of the expense allocation methodology and information about the profitability of the Funds to Guggenheim Investments (the investment management business of Guggenheim Partners), financial information for Guggenheim Investments (unaudited), and information about Guggenheim’s compliance and risk management programs.

Following an analysis and discussion of the factors identified below and in the exercise of its business judgment, the Committee concluded that it was in the best interests of the Funds to recommend that the Board approve the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.

Advisory Agreements

Nature, Extent and Quality of Services Provided by each Adviser: With respect to the nature, extent and quality of services currently provided by each Adviser, the Committee considered the information provided by Guggenheim concerning the education, experience, professional affiliations, area of responsibility and duties of all key personnel performing services for the Funds, including those personnel providing compliance oversight. In this connection, the Committee considered Guggenheim’s resources and related efforts to retain, attract and motivate capable personnel to serve the Funds and noted Guggenheim’s report on recent additions and departures in personnel who work on matters relating to the Funds or are significant to the operations of each Adviser. The Committee noted that on a regular basis the Board receives and reviews information from the Trust’s Chief Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. In addition, the Committee took into account the various compliance and risk management initiatives undertaken by Guggenheim, including, among other things, the hiring of a new Chief Risk Officer, Portfolio Management, responsible for implementing various initiatives related to the risks associated with the investment process, the organization’s risk management infrastructure and critical activities. The Committee also considered Guggenheim’s other initiatives intended to achieve greater enhancements and efficiencies in the organization’s ability to provide services to all of the registered investment companies for which Security Investors, GPIM or another Guggenheim affiliate serves as investment adviser/manager (including the Funds), such as efforts to streamline and simplify the organizational structure of Guggenheim’s advisory business, as reflected by the internal restructuring that consolidated the investment advisers, broker/dealers and other entities that comprise “Guggenheim Investments” under a new, single holding company, Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”). In this regard, the Committee considered that although the restructuring neither impacted the services rendered on a day-to-day basis to the Funds nor changed the ultimate ownership of the various Guggenheim entities involved, which, through GPIMH, continue to be indirect subsidiaries of Guggenheim Capital, LLC, Guggenheim stated that the restructuring will allow the financial statements of the various entities to be consolidated and audited, thus providing a clearer view of Guggenheim Investments’ business within the broader Guggenheim organization. Moreover, in connection with the Committee’s evaluation of the overall package of services provided by each Adviser, the Committee considered each Adviser’s administrative capabilities, including its role in monitoring and coordinating compliance responsibilities with the fund administrator, transfer agent, distributor, custodian and other service providers to the Funds.

With respect to Guggenheim’s resources and the ability of each Adviser to carry out its responsibilities under the applicable Advisory Agreement, the Chief Financial Officer of Guggenheim Investments reviewed with the Committee certain unaudited financial information concerning GPIMH. (The Committee received the audited financial statements of GPIMH once available following the May Meeting.)


 
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OTHER INFORMATION (Unaudited) (continued)
 

The Committee also considered the acceptability of the terms of each Advisory Agreement (including the scope of services required to be performed by each Adviser). Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of each Adviser’s quality of performance of its duties through Board meetings, discussions, and reports throughout the year, the Committee concluded that each Adviser and its personnel were qualified to serve the Funds in such capacity and may reasonably be expected to continue to provide a high quality of services under each Advisory Agreement with respect to the Funds.

Investment Performance: The Committee received for each Fund investment returns for the five-year, three-year, one-year and three-month periods ended December 31, 2013, as applicable. In addition, the Committee received a comparison of each Fund’s performance to the performance of a benchmark, a peer group of similar funds and a broader universe of funds identified by FUSE, in each case for the same periods and, with respect to performance universe rankings for each Fund as to the returns of Class A shares, also for the ten-year period ended December 31, 2013, as applicable. The Committee received from FUSE representatives and considered a description of the methodology employed by FUSE for identifying each Fund’s peer group and universe for performance and expense comparisons.

In seeking to evaluate Fund performance over a full market cycle, the Committee generally focused its attention first on five- and three-year performance rankings as compared to the relevant universe of funds, but also considered more recent performance periods, including the one-year period and, as deemed appropriate, the three-month period, for certain Funds such as for those Funds that were recently launched or had undergone recent changes in the composition of the portfolio management team and/or the investment strategies employed. In this connection, the Committee made the following observations:

  •   Alpha Opportunity Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 1st percentile for both periods. In light of the resignation of Mainstream Investment Advisors, LLC, effective, September 30, 2013, as the Fund’s sub-adviser for the domestic long/short sub-portfolio of the Fund, the Committee also considered more recent performance periods, including the one-year period and the three-month period.5 In this connection, the Committee noted that Security Investors assumed investment management responsibility for the domestic long/short sub-portfolio as of September 30, 2013. The Committee observed that the Fund’s Class A shares outperformed the performance universe median for the one-year and three-month periods ended December 31, 2013, ranking in the 5th and 13th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund’s performance for the periods ended December 31, 2013 was comparable to the Fund’s benchmark, the S&P 500 Index, for the one- and three-year periods and better than the Fund’s benchmark for the five-year period, and lagged the benchmark for the three-month period. The Committee also considered the circumstances affecting the management of the Fund as a result of the Fund’s prime broker, Lehman Brothers International Europe (“LBIE”), being placed into administration on September 15, 2008. 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 such short sales. Until such time as the liability for short sales was settled and all restrictions were removed by LBIE and Lehman Brothers, Inc. (“LBI”), the Fund could not sell such restricted long positions and/or utilize the restricted cash balances to achieve the Fund’s investment objectives and/or meet Fund redemptions or other Fund obligations. In evaluating the services provided by the Adviser and the performance of the Fund, the Committee also considered Guggenheim’s efforts to resolve the issues with LBIE and LBI and to seek the release of the collateral by LBIE and LBI in conjunction with the potential settlement of LBIE’s claim. In addition, the Committee took into account information received from Guggenheim regarding the minimum assets required to manage the Fund’s assets consistent with the Fund’s investment objectives and the undertaking made by Guggenheim to assure adequate liquidity to meet Fund redemptions.
       
  •   Floating Rate Strategies Fund: The returns of the Class A shares exceeded the median of its performance universe in both the one-year and three-month periods, ranking in the 19th and 32nd percentile, respectively. The Fund, which commenced operations on November 30, 2011, also outperformed its benchmark, the Credit Suisse Leveraged Loan Index for the one-year and three-month periods, according to information provided by Guggenheim.
       
  •   High Yield Fund: While the returns of the Class A shares underperformed the median of its performance universe for the three-year period and ranked in the third quartile (72nd percentile), returns for the five-year period exceeded the performance universe median and ranked in the first quartile (4th percentile) and recent performance for the one-year period also ranked in the first quartile (3rd percentile). The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Corporate High Yield Index, for the five-year and one-year periods, but lagged the benchmark for the three-year period and that the current portfolio management team for the Fund began management in August 2012 and, since that time period, performance has ranked in the first quartile and has outperformed its benchmark. In light of the foregoing, the

  5   Prior to September 30, 2013, Mainstream Investment Advisers, LLC (“Mainstream”) acted as sub-adviser to Alpha Opportunity Fund. Pursuant to an investment sub-advisory agreement, Mainstream furnished investment advisory services, supervised and arranged for the purchase and sale of securities on behalf of a portion of the assets of Alpha Opportunity Fund and provided for the compilation and maintenance of records pertaining to such investment advisory services, subject to the supervision of Security Investors and the Board of Directors of Security Equity Fund. Effective September 30, 2013, Mainstream resigned as sub-adviser to Alpha Opportunity Fund and Security Investors assumed all advisory obligations and responsibilities.

26 | THE GUGGENHEIM FUNDS ANNUAL REPORT

OTHER INFORMATION (Unaudited) (continued)
 

      Committee focused, in particular, on the Fund’s recent performance, including the one-year and three-month periods ended December 31, 2013, and, with respect to the latter, noted that the FUSE report ranked the Fund in the first quartile (1st percentile).
       
  •   Investment Grade Bond Fund: The Fund’s Class A shares outperformed the performance universe median for the five- and three-year periods, ranking in the 46th and 8th percentile, respectively. The Committee also noted information provided by Guggenheim that the Fund outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, for the five-year and three-year periods and that the current portfolio manager began management in August 2012 and, since that time, performance has been in the 1st quartile. The Committee considered that the FUSE report listed the Fund’s performance for the one-year and three-month periods in the 1st percentile and 4th percentile, respectively.
       
  •   Large Cap Value Fund: The returns of the Class A shares exceeded the median of the performance universe for the five-year period, but underperformed the median for the three-year and one-year periods and ranked in the 49th percentile, 79th percentile and 55th percentile for the five-, three- and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (18th percentile) for the year-to-date. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as part of its assessment of Fund performance and took into account the additional performance metrics provided by Guggenheim, including information that, as of December 31, 2013, the Fund ranked in the 25th percentile of its peer group since inception (July 1, 2005) based on gross returns.
       
  •   Macro Opportunities Fund: The returns of the Fund’s Class A shares ranked in the 13th and 1st percentile of its performance universe for the one-year and three-month periods, respectively, and outperformed the performance universe median for each of these periods. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Bank of America Merrill Lynch 3-Month U.S. Treasury Bill Index, for the one-year and three-month periods ended December 31, 2013.
       
  •   Mid Cap Value Fund: The returns of the Class A shares underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 83rd, 67th and 79th percentile for the five-year, three-year and one-year periods, respectively. The Committee concluded that longer-term performance and other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this regard, the Committee considered that the Adviser had taken steps designed to mitigate risks associated with the portfolio by enhancing the risk management and portfolio analytics processes. The Committee also noted the presentation provided by the Fund’s portfolio manager at the April Meeting, as requested by the Committee. The Committee took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (13th percentile) for the year-to-date. The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap. In light of all of the foregoing, the Committee determined to consider a longer term performance track record as a part of its assessment of Fund performance and, in this regard, noted that the FUSE report listed the Fund’s performance for the ten-year period ended December 31, 2013 in the 1st quartile (11th percentile) and that, according to Guggenheim, the Fund outperformed its benchmark over the same period and since inception.
       
  •   Mid Cap Value Institutional: The Fund’s returns underperformed the performance universe median for the five-year, three-year and one-year periods and ranked in the 69th, 80th and 83rd percentile for the five-year, three-year and one-year periods, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund. In this connection, the Committee considered the presentation provided by the Fund’s portfolio management team at the April Meeting, as requested by the Committee. The Committee also took into account the portfolio management team’s view that market conditions over the past several years have posed challenges for disciplined, long-term value investors, the long-term investment process employed for the Fund remains effective and, importantly, Guggenheim’s senior personnel responsible for overseeing performance supported this view and expressed confidence in the team’s capabilities, noting that, according to Morningstar peer group rankings based on total returns as of March 31, 2014, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date.

 
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OTHER INFORMATION (Unaudited) (continued)
 

      The Committee also noted Guggenheim’s statement that the underperformance is heavily influenced by the lagging performance in calendar year 2011 where growth and large cap stocks were rewarded over value and small cap stocks.
       
  •   Municipal Income Fund: The Committee considered that Security Investors does not directly manage the investment portfolio but has delegated such duties to GPIM. Based on the information provided and the review of the Fund’s investment performance, the Committee concluded that Security Investors had appropriately reviewed and monitored GPIM’s investment performance as Sub-Adviser to the Fund.
       
  •   Small Cap Value Fund: The returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year and three-year periods, ranking in the 6th and 45th percentile, respectively. The Committee also considered information provided by Guggenheim stating that the Fund’s performance exceeded its benchmark, the Russell 2000 Value Index, for the five-year and three-year periods ended December 31, 2013. The Committee also noted supplemental information provided by the Fund’s portfolio management team indicating that since inception (August 1, 2008), the Fund has ranked in the 1st percentile of its peer group based on gross returns.
       
  •   StylePlus —Large Core: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 78th and 93rd percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for the period from May 1, 2013 through December 31, 2013 was 16.86%, as compared to the 17.43% return of the Fund’s benchmark, the S&P 500 Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (25th percentile). Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (14th percentile) for the year-to-date.
       
  •   StylePlus —Mid Growth: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 70th and 78th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team. In this regard, the Committee considered that the Fund’s current portfolio management team assumed responsibility for management of the Fund on May 1, 2013. In light of the foregoing, the Committee took into account Guggenheim’s statement that the Fund’s performance has improved since the changes were implemented and that the Fund’s annualized net return for period from May 1, 2013 through December 31, 2013 was 19.88%, as compared to the 19.97% return of the Fund’s benchmark, the Russell Mid Cap Growth Index, and outperformed the benchmark for the three-month period ended December 31, 2013. The Committee also considered that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 40th percentile. Finally, the Committee noted that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (22nd percentile) for the year-to-date.
       
  •   Total Return Bond Fund: The returns of the Fund’s Class A shares ranked in the 1st quartile (the 3rd and 4th percentile, respectively) of its performance universe for the one-year and three-month periods, respectively. The Committee considered information provided by Guggenheim indicating that the Fund, which commenced operations on November 30, 2011, outperformed its benchmark, the Barclays Capital U.S. Aggregate Index, as well as the Fund’s peer group average, for the one-year and three-month periods ended December 31, 2013.
       
  •   World Equity Income Fund: The Fund’s Class A shares underperformed the performance universe median for the five-year and three-year periods, ranking in the 96th and 95th percentile, respectively. However, the Committee concluded that other factors relevant to performance were sufficient to warrant continuation of the Advisory Agreement with respect to the Fund, including that the Adviser had taken steps designed to help improve the Fund’s investment performance by implementing a strategy change along with a new portfolio management team in August 2013. Thus, the Committee took into account that according to Morningstar peer group rankings based on total returns as of March 31, 2014, as provided by Guggenheim, the Fund ranked in the 1st quartile (12th percentile) for the year-to-date and outperformed its benchmark, the MSCI World Index, over the same period.

After reviewing the foregoing and related factors, the Committee concluded, within the context of its overall conclusions regarding the Advisory Agreements, that: (i) each Fund’s performance was acceptable; or (ii) it was satisfied with Guggenheim’s responses and efforts relating to investment performance.
28 | THE GUGGENHEIM FUNDS ANNUAL REPORT


OTHER INFORMATION (Unaudited) (continued)
 

Comparative Fees, Costs of Services Provided and the Profits Realized by the Investment Manager from its Relationship with the Funds: The Committee compared each Fund’s contractual advisory fee and total net expense ratio to the applicable peer group and compared each Fund’s total net expense ratio to its universe of funds for the various classes. The Committee also reviewed the median advisory fees and expense ratios, including expense ratio components (e.g., transfer agency fees, administration fees, other operating expenses, distribution fees and fee waivers/reimbursements) of the peer group of funds. In addition, the Committee considered each Fund’s advisory fee as compared to the advisory fee charged by the applicable Adviser to another fund with a similar investment objective and strategies, as applicable, noting that, in certain instances, the Adviser charges a lower advisory fee to other clients for which it provides comparable services. In this regard, the Committee considered Guggenheim’s explanation that lower fees are charged in certain instances due to numerous factors, including the scope of contract, types of investors, applicable regulation and legal structures, tax status, and for historical pricing reasons.

In further considering the comparative fee and expense data presented in the Contract Materials and addressed by Guggenheim, the Committee made the following observations:

  •   Alpha Opportunity Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (39th percentile) and the asset weighted total net expense ratio is in the third quartile (72nd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Floating Rate Strategies Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (64th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (36th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   High Yield Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the median of its peer group (41st percentile) and the asset weighted total net expense ratio is in the third quartile (63rd percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Investment Grade Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is at the 51st percentile of its peer group and the asset weighted total net expense ratio is in the fourth quartile (88th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Large Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund and the asset weighted total net expense ratio are each below the peer group median (at the 30th and 19th percentile, respectively). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Macro Opportunities Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (89th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (65th percentile). The Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility. In this connection, the Committee noted that the Fund’s performance has been relatively strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   Mid Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (85th percentile) of its peer group and the asset weighted total net expense ratio is in the third quartile (72nd percentile). Although higher than median, the contractual advisory fee and the total net expense ratio for each class of shares was within a competitive range of the median of the peer group. For example, the Class A contractual advisory fee of 0.79% is 2 basis points above the peer group median and the total net expense ratio of 1.39% is 9 basis points above the peer group median.
       
  •   Mid Cap Value Institutional Fund: The contractual advisory fee percentile rank is in the first quartile (17th percentile) of its peer group and the total net expense ratio is in the third quartile (67th percentile) of its peer group.
       
  •   Municipal Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (8th percentile) of its peer group and the asset weighted total net expense ratio is in the 55th percentile. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.

 
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OTHER INFORMATION (Unaudited) (continued)
 

  •   Small Cap Value Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the fourth quartile (77th percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (43rd percentile). The Committee also considered that the Fund’s long-term performance has been strong. In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   StylePlus —Large Core: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (67th percentile) of its peer group and the asset weighted total net expense ratio is in the fourth quartile (92nd percentile). Although the total net expense ratio for each class is higher than its peer group median, the contractual advisory fee (0.75%), at four to five basis above the peer group median for each class, was deemed to be within a reasonable range.
       
  •   StylePlus —Mid Growth: The average contractual advisory fee percentile rank across all share classes of the Fund is in the first quartile (23rd percentile) and the asset weighted total net expense ratio is in the fourth quartile (93rd percentile) of its peer group. The Committee noted Guggenheim’s statement that the Fund’s total net expense ratio is slightly higher but comparable to its peer group average.
       
  •   Total Return Bond Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is in the third quartile (63rd percentile) of its peer group and the asset weighted total net expense ratio is below the peer group median (28th percentile). In addition, the Adviser has entered into an expense limitation agreement with respect to the Fund.
       
  •   World Equity Income Fund: The average contractual advisory fee percentile rank across all share classes of the Fund is below the peer group median (45th percentile) and the Fund’s asset weighted total net expense ratio is in the fourth quartile (88th percentile) of its peer group.

With respect to the costs of services provided and profits realized by Guggenheim from its relationship with the Funds, the Committee reviewed a profit and loss statement for each Fund setting forth the revenues received from gross advisory fees, the expenses incurred in providing services to the Funds, the pre-tax operating margin and profitability rate and each Fund’s average assets for the twelve months ended December 31, 2012 and December 31, 2013, and information with respect to Guggenheim’s allocation methodologies used in preparing the profitability data.

The Committee considered other benefits available to each Adviser because of its relationship with the Funds and noted that Security Investors and GPIM may be deemed to benefit from arrangements whereby an affiliate, Rydex Fund Services, LLC, receives fees for: (i) performing certain administrative functions and bookkeeping, accounting and pricing functions for the Funds pursuant to a Fund Accounting and Administration Agreement; and (ii) acting as transfer agent for the Funds and performing all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications, and acting as the dividend disbursing agent pursuant to a Transfer Agency Agreement. The Committee reviewed the compensation arrangements for the provision of the foregoing services. The Committee also noted Guggenheim’s statement that it may benefit from marketing synergies arising from offering a broad spectrum of products, including the Funds. Based on all of the information provided and its review, the Committee determined that Guggenheim’s profitability from its relationship with the Funds was not unreasonable.

Economies of Scale to be Realized: The Committee received and considered information regarding whether there have been economies of scale with respect to the management of the Funds as Fund assets grow, whether the Funds has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale in the provision of services to the Funds were being passed along to the shareholders. In this connection, the Committee considered management’s view that Guggenheim continues to add system resources as required to develop its infrastructure in response to the growth in the firm’s assets and there is an opportunity to optimize economies of scale across the firm’s array of products and product lines. Therefore, although Guggenheim may be realizing economies of scale and efficiencies due to its growth, it is concurrently realizing new costs and expenses associated with investment in its infrastructure.

In addition, the Committee considered the size of the Funds and the competitiveness of and/or other determinations made regarding the current advisory fee for each Fund. The Committee also took into account Guggenheim’s statement that generally the Funds’ assets are not sufficiently large to warrant breakpoints, with only four Funds—Floating Rate Strategies Fund, Macro Opportunities Fund, Mid Cap Value Fund and Mid Cap Value Institutional Fund —having assets in excess of $500 million as of March 13, 2014. With respect to the four Funds noted, the Committee noted that none of the Funds had levels of profitability that were outliers and made the following observations:

  •   Floating Rate Strategies Fund: The Adviser has entered into an expense limitation agreement with respect to the Fund. In addition, the Fund’s asset weighted total net expense ratio is below the peer group median (36th percentile).

30 | THE GUGGENHEIM FUNDS ANNUAL REPORT


OTHER INFORMATION (Unaudited) (concluded)
 

  •   Macro Opportunities Fund: The Fund is relatively new and the Adviser has entered into an expense limitation agreement with respect to the Fund. Although the contractual advisory fee is in the fourth quartile of its peer group, the total net expense ratio is competitive with the peer group median. In addition, as noted, the Committee considered Guggenheim’s statement that the Fund is unique to its peer group in that it has a broader investment mandate with greater opportunistic flexibility.
       
  •   Mid Cap Value Fund: The Fund’s contractual advisory fee is in line with the peer group median and the total net expense ratio is competitive with the peer group median.
       
  •   Mid Cap Value Institutional Fund: The Fund’s contractual advisory fee ranks in the first quartile (17th percentile) of its peer group and the total net expense ratio is competitive with the peer group median.

The Committee determined that the advisory fee structure for the Funds was reasonable.

Sub-Advisory Agreement

Nature, Extent and Quality of Services Provided by the Sub-Adviser: With respect to the nature, extent and quality of services provided by GPIM (referred to in this discussion as the “Sub-Adviser”), the Committee considered the qualifications, experience and skills of the Sub-Adviser’s portfolio management and other key personnel and information from the Sub-Adviser describing the scope of its services to Municipal Income Fund. The Committee also considered the information provided by the Sub-Adviser concerning the Sub-Adviser’s investment practices and techniques, risk management processes, compliance policies and procedures, brokerage allocation, best execution and trade allocation, among other things. With respect to Guggenheim’s resources and the Sub-Adviser’s ability to carry out its responsibilities under the Sub-Advisory Agreement, the Committee recalled the review of certain unaudited financial information concerning GPIMH by the Chief Financial Officer of Guggenheim Investments.

The Committee also considered the acceptability of the terms of the Sub-Advisory Agreement. Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and at the May Meeting, as well as other considerations, including the Committee’s knowledge of the Sub-Adviser’s quality of performance of its duties through Board meetings, discussions and reports throughout the year, the Committee concluded that the Sub-Adviser and its personnel were qualified to serve Municipal Income Fund in such capacity and may reasonably be expected to continue to provide a high quality of services under the Sub-Advisory Agreement.

Investment Performance: The Committee considered that the returns of the Fund’s Class A shares exceeded the median of its performance universe for the five-year period and underperformed the median for the three-year period and ranked in the 1st percentile and 82nd percentile, respectively. The Committee took into account information provided by Guggenheim stating that the Fund’s performance for the periods ended December 31, 2013 outperformed the Fund’s benchmark, the Barclays Capital U.S. Municipal Long Bond Index, for the one-year and three-month periods, lagged the benchmark for the three-year period and outperformed the benchmark for the five-year period. In light of the foregoing, the Committee also noted that the FUSE report listed the Fund’s performance for the three-month period ended December 31, 2013 in the 1st quartile (9th percentile). In addition, the Committee considered Guggenheim’s statement that the Fund was converted from a closed-end fund in January 2012 and since the conversion has outperformed its benchmark.

Comparative Fees, Costs of Services Provided and the Profits Realized by the Sub-Adviser from its Relationship with the Fund: The Committee reviewed the level of sub-advisory fees payable to GPIM, noting that the fees would be paid by Security Investors and do not impact the fees paid by the Fund. The Committee also compared the sub-advisory fee paid by the Adviser to the Sub-Adviser to the fees charged by the Sub-Adviser to other clients including other registered investment companies.

Economies of Scale to be Realized: The Committee recognized that, because the Sub-Adviser’s fees would be paid by the Adviser and not the Fund, the analysis of economies of scale was more appropriate in the context of the Committee’s consideration of the applicable Advisory Agreement, which was separately considered. (See “Advisory Agreements – Economies of Scale to be Realized” above.)

Overall Conclusions

Based on the foregoing, the Committee determined that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other benefits received and that the continuation of the Agreements is in the best interests of each Fund. In reaching this conclusion, no single factor was determinative and each Committee member, in the exercise of his business judgment, may attribute different weights to different factors. At the May Meeting, the Committee, constituting all of the Independent Trustees, recommended the renewal of each Advisory Agreement and the Sub-Advisory Agreement for an additional 12-month term.


 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  31

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)
 

        Term of Office       Number of Portfolios in    
Name, Address*
and Year of Birth		   Position(s) Held
with the Trust		   and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years		   Fund Complex
Overseen		   Other Directorships
Held by Trustees
 
 
 
 
 
INDEPENDENT TRUSTEES                    
 
Randall C. Barnes
(1951)		   Trustee    Since 2014   Current: Private Investor (2001-present).

Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990).		   92   Current: Trustee, Purpose, Inc.
(2014-present).
 
Donald A. Chubb, Jr.
(1946)		   Trustee and Vice Chairman of the Board   Since 1994   Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc.(1997-present).   88   None.
 
Jerry B. Farley
(1946)		   Trustee and Vice Chairman of the Audit Committee   Since 2005   Current: President, Washburn University(1997-present).   88   Current: Westar Energy, Inc. (2004-present);Core First Bank & Trust(2000-present).
 
Roman Friedrich III
(1946)		   Trustee and Chairman of the Contracts Review Committee   Since 2014   Current: Founder and President, Roman Friedrich & Company (1998-present).   88   Current: Zincore Metals, Inc. (2009-present).
            Former: Senior Managing Director, MLV & Co. LLC (2010-2011).       Former: Mercator Minerals Ltd. (2013-2014); First. Americas Gold Corp.(2012-2014); Blue Sky Uranium Corp. (2011-2012);Axiom Gold and Silver Corp. (2011-2012);Stratagold Corp.(2003-2009); GFM Resources Ltd. (2005-2010).
 
Robert B. Karn III
(1942)		   Trustee and Chairman of the Audit Committee   Since 2014   Current: Consultant (1998-present).

Former: Arthur Andersen (1965-1997) and Managing Partner, Financial and Economic Consulting, St. Louis office (1987-1997).		   88   Current: Peabody Energy Company (2003-present);GP Natural Resource Partners, LLC (2002- present).
 
Ronald A. Nyberg
(1953)		   Trustee and Chairman of the Nominating and Governance Committee   Since 2014   Current: Partner, Nyberg & Cassioppi, LLC(2000-present).

Former: Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999).		   94   Current: Edward-Elmhurst Healthcare System(2012-present).
 
Maynard F. Oliverius
(1943)		   Trustee and Vice Chairman of the Contracts Review Committee   Since 1998   Retired.

Former: President and CEO, Stormont-Vail HealthCare (1996-2012).		   88   None.
 
Ronald E. Toupin, Jr.
(1958)		   Trustee and Chairman of the Board   Since 2014   Current: Portfolio Consultant (2010-present).   91   Former: Bennett Group of Funds (2011-2013).
            Former: Vice President, Manager and Portfolio Manager, Nuveen Asset Management(1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999);Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999).        
INTERESTED TRUSTEE                    
 
Donald C. Cacciapaglia***   
(1951)		 President, Chief Executive Officer and Trustee   Since 2012   Current: President and CEO, certain other funds in the Fund Complex (2012-present); Vice Chairman, Guggenheim Investments(2010-present).

Former: Chairman and CEO, Channel Capital Group, Inc. (2002-2010).		   220   Current: Delaware Life(2013-present); Guggenheim Life and Annuity Company(2011-present); Paragon Life Insurance Company of Indiana(2011-present).
                     

*   The business address of each Trustee is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850
**   Each Trustee serves an indefinite term, until his successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.
***   This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager.

32 | THE GUGGENHEIM FUNDS ANNUAL REPORT

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)
 

Name, Address*
and Year of Birth		     Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years
   
 
 
OFFICERS              
               
Joseph M. Arruda
(1966)		     Assistant Treasurer   Since 2010   Current: Assistant Treasurer, certain other funds in the Fund Complex (2006-present); Vice President, Security Investors, LLC (2010-present); CFO and Manager, Guggenheim Specialized Products, LLC (2009-present).

Former: Vice President, Security Global Investors, LLC (2010-2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010).
 
William H. Belden, III
(1965)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (2006-present); Managing Director, Guggenheim Funds Investment Advisors, LLC (2005-present).

Former: Vice President of Management, Northern Trust Global Investments (1999-2005).
 
Mark J. Furjanic
(1959)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2005-present); Assistant Treasurer, certain other funds in the Fund Complex (2008-present).

Former: Senior Manager, Ernst & Young LLP (1999-2005).
 
James Howley
(1972)		     Assistant Treasurer   Since 2014   Current: Director, Guggenheim Investments (2004-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2006-present).

Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004).
 
Amy J. Lee
(1961)		     Vice President and
Chief Legal Officer		   Since 1987
(Secretary) Since 2007
(Vice President)		   Current: Chief Legal Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).

Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012).
 
Mark E. Mathiasen
(1978)		     Secretary   Since 2014   Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
 
Michael P. Megaris
(1984)		     Assistant Secretary   Since 2014   Current: Assistant Secretary, certain other funds in the Fund Complex (April 2014-present); Associate, Guggenheim Investments (2012-present).

Former: J.D., University of Kansas School of Law (2009-2012).
 
Elisabeth Miller
(1968)		     Chief Compliance Officer   Since 2012   Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Vice President, Guggenheim Funds Distributors, LLC (March 2014-present).

Former: CCO, Guggenheim Distributors, LLC (2009-March 2014); Senior Manager, Security Investors, LLC(2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009).
 
Alison Santay
(1974)		     AML Officer   Since 2013   Current: AML Officer, certain other funds in the Fund Complex (2010-present); Director and AML Officer, Rydex Fund Services, LLC (2010-present); AML Officer, Security Investors, LLC (2010-present); Director, Shareholder Risk and Compliance, Rydex Fund Services, LLC (2004-present).

Former: AML Officer, Guggenheim Distributors, LLC (2013-March 2014).
 
Kimberly Scott
(1974)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2012-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2012-present).

Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009).
 
Bryan Stone
(1979)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (April 2014-present); Director, Guggenheim Investments (2013-present).

Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
 
John L. Sullivan
(1955)		     Chief Financial Officer and Treasurer   Since 2014   Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex(2010-present); Senior Managing Director, Guggenheim Investments (2010-present).

Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex(2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
               

*   The business address of each officer is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
**   Each officer serves an indefinite term, until his or her successor is duly elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.

 
  THE GUGGENHEIM FUNDS ANNUAL REPORT  |  33


GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)
 

Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).

Our Commitment to You

When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.

The Information We Collect About You

In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).

How We Handle Your Personal Information

As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.

Opt Out Provisions

We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.

How We Protect Privacy Online

Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.

How We Safeguard Your Personal Information

We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
34 | THE GUGGENHEIM FUNDS ANNUAL REPORT


GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded)
 

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  |  35


 

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9.30.2014

Guggenheim Funds Annual Report

Guggenheim Capital Stewardship Fund






  SBCAP-ANN-0914x0915 guggenheiminvestments.com  

 
 

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With Guggenheim Investments eDelivery you can:

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This report and the financial statements contained herein are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.

Distributed by Guggenheim Funds Distributors, LLC. GI-GOGREEN-0414 x0415 #12604


TABLE OF CONTENTS    
 
     
DEAR SHAREHOLDER   2
     
ECONOMIC AND MARKET OVERVIEW   3
     
ABOUT SHAREHOLDERS’ FUND EXPENSES   4
     
CAPITAL STEWARDSHIP FUND   6
     
NOTES TO FINANCIAL STATEMENTS   13
     
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   17
     
OTHER INFORMATION   18
     
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS   23
     
GUGGENHEIM INVESTMENTS PRIVACY POLICIES   25

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 1

September 30, 2014
 

Dear Shareholder:

Guggenheim Partners Investment Management (the “Investment Adviser”) is pleased to present the annual shareholder report for the Guggenheim Capital Stewardship Fund (the “Fund”) for the abbreviated annual period ended September 30, 2014.

The Investment Adviser is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, (“Guggenheim”) a global, diversified financial services firm.

Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.

We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Manager’s Commentary for the Fund.

We are committed to providing innovative investment solutions and appreciate the trust you place in us.

Sincerely,

Donald C. Cacciapaglia
President
October 31, 2014

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.

There can be no assurance that any investment product will achieve its investment objective(s). There are risks associated with investing, including the entire loss of principal invested. Investing involves market risks. The investment return and principal value of any investment product will fluctuate with changes in market conditions.

 
2 | THE GUGGENHEIM FUNDS ANNUAL REPORT

ECONOMIC AND MARKET OVERVIEW (Unaudited)   September 30, 2014
 

Despite market volatility rising in October, for the year ended September 30, data on everything from hiring to housing conveys that the U.S. economy is firing on all cylinders. Overcoming a first-quarter weather-related soft patch, second-quarter GDP was revised upward to 4.6%, led by business investment. Durable goods orders surged over the summer and consumer confidence was at multi-year highs, despite a lower reading for the last part of the period. With tailwinds for economic growth gathering, we could see a strong third quarter GDP reading.

September’s addition of 248,000 non-farm payroll jobs was, on the surface, at least a strong figure and certainly not something to be discounted. However, investor optimism about the report, which also showed the unemployment rate falling to 5.9%—its lowest level since 2008—masked the fact that average hourly earnings were unchanged. Economic data late in the period included disappointing factory orders, poor construction spending, and weaker-than-expected ISM manufacturing data. The most recent decline in the U.S. Conference Board Consumer Confidence Index was worrisome.

The U.S. economy is certainly doing well enough to suggest higher interest rates ahead. With quantitative easing ending in the U.S. in October 2014 and the Fed preparing investors for a higher federal funds rate, the stage is set for U.S. interest rates to move higher. However, our view is that, despite a strengthening U.S. economy, the greater risk is that interest rates head lower in the near term.

Following the “taper tantrum” last year, before rates were able to reach historical norms, the average rate on a 30-year mortgage spiked almost a full percentage point in two months—the sharpest rise since the late 1990s—resulting in an abrupt housing slowdown, which slowed the U.S. economy materially.

In addition, U.S. Treasury yields are still materially higher than those in any other developed market. The spread between 10-year U.S. Treasuries and comparable German bunds reached 157 basis points in September, its widest level since 1999, and the spread between 10-year Treasuries and 10-year Japanese government bonds was recently 189 basis points. With developments in the Middle East increasingly troubling and turbulence continuing elsewhere from Ukraine to Hong Kong, the relative price value of U.S. government bonds versus other safe haven investments should continue to be a factor keeping U.S. interest rates low.

International economic data remain weak. Euro zone economic confidence is falling as the entire region continues to battle below-target inflation. At the start of September, the European Central Bank cut interest rates and signaled their intent to launch a program to purchase asset-backed securities and covered bonds to stimulate the dismal economy. In Japan, retail sales fell month-over-month in August, while industrial production falters.

Economic data around the world confirms our view that central banks are likely to renew efforts to force liquidity into the global financial system, which in turn further supports our positive outlook for risk assets. However, positive returns are unlikely without volatility. While markets continue to rally, gains are becoming more grudging. The upward momentum in U.S. stocks has deteriorated meaningfully while credit spreads, specifically high-yield spreads, have widened significantly over the past number of weeks. While the bull market trend remains intact, as the appreciation in risk assets continues it becomes more likely that this ageing advance will, at some point, experience a correction.

For the year ended September 30, 2014, the return of the Standard & Poor’s 500® Index* (“S&P 500”) was 19.73%. The Barclays U.S. Aggregate Bond Index* returned 3.96% for the year, while the Barclays U.S. Corporate High Yield Index* returned 7.20%. The BofA Merrill Lynch 3-Month U.S. Treasury Bill Index* returned 0.05%. The MSCI World Index* returned 12.22%, while the MSCI Emerging Markets Index* returned 4.30%.

The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.

*Index Definitions:

The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.

BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.

Barclays U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Barclays U.S. Corporate High Yield Index covers the universe of dollar denominated, fixed rate, non-investment grade debt, taxable corporate debt.

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 World Index (Net) is calculated with net dividends reinvested. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

S&P 500® Index is a market-weighted stock market index comprised of the stocks of 500 U.S. corporations; the index is owned and maintained by Standard & Poor’s.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 3

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 March 31, 2014 and ending September 30, 2014.

The following tables illustrate a Fund’s costs in two ways:

Table 1. Based on actual Fund return. This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”

Table 2. Based on hypothetical 5% return. This section is intended to help investors compare a Fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

More information about a Fund’s expenses, including annual expense ratios for the past five years, can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.

 
4 | THE GUGGENHEIM FUNDS ANNUAL REPORT

ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) (concluded)
 

                      Beginning       Ending       Expenses  
      Expense       Fund       Account Value       Account value       Paid During  
      Ratio1       Return       March 31, 2014       September 30, 2014       Period2  
 
                                         
Table 1. Based on actual Fund return3                                        
Capital Stewardship Fund4                                        

Institutional Class

     1.24 %     -0.84 %     $1,000.00       $   991.60       $0.07  
 
Table 2. Based on hypothetical 5% return (before expenses)                                
Capital Stewardship Fund4                                        

Institutional Class

     1.24 %     5.00 %     $1,000.00       $1,018.85       $6.28  


1   Annualized.
2   Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
3   Actual cumulative return at net asset value for the period September 26, 2014 to September 30, 2014.
4   Since the commencement of operations: September 26, 2014. Due to the limited length of Class operations, current expense ratios may not be indicative of future expense ratios. Expenses paid based on actual fund return are calculated using 2 days from the commencement of operations. Expenses paid based on the hypothetical 5% return are calculated using 183 days.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 5

MANAGERS’ COMMENTARY (Unaudited)   September 30, 2014
 

To Our Shareholders

Guggenheim Capital Stewardship Fund (the “Fund”) is managed by a team of seasoned professionals led by B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer and Portfolio Manager; Farhan Sharaff, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Jayson Flowers, Senior Managing Director and Head of Equity and Derivative Strategies, and Portfolio Manager; and Peter Derby, Portfolio Manager at Concinnity Partners, LP, an unaffiliated Sub-adviser (the “Sub-adviser”) to the Fund. In the following paragraphs, they discuss the Fund for the fiscal year ended September 30, 2014.

For the abbreviated fiscal Period ended September 30, 2014 (the “Period”), the Guggenheim Capital Stewardship Fund Institutional Shares returned -0.84%, compared with the -0.52% return of its benchmark, the S&P 500 Index. The Fund’s inception date was September 26, 2014.

The Fund’s investment objective is to seek long-term capital appreciation. It pursues its investment objective by investing in equity securities that the Fund believes will provide attractive long-term returns relative to the S&P 500 Index.

Guggenheim Partners Investment Management, LLC, the Fund’s adviser (the “Investment Adviser or Manager”), and Concinnity Advisors, LP, the Fund’s sub-adviser (the “Sub-Adviser”), believe that companies that successfully implement multi-stakeholder management systems are generally better positioned to create sustained long-term value for their shareholders than competing companies that do not implement such systems. The Investment Adviser and Sub-Adviser believe that companies implementing such systems do so by aligning the interests of all of a company’s core stakeholders, including investors, customers, employees, business partners and communities in which a company does business.

To identify an initial universe of companies that it believes have exemplary multi-stakeholder management systems, the Sub-Adviser uses its proprietary research methodology system, which seeks to identify the components of those management systems, including, but not limited to: (1) customer loyalty; (2) employee engagement, as demonstrated by high levels of loyalty; (3) efficient use of “intangible” assets; and (4) high supplier loyalty, as demonstrated by the maturity of supply chain activities and community engagement.





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.


 
6 | THE GUGGENHEIM FUNDS ANNUAL REPORT

 

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THE GUGGENHEIM FUNDS ANNUAL REPORT | 7

PERFORMANCE REPORT AND FUND PROFILE (Unaudited)   September 30, 2014
 

CAPITAL STEWARDSHIP FUND

OBJECTIVE: Seeks long-term capital appreciation.

Holdings Diversification (Market Exposure as % of Net Assets)

“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.

Total Returns*
Period Ended September 30, 2014

    Since Inception
    (09/26/14)
Institutional Class Shares   -0.84%
 
S&P 500 Index   -0.52%
 

Inception Date:    
 
Institutional Class   September 26, 2014

Ten Largest Holdings (% of Total Net Assets)      
 
Apple, Inc.   4.6 %
International Business Machines Corp.   3.1 %
Clorox Co.   2.4 %
Wells Fargo & Co.   2.4 %
PNC Financial Services Group, Inc.   2.4 %
Medtronic, Inc.   2.3 %
Agilent Technologies, Inc.   2.3 %
United Parcel Service, Inc. — Class B   2.3 %
Simon Property Group, Inc.   2.3 %
Ford Motor Co.   2.3 %
 
Top Ten Total   26.4 %
 

“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 S&P 500 Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return.

 
8 | THE GUGGENHEIM FUNDS ANNUAL REPORT

SCHEDULE OF INVESTMENTS   September 30, 2014
CAPITAL STEWARDSHIP FUND    

      SHARES     VALUE  
 
               
COMMON STOCKS† - 99.6%              
               
CONSUMER, NON-CYCLICAL - 19.0%              

Clorox Co.

     53,289   $ 5,117,876  

Medtronic, Inc.

     78,972     4,892,315  

Baxter International, Inc.

     64,169     4,605,409  

Pfizer, Inc.

     140,043     4,141,071  

Constellation Brands, Inc. — Class A*

     40,969     3,570,858  

Merck & Company, Inc.

     55,271     3,276,465  

Johnson & Johnson

     28,951     3,085,887  

Coca-Cola Enterprises, Inc.

     58,964     2,615,643  

Becton Dickinson and Co.

     19,990     2,275,062  

Procter & Gamble Co.

     15,836     1,326,107  

PepsiCo, Inc.

     13,854     1,289,669  

Colgate-Palmolive Co.

     19,373     1,263,507  

Laboratory Corporation of America Holdings*

     11,826     1,203,296  

Automatic Data Processing, Inc.

     13,297     1,104,715  
             
Total Consumer, Non-cyclical           39,767,880  
             
               
TECHNOLOGY - 19.0%              

Apple, Inc.

     96,372     9,709,479  

International Business Machines Corp.

     33,820     6,420,051  

SanDisk Corp.

     45,148     4,422,246  

Texas Instruments, Inc.

     84,807     4,044,446  

Intel Corp.

     109,287     3,805,373  

KLA-Tencor Corp.

     31,598     2,489,291  

Seagate Technology plc

     37,725     2,160,511  

salesforce.com, Inc.*

     23,554     1,355,062  

Applied Materials, Inc.

     59,235     1,280,068  

Xilinx, Inc.

     29,752     1,259,997  

NVIDIA Corp.

     61,354     1,131,981  

QUALCOMM, Inc.

     11,464     857,163  

Intuit, Inc.

     9,440     827,416  
             
Total Technology           39,763,084  
             
               
FINANCIAL - 13.5%              

Wells Fargo & Co.

     98,538     5,111,166  

PNC Financial Services Group, Inc.

     58,241     4,984,266  

Simon Property Group, Inc.

     29,491     4,848,910  

American Express Co.

     41,045     3,593,079  

Aflac, Inc.

     61,576     3,586,802  

Prudential Financial, Inc.

     29,368     2,582,622  

M&T Bank Corp.

     17,504     2,158,068  

U.S. Bancorp

     29,993     1,254,607  
             
Total Financial           28,119,520  
             
               
INDUSTRIAL - 12.5%              

Agilent Technologies, Inc.

     85,701     4,883,242  

United Parcel Service, Inc. — Class B

     49,620     4,877,149  

Deere & Co.

     57,645     4,726,314  

General Electric Co.

     126,909     3,251,409  

Union Pacific Corp.

     29,952     3,247,396  

FedEx Corp.

     11,922     1,924,807  

Littelfuse, Inc.

     16,695     1,422,080  

Waters Corp.*

     11,721     1,161,786  

Ball Corp.

     11,129     704,132  
             
Total Industrial           26,198,315  
             
               
CONSUMER, CYCLICAL - 11.8%              

Ford Motor Co.

     322,423     4,768,636  

Marriott International, Inc. — Class A

     67,435     4,713,707  

Delphi Automotive plc

     52,813     3,239,549  

Costco Wholesale Corp.

     22,969     2,878,475  

Southwest Airlines Co.

     79,796     2,694,711  

AutoZone, Inc.*

     3,852     1,963,210  

TRW Automotive Holdings Corp.*

     12,749     1,290,836  

Wyndham Worldwide Corp.

     14,561     1,183,227  

WABCO Holdings, Inc.*

     11,142     1,013,365  

Lear Corp.

     10,458     903,676  
             
Total Consumer, Cyclical           24,649,392  
             
               
ENERGY - 11.8%              

Marathon Petroleum Corp.

     49,929     4,227,488  

Devon Energy Corp.

     50,406     3,436,681  

Hess Corp.

     36,019     3,397,312  

Valero Energy Corp.

     67,511     3,123,734  

EOG Resources, Inc.

     30,638     3,033,775  

Anadarko Petroleum Corp.

     29,332     2,975,438  

Chevron Corp.

     18,677     2,228,540  

Nabors Industries Ltd.

     96,103     2,187,304  
             
Total Energy           24,610,272  
             
               
UTILITIES - 5.8%              

NextEra Energy, Inc.

     39,738     3,730,603  

Northeast Utilities

     81,095     3,592,509  

PG&E Corp.

     41,061     1,849,387  

Sempra Energy

     15,044     1,585,337  

Consolidated Edison, Inc.

     25,321     1,434,688  
             
Total Utilities           12,192,524  
             
               
COMMUNICATIONS - 3.8%              

AT&T, Inc.

     90,864     3,202,047  

Verizon Communications, Inc.

     51,638     2,581,384  

Cisco Systems, Inc.

     83,194     2,093,993  
             
Total Communications           7,877,424  
             
               
BASIC MATERIALS - 2.4%              

Praxair, Inc.

     31,246     4,030,734  

Nucor Corp.

     19,054     1,034,251  
             
Total Basic Materials           5,064,985  
             
Total Common Stocks              

(Cost $210,026,813)

           208,243,396  
             
               
SHORT TERM INVESTMENTS†- 0.9%              

Dreyfus Treasury Prime

              

Cash Management Fund

     1,877,082     1,877,082  
             
               
Total Short Term Investments              

(Cost $1,877,082)

           1,877,082  
             
Total Investments - 100.5%              

(Cost $211,903,895)

         $ 210,120,478  
             
Other Assets & Liabilities, net - (0.5)%           (1,105,974 )
             
Total Net Assets - 100.0%         $ 209,014,504  

*   Non-income producing security.
†   Value determined based on Level 1 inputs — See Note 3.
    plc — Public Limited Company

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 9

CAPITAL STEWARDSHIP FUND

STATEMENT OF ASSETS AND LIABILITIES        
 
September 30, 2014        
         
ASSETS:        
Investments, at value        

(cost $211,903,895)

   $ 210,120,478  
Receivables:        

Dividends

     15,807  
       
Total assets     210,136,285  
       
         
LIABILITIES:        
Payable for:        

Fund shares redeemed

     1,107,439  

Management fees

     10,432  

Fund accounting/administration fees

     1,101  

Transfer agent/maintenance fees

     67  

Trustees’ fees*

     38  

Miscellaneous

     2,704  
       
Total liabilities     1,121,781  
       
NET ASSETS   $ 209,014,504  
       
         
NET ASSETS CONSIST OF:        
Paid in capital   $ 210,796,457  
Undistributed net investment income     1,464  
Accumulated net realized gain on investments     —  
Net unrealized depreciation on investments     (1,783,417 )
       
Net assets   $ 209,014,504  
       
INSTITUTIONAL CLASS:        
Net assets   $ 209,014,504  
Capital shares outstanding     8,431,483  
Net asset value per share     $24.79  
       

STATEMENT OF OPERATIONS        
 
Period Ended September 30, 2014**        
         
INVESTMENT INCOME:        
Dividends   $ 15,807  
       

Total investment income

     15,807  
       
         
EXPENSES:        
Management fees     10,432  
Transfer agent/maintenance fees     67  
Fund accounting/administration fees     1,101  
Professional fees     1,740  
Trustees’ fees*     38  
Custodian fees     33  
Miscellaneous     932  
       

Total expenses

     14,343  
       
Net investment income     1,464  
       
         
NET REALIZED AND UNREALIZED GAIN (LOSS):        
Net realized gain (loss) on:        

Investments

     —  
       
Net realized gain     —  
       
Net change in unrealized appreciation        

(depreciation) on:

        

Investments

     (1,783,417 )
       
Net change in unrealized appreciation        

(depreciation)

     (1,783,417 )
       
Net realized and unrealized loss     (1,783,417 )
       
Net decrease in net assets resulting        

from operations

   $ (1,781,953 )
       

*   Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act.
**   Since commencement of operations: September 26, 2014.

 
10 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

CAPITAL STEWARDSHIP FUND

STATEMENT OF CHANGES IN NET ASSETS          
 
        Period Ended  
        September 30,  
        2014a  
 
           
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:          
Net investment income     $ 1,464  
Net realized gain on investments       —  
Net change in unrealized appreciation (depreciation) on investments       (1,783,417 )
 
Net decrease in net assets resulting from operations       (1,781,953 )
 
           
CAPITAL SHARE TRANSACTIONS:          
Proceeds from sale of shares       297,903,896  
Cost of shares redeemed       (87,107,439 )
 
Net increase from capital share transactions       210,796,457  
 
Net increase in net assets       209,014,504  
           
NET ASSETS:          

Beginning of period

       —  
 

End of period

     $ 209,014,504  
 
Undistributed net investment income at end of period     $ 1,464  
 
           
CAPITAL SHARE ACTIVITY:          
Shares sold       11,928,585  
Shares redeemed       (3,497,102 )
 
Net increase in shares       8,431,483  
 

a Since commencement of operations: September 26, 2014.

 
SEE NOTES TO FINANCIAL STATEMENTS.   THE GUGGENHEIM FUNDS ANNUAL REPORT | 11

CAPITAL STEWARDSHIP FUND

FINANCIAL HIGHLIGHTS
 
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.

        Period Ended  
        September 30,  
Institutional Class       2014 a  
 
Per Share Data          
Net asset value, beginning of period     $ 25.00  
 
Income (loss) from investment operations:          
Net investment income (loss)b       — c  
Net gain (loss) on investments (realized and unrealized)       (.21 )
       
Total from investment operations       (.21 )
 
Net asset value, end of period     $ 24.79  
       
           
 
Total Returnd       (0.84% )
 
Ratios/Supplemental Data          
Net assets, end of period (in thousands)     $ 209,015  
 
Ratios to average net assets:          
Net investment income (loss)       0.13%  
Total expenses       1.24%  
 
Portfolio turnover rate       —  

a   Since commencement of operations: September 26, 2014. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized.
b   Net investment income (loss) per share was computed using average shares outstanding throughout the period.
c   Net investment income is less than $0.01 per share.
d   Total return does not reflect the impact of any applicable sales charge and has not been annualized.

 
12 | THE GUGGENHEIM FUNDS ANNUAL REPORT   SEE NOTES TO FINANCIAL STATEMENTS.

NOTES TO FINANCIAL STATEMENTS
 

1. Organization and Significant Accounting Policies

Organization

Guggenheim Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as a non-diversified, open-ended investment company of the series type. Each series, in effect, is representing a separate Fund. The Trust is authorized to issue an unlimited number of shares. The Trust accounts for the assets of each Fund separately.

The Trust offers a combination of four separate classes of shares, A-Class shares, B-Class shares, C-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. Prior to February 22, 2011, the maximum sales charge was 5.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1% contingent deferred sales charge (“CDSC”), if shares are redeemed within 12 months of purchase. B-Class shares were offered without a front-end sales charge, but were subject to a CDSC of up to 5% for five years and convert to A-Class shares after eight years. Effective January 4, 2010, subscriptions for B-Class shares are no longer accepted. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares have a minimum initial investment of $2 million and a minimum account balance of $1 million. Institutional Class shares are offered without a front-end sales charge or a CDSC. At September 30, 2014, the Trust consisted of eighteen Funds.

This report covers the Capital Stewardship Fund (the “Fund”). As of September 30, 2014, only Institutional Class shares of the Fund were offered for subscription.

Guggenheim Investments (“GI”) provides advisory services, and Rydex Fund Services, LLC (“RFS”) provides transfer agent, administrative and accounting services to the Trust. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI, RFS and GFD are affiliated entities.

Concinnity Advisors, LP (the “Sub-Adviser”) serves as the sub-adviser to the Fund and is responsible for the day-to-day management of the Fund’s portfolio.

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.

The NAV of a fund is calculated by dividing the market value of the fund’s securities and other assets, less all liabilities, by the number of outstanding shares of the fund.

A. The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Funds’ securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.

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 a given day, the security is valued at the closing bid price on that day.

Investments for which market quotations are not readily available are fair valued as determined in good faith by GI under the direction of the Board of Trustees using methods established or ratified by the Board of Trustees. These methods include, but are not limited to: (i) obtaining general information as to how these securities and assets trade; and (ii) obtaining other information and considerations, including current values in related markets.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 13

NOTES TO FINANCIAL STATEMENTS (continued)
 

B. Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as realized gains in the Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from REITs is recorded based on the income included in distributions received from the REIT investments using published REIT reclassifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.

C. Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations which may differ from U.S. GAAP.

D. Interest and dividend income, most expenses, all realized gains and losses, and all unrealized gains and losses are allocated to the classes based upon the value of the outstanding shares in each class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust on a pro rata basis upon the respective aggregate net assets of each Fund included in the Trust.

E. Under the fee arrangement with the custodian, the Fund 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 period ended September 30, 2014, there were no earnings credits received.

The Fund may leave cash overnight in its cash account with the custodian. Periodically, the Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate.

F. Under the Fund’s organizational documents, its Trustees and Officers 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 Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

2. Fees and Other Transactions with Affiliates

Under the terms of an investment advisory contract, the Fund pays GI investment advisory fees calculated at an annualized rate of 0.90% of the average daily net assets of the Fund.

RFS provides transfer agent services to the Fund for fees calculated at the rates below, which are assessed to the applicable class of the Fund. For these services, RFS receives the following:

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

† Not subject to Fund during first twelve months of operations.

RFS also acts as the administrative agent for the Fund, and as such performs administrative functions and the bookkeeping, accounting and pricing functions for the Fund. For these services, RFS receives 0.095% of the average daily net assets of the Fund. The minimum annual charge for fund accounting/administrative fees is $25,000.

RFS engages external service providers to perform other necessary services for the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, etc., on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.

The Fund has adopted Distribution Plans related to the offering of A-Class, B-Class and C-Class shares pursuant to Rule 12b-1 under the 1940 Act. The plans provide for payments at an annual rate of 0.25% of the average daily net assets of the Fund’s A-Class shares and 1.00% of the average daily net assets of the Fund’s B-Class and C-Class shares. At September 30, 2014, only the Institutional Class shares of the Fund were offered for subscription.

Certain trustees and officers of the Trust are also officers of GI, RFS and GFD.

 
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS (continued)
 

3. Fair Value Measurement

In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3 — significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

The following table summarizes the inputs used to value the Fund’s net assets at September 30, 2014:

    Level 1   Level 2   Level 3    
    Investments   Investments   Investments    
    In Securities   In Securities   In Securities   Total
 
Assets                
Capital Stewardship Fund   $210,120,478   $ —   $ —   $210,120,478

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

4. Federal Income Tax Information

The Fund intends to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required.

Tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions taken, or to be taken, on Federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

The RIC Modernization Act of 2010 was signed into law on December 22, 2010, and simplified some of the tax provisions applicable to regulated investment companies, the tax reporting to their shareholders and improved the tax efficiency of certain fund structures. The greatest impact to the disclosure in the financial reports for the Fund was on the treatment of net capital losses, effective for tax years beginning after December 22, 2010. However, the Fund did not incur or carry forward any capital losses for the year ended September 30, 2014.

The Fund did not make any distributions during its initial year ended September 30, 2014.

The tax character of distributable earnings/(accumulated losses) at September 30, 2014, was as follows:

    Undistributed   Undistributed   Accumulated   Net Unrealized   Total
    Ordinary   Long-Term   Capital and   Appreciation/   Accumulated
Fund   Income   Capital Gain   Other Losses   (Depreciation)   Earnings/(Deficit)
 
Capital Stewardship Fund   $1,464   $ —   $ —   $(1,783,417)   $(1,781,953)

The Fund had no permanent book/tax differences which impact net investment income or net realized gain/(loss) for the year ended September 30, 2014.

 
THE GUGGENHEIM FUNDS ANNUAL REPORT | 15

NOTES TO FINANCIAL STATEMENTS (concluded)
 

At September 30, 2014, the cost of securities for Federal income tax purposes, the aggregate gross unrealized gain for all securities for which there was an excess of value over tax cost and the aggregate gross unrealized loss for all securities for which there was an excess of tax cost over value, were as follows:

        Tax   Tax   Net   Net Unrealized
    Tax   Unrealized   Unrealized   Unrealized   Gain/(Loss)
Fund   Cost   Gain   Loss   Gain/(Loss)   Derivatives
Capital Stewardship Fund   $211,903,895   $383,828   $(2,167,245)   $(1,783,417)   $    —

5. Securities Transactions

For the period ended September 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:

Fund   Purchases   Sales
Capital Stewardship Fund   $210,026,813   $    —


 
16 | THE GUGGENHEIM FUNDS ANNUAL REPORT    


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    
 

The Board of Trustees and Shareholders
of Guggenheim Funds Trust

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Guggenheim Capital Stewardship Fund (one of the series constituting the Guggenheim Funds Trust) (the “Fund”) as of September 30, 2014, and the related statement of operations, statement of changes in net assets, and the financial highlights for the period September 26, 2014 (commencement of operations) through September 30, 2014. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Guggenheim Capital Stewardship Fund (one of the Series constituting the Guggenheim Funds Trust) at September 30, 2014, and the results of its operations, the changes in its net assets, and its financial highlights for the period September 26, 2014 (commencement of operations) through September 30, 2014 in conformity with U.S. generally accepted accounting principles.

McLean, Virginia
November 25, 2014

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 17

OTHER INFORMATION (Unaudited)    
 

Proxy Voting Information

A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Funds’ portfolios is available, without charge and upon request, by calling 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 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at http://www.sec.gov.

Quarterly Portfolio Schedules Information

The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q; which are available on the SEC’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC, and that information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.

Office Locations

The offices of Guggenheim Investments can be found in the following locations:

330 Madison Avenue
10th Floor
New York, NY 10017
(Headquarters)

Four Irvington Centre
805 King Farm Boulevard
Suite 600
Rockville, MD 20850

9401 Indian Creek Parkway
40 Corporate Woods
Suite 850
Overland Park, KS 66210

 
18 | THE GUGGENHEIM FUNDS ANNUAL REPORT    

OTHER INFORMATION (Unaudited) (continued)    
 

Distributor change

Effective March 3, 2014, Guggenheim Distributors, LLC (“GD”), the distributor for shares of the Funds was consolidated into and with Guggenheim Funds Distributors, LLC (“GFD”). Following the consolidation, GFD serves as the Funds’ distributor.

GD and GFD are both indirect, wholly-owned subsidiaries of Guggenheim Capital, LLC and, therefore, the consolidation will not result in a change of actual control of the Funds’ distributor. The primary goal of the consolidation is to achieve greater operational efficiencies and allow all of the Guggenheim funds, including funds that are not series of the Trusts, to be distributed by a single distributor.

The consolidation is not expected to affect the day-to-day management of the Funds or result in any material changes to the distribution of the Funds, including any changes to the distribution fees paid by the Funds.

Guggenheim Funds Trust

Guggenheim Funds Trust (the “Trust”), which was organized as a Delaware statutory trust on November 8, 2013, is registered with the Securities and Exchange Commission (“SEC”) as an investment company. The Trust is an open-end management investment company that, upon the demand of the investor, must redeem its shares and pay the investor the next calculated NAV. The Guggenheim Enhanced World Equity Fund (“Enhanced World Equity Fund”), Guggenheim Large Cap Value Fund (“Large Cap Value Fund”), Guggenheim Mid Cap Value Fund (“Mid Cap Value Fund”), Guggenheim Mid Cap Value Institutional Fund (“Mid Cap Value Institutional Fund”), Guggenheim Small Cap Value Fund (“Small Cap Value Fund”), Guggenheim StylePlus—Large Core Fund (“StylePlus—Large Core Fund”), Guggenheim StylePlus—Mid Growth Fund (“StylePlus—Mid Growth Fund”) and Guggenheim World Equity Income Fund (“World Equity Income Fund”) (collectively, the “Funds”) were previously series (the “Predecessor Funds”) of Security Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth Fund (the “Predecessor Corporations”), different registered open-end investment companies, which were organized as Kansas corporations. In January 2014, at special meetings of shareholders, the shareholders of each Predecessor Fund approved the reorganization of each Predecessor Fund with and into a corresponding “shell” series of the Trust. The shell series of the Trust succeeded to the accounting and performance histories of the Predecessor Funds. Any such historical information provided for a series of the Trust that relates to periods prior to January 28, 2014, therefore, is that of the corresponding Predecessor Fund.

Effective January 28, 2014, the Guggenheim Floating Rate Strategies Fund (“Floating Rate Strategies Fund”), Guggenheim High Yield Fund (“High Yield Fund”), Guggenheim Investment Grade Bond Fund (“Investment Grade Bond Fund”), Guggenheim Limited Duration Fund (“Limited Duration Fund”), Guggenheim Macro Opportunities Fund (“Macro Opportunities Fund”), Guggenheim Municipal Income Fund (“Municipal Income Fund”), and Guggenheim Total Return Bond Fund (“Total Return Bond Fund”), which were series of Security Income Fund, a Kansas corporation, reorganized with and into corresponding series of Guggenheim Funds Trust, a Delaware Statutory Trust (each, a “Reorganization”). Upon completion of each Reorganization, the respective share classes of each Fund assumed the performance, financial and other historical information of those of the corresponding predecessor fund.

At a meeting of shareholders held on January 8, 2014, shareholders of the Guggenheim Alpha Opportunity Fund (“Alpha Opportunity Fund”) approved the reorganization of the Fund from a Kansas corporation to a Delaware statutory trust. After the close of business on September 23, 2014, the Fund, which is a series of Security Equity Fund, a Kansas corporation, will reorganize with and into a corresponding “shell” fund (the “New Fund”), which is a series of Guggenheim Funds Trust, a Delaware statutory trust. Upon completion of the Reorganization, shareholders of the Fund will own shares of the New Fund that are equal in number and in value to the shares of the Fund that were held by those shareholders immediately prior to the closing of the Reorganization. In addition, the New Fund will assume the performance, financial and other historical information of that of the Fund. Once the Reorganization is completed, the Fund will no longer be offered as a series of Security Equity Fund.

Board Considerations Regarding Approval of Investment Advisory Agreement — Guggenheim Capital Stewardship Fund

Guggenheim Funds Trust (the “Trust”) was organized as a Delaware statutory trust on November 8, 2013, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust is authorized to issue an unlimited number of shares of beneficial interest in separate series, with each such series representing interests in a separate portfolio of securities and other assets (each, a “Fund” and collectively, the “Funds”). On August 20, 2014, Guggenheim Partners Investment Management, LLC (“GPIM” or the “Adviser”), an indirect subsidiary of Guggenheim Partners, LLC, a global diversified financial services firm (“Guggenheim Partners”), was approved to serve as the investment adviser to Guggenheim Capital Stewardship Fund (the “New Fund”), a new series of the Trust, pursuant to an investment advisory agreement between the Trust and GPIM, with respect to the New Fund (the “Investment Advisory Agreement”). (Guggenheim Partners, GPIM and its affiliates may be referred to herein together as “Guggenheim.”) Under the supervision of the Board of Trustees of the Trust (the “Board” and the members individually, “Trustees”), GPIM regularly provides (or oversees the provision of) investment research, advice and supervision, a continuous investment program and the purchase and sale of securities and other

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 19

OTHER INFORMATION (Unaudited) (continued)    
 

investments for various Funds’ portfolios. GPIM will provide those same services to the New Fund. Under the terms of the Investment Advisory Agreement, GPIM also is responsible for overseeing the activities of Concinnity Advisors, LP (“Concinnity” or the “Sub-Adviser”) with respect to Concinnity’s service as investment sub-adviser to the New Fund, pursuant to an investment sub-advisory agreement between GPIM and Concinnity (the “Sub-Advisory Agreement” and together with the Investment Advisory Agreement, the “Advisory Agreements”).

The 1940 Act, provides, in substance, that an investment advisory agreement between a fund and its investment adviser may be entered into only if it is approved, and may continue in effect from year to year after an initial two-year period only if its continuance is approved at least annually, by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons,” as defined by the 1940 Act, of the fund, cast in person at a meeting called for the purpose of considering such approval. At a meeting held in person on August 20, 2014 (the “August Meeting”), the Trustees who are not “interested persons” of the Trust (collectively, the “Independent Trustees”) met separately from Guggenheim to consider the approval of the Advisory Agreements. As part of its review process, the Independent Trustees were represented by independent legal counsel (“Independent Legal Counsel”). Independent Legal Counsel reviewed and discussed with the Independent Trustees various factors relevant to the consideration of the Advisory Agreements and the legal responsibilities of the Trustees related to such consideration and assisted the Independent Trustees in their deliberations.

The Trustees, including the Independent Trustees, discussed the Advisory Agreements in light of the regulatory requirements and criteria and assessed information concerning the New Fund’s proposed fees and expenses, investment objective and policies, investment strategies and models, portfolio construction process, strategy performance and portfolio management team, among other things. For this purpose, management updated and supplemented materials previously provided to the Board in connection with the consideration of the investment advisory agreements between GPIM and the Trust, with respect to those series of the Trust for which GPIM serves as investment adviser and which were included in the contract renewal proposals considered by the Board in April and May 2014 (“Contract Renewal”). Among other things, GPIM provided a schedule showing the New Fund’s advisory fees compared to advisory fees charged by GPIM to other funds and to other non-fund clients with similar investment objectives to the New Fund, a statement as to whether GPIM charges a lower advisory fee to any other client for which it provides comparable services, and if so, an explanation as to why, and peer group comparisons of the proposed contractual advisory fee and total net expense ratio, as set forth in a report prepared by an independent, third party research provider, FUSE Research Networks LLC (“FUSE”).

The Board also considered the variety of written materials, reports and oral presentations it received throughout the year, including information regarding performance and operating results of other registered investment companies or series thereof for which GPIM serves as investment adviser or sub-adviser. In addition, Guggenheim made a presentation at the August Meeting which addressed areas identified for discussion by Independent Legal Counsel and, among other things, provided information about Guggenheim’s short-term and long-term business plans with respect to the New Fund.

The Board considered management’s proposal that the assets of Guggenheim Concinnity Master Strategy Fund, SPC, a Cayman Islands exempted segregated portfolio company which relies on the exclusion from the definition of an “investment company” provided by Section 3(c)(7) of the 1940 Act (the “Predecessor Fund”) and for which GPIM serves as investment adviser and Concinnity is the sub-adviser, be reorganized with and into the New Fund (the “Reorganization”). In this connection, the Board noted that the Predecessor Fund is a master fund in a set of unregistered offshore and domestic master-feeder funds (collectively, the “Private Funds”), which have bank investors. The Board also noted that the investors issue notes that provide coupon payments based on the after-tax return of the Private Funds and that the notes, in turn, are held by a single holder affiliated with Guggenheim. In this respect, the Board took into account that the Reorganization would enable the bank investors and noteholder to continue to benefit from the strategies currently offered by the Private Funds by converting the Predecessor Fund into a registered investment company structure that pursues the same investment strategies, since the New Fund’s investment objective and strategies are, in all materials respects, the same as those of the Predecessor Fund. The Board also took into account that the New Fund would not be offered to other investors unless and until such time as the Board determined to permit additional sales.

Following an analysis and discussion of the factors identified below and in the exercise of its business judgment, the Board concluded that it was in the best interests of the New Fund to approve each of the Advisory Agreements for an initial term of two years.

Investment Advisory Agreement

Nature, Extent and Quality of Services to be Provided by the Adviser: With respect to the nature, extent and quality of services to be provided by the Adviser, the Independent Trustees considered the functions to be performed by the Adviser for the New Fund and the background and experience of the individuals to be responsible for the day-to-day management of the New Fund’s portfolio. The Independent Trustees also considered the nature and quality of services provided by GPIM in the past and the firm’s management capabilities demonstrated with respect to other registered investment companies for which GPIM or an affiliate serves as investment adviser/manager (collectively, “Guggenheim Funds”). With respect to the New Fund, the Board considered the Adviser’s

 
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT    

OTHER INFORMATION (Unaudited) (continued)    
 

responsibility to oversee the Sub-Adviser and that the Adviser has similar oversight responsibilities for other Guggenheim Funds. The Board also took into account information provided by Guggenheim in connection with Contract Renewal describing and illustrating the Adviser’s processes and activities for providing oversight of each investment sub-adviser’s investment strategies and compliance with investment restrictions, as well as information regarding the Adviser’s Sub-Advisory Oversight Committee. Moreover, in connection with the Board’s evaluation of the overall package of services to be provided by the Adviser, the Board considered the Adviser’s administrative capabilities, including its role in monitoring and coordinating compliance responsibilities with the fund administrator, transfer agent, distributor, custodian and other service providers to the New Fund.

With respect to Guggenheim’s resources and the ability of the Adviser to carry out its responsibilities under the Investment Advisory Agreement, the Chief Financial Officer of Guggenheim Investments (the investment management business of Guggenheim Partners) reviewed with the Board the audited financial statements of Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”), the holding company of the investment advisers (including GPIM), broker/dealers and other entities that comprise Guggenheim Investments.

The Board also considered the acceptability of the terms of the Investment Advisory Agreement (including the scope of services required to be performed by the Adviser), noting that the terms were consistent with the terms of the investment advisory/management agreements of other Guggenheim Funds. Based on the foregoing, and based on other information received (both oral and written) at the August Meeting and in connection with Contract Renewal, as well as other considerations, including the Board’s knowledge of the Adviser’s quality of performance of its duties for other Guggenheim Funds through Board meetings, discussions and reports throughout the year, the Board concluded that the Adviser and its personnel were qualified to serve the New Fund in such capacity.

Investment Performance: The Board noted that the New Fund seeks long-term capital appreciation and to generate returns in excess of the S&P 500 Total Return Index by investing in companies that use a Multi-stakeholder Management System (“MsMs”) approach to achieve sustainable corporate performance. Since management proposed the reorganization of the Predecessor Fund with and into the New Fund, the Board took into account performance data provided by Guggenheim regarding the performance of the Predecessor Fund as of March 31, 2014. In this respect, the Board noted that although the Predecessor Fund’s 1-year gross return of 19.49% ranked in the 78th percentile of the Morningstar Large Blend Category, the Predecessor Fund’s gross return since inception (September 1, 2011) of 19.59% ranked in the 43rd percentile of the same Morningstar Category. The Board also noted that the Predecessor Fund’s gross returns for each period underperformed the S&P 500 Index, but that the same strategy managed by Concinnity between January 1, 2009 and August 31, 2011, performed in the 5th, 9th and 54th percentile for the since-strategy inception, 5-year and 3-year periods, respectively. In light of all of the foregoing, the Board determined that performance was expected to be acceptable.

Comparative Fees, Costs of Services to be Provided and the Profits to be Realized by GPIM from its Relationship with the New Fund: The Board compared the New Fund’s proposed contractual advisory fee and total net expense ratio to its applicable peer group, as set forth in the FUSE report. The Board also reviewed the median and average advisory fees and expense ratios, including certain expense ratio components (e.g., distribution fees and fee waivers/reimbursements) of the peer group of funds. In this connection, the Board noted that the New Fund’s proposed contractual advisory fee and total expense ratio was above the median of the Fund’s peer group. The Board considered, however, that at this time investors in the New Fund would consist solely of the current investors in the Predecessor Fund, and that the New Fund has a lower contractual advisory fee and total expense ratio than the Predecessor Fund. In addition, GPIM does not charge a lower advisory fee for other funds or separate accounts with investment strategies comparable to those of the New Fund.

With respect to the costs of advisory services to be provided and estimated level of profitability, on the basis of the Trustees’ review of the fees to be charged by GPIM for investment advisory and related services, the Board concluded that it was too early to predict profitability from the New Fund, but the Trustees also noted that they would have the opportunity in the future to periodically re-examine this matter.

The Board considered other benefits to be available to GPIM because of its relationship with the New Fund and noted that GPIM may be deemed to benefit from arrangements whereby an affiliate, Rydex Fund Services, LLC, will receive fees for: (i) performing certain administrative functions and bookkeeping, accounting and pricing functions for the New Fund pursuant to a Fund Accounting and Administration Agreement; and (ii) acting as transfer agent for the New Fund and performing all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications, and acting as the dividend disbursing agent pursuant to a Transfer Agency Agreement. In this connection, the Trustees considered its prior review of the compensation arrangements for the provision of the foregoing services.

Economies of Scale to be Realized: With respect to economies of scale, the Board considered that the New Fund would not at this time be available to retail investors. The Board concluded that the advisory fee schedule reflected an appropriate level of sharing of any economies of scale. The Trustees also noted that they would have the opportunity in the future to periodically re-examine whether the New Fund had achieved economies of scale and the appropriateness of the advisory fees payable by the New Fund to GPIM.

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 21

OTHER INFORMATION (Unaudited) (concluded)    
 

Sub-Advisory Agreement

Nature, Extent and Quality of Services to be Provided by the Sub-Adviser: With respect to the nature, extent and quality of services to be provided by Concinnity to the New Fund, the Board reviewed the New Fund’s investment goal and Concinnity’s proposed investment strategy and method for implementing such investment strategy, including, but not limited to, the trading practices and investment decision processes to be employed for the Fund. In this connection, the Trustees also noted that the Sub-Adviser is experienced in identifying companies with elements of the MsMs management system. The Board also inquired about, discussed and considered information provided by Guggenheim management (both in writing and orally) regarding Concinnity’s personnel, including the capabilities and background of the Sub-Adviser’s investment personnel, operations, compliance processes, experience and performance as a hedge fund manager, experience working with GPIM, the scalability of the Sub-Adviser’s processes and procedures over time, and the firm’s financial condition. In this respect, the Board noted that it had been provided with Concinnity’s U.S. Return of Partnership Income on I.R.S. Form 1065. The Board also took into account Independent Legal Counsel’s discussion with the Board regarding Concinnity’s Form ADV and Brochure. With respect to Concinnity’s Compliance Manual and related Supplement, its Code of Ethics and compliance procedures, the Board also considered the assessment of the Chief Compliance Officer of the Trust as to the sufficiency of the Sub-Adviser’s Code of Ethics and compliance processes and procedures.

The Board also considered the acceptability of the terms of the proposed Sub-Advisory Agreement. Based on the foregoing, and based on other information received (both oral and written) at the August Meeting, as well as other considerations, including the GPIM’s knowledge of the Sub-Adviser’s quality of performance of its duties for the Predecessor Fund, the Trustees determined that the Sub-Adviser was qualified to serve the Capital Stewardship Fund in such capacity.

Investment Performance: The Board took into account performance data provided by Guggenheim regarding the performance of the Predecessor Fund as of March 31, 2014, since its inception on September 1, 2011, as well as the performance of the same strategy as managed by Concinnity between January 1, 2009 and August 31, 2011 (as set forth under “Investment Advisory Agreement—Investment Performance” above). In light of all of the foregoing, the Board determined that Concinnity’s performance was expected to be acceptable.

Comparative Fees, Costs of Services to be Provided and the Profits to be Realized by the Sub-Adviser from its Relationship with the New Fund: The Board reviewed the proposed level of sub-advisory fees payable to Concinnity, noting that the fees would be paid by GPIM and would not be additional fees to be borne by the New Fund. The Board also noted that the sub-advisory fees to be paid by GPIM to Concinnity were the product of arms-length negotiations between GPIM and Concinnity and the Board considered the allocation of the advisory fee charged to the New Fund between GPIM and Concinnity in light of the nature, extent and quality of the investment advisory services expected to be provided by GPIM and Concinnity.

The Board considered the extent to which Concinnity may derive ancillary benefits from the Fund’s operations and, in this regard, noted Concinnity’s statement that it will not receive any benefits other than compensation received under the Sub-Advisory Agreement.

The Board concluded that the level of investment sub-advisory fees was appropriate in light of the services to be provided.

Economies of Scale to be Realized: The Board recognized that, because the Sub-Adviser’s fees would be paid by GPIM and not the Fund, the analysis of economies of scale was more appropriate in the context of the Board’s consideration of the applicable Investment Advisory Agreement, which was separately considered. (See “Investment Advisory Agreement — Economies of Scale to be Realized” above.)

Overall Conclusions

Based on the foregoing, the Trustees determined that the proposed investment advisory fee for the New Fund is fair and reasonable in light of the extent and quality of the services to be provided and other benefits to be received and that the approval of each of the Advisory Agreements is in the best interests of the New Fund and its shareholders. In reaching this conclusion, no single factor was determinative. The Board, including all of the Independent Trustees, approved each of the Advisory Agreements for an initial term of two years.

 
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT    


INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)    
 

        Term of Office       Number of
Portfolios in		    
Name, Address*
and Year of Birth		   Position(s) Held
with the Trust		   and Length of
Time Served**		   Principal Occupation(s)
During Past Five Years		   Fund Complex
Overseen		   Other Directorships
Held by Trustees
 
 
 
 
 
INDEPENDENT TRUSTEES                    
 
Randall C. Barnes
(1951)		   Trustee    Since 2014   Current: Private Investor (2001-present).

Former: Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); President, Pizza Hut International (1991-1993); Senior Vice President, Strategic Planning and New Business Development, PepsiCo, Inc. (1987-1990).		   92   Current: Trustee, Purpose, Inc.
(2014-present).
 
Donald A. Chubb, Jr.
(1946)		   Trustee and Vice Chairman of the Board   Since 1994   Current: Business broker and manager of commercial real estate, Griffith & Blair, Inc.(1997-present).   88   None.
 
Jerry B. Farley
(1946)		   Trustee and Vice Chairman of the Audit Committee   Since 2005   Current: President, Washburn University(1997-present).   88   Current: Westar Energy, Inc. (2004-present); CoreFirst Bank & Trust(2000-present).
 
Roman Friedrich III
(1946)		   Trustee and Chairman of the Contracts Review Committee   Since 2014   Current: Founder and President, Roman Friedrich & Company (1998-present).   88   Current: Zincore Metals, Inc. (2009-present).
            Former: Senior Managing Director, MLV & Co. LLC (2010-2011).       Former: Mercator Minerals Ltd. (2013-2014); First. Americas Gold Corp.(2012-2014); Blue Sky Uranium Corp. (2011-2012);Axiom Gold and Silver Corp. (2011-2012);Stratagold Corp.(2003-2009); GFM Resources Ltd. (2005-2010).
 
Robert B. Karn III
(1942)		   Trustee and Chairman of the Audit Committee   Since 2014   Current: Consultant (1998-present).

Former: Arthur Andersen (1965-1997) and Managing Partner, Financial and Economic Consulting, St. Louis office (1987-1997).		   88   Current: Peabody Energy Company (2003-present); GP Natural Resource Partners, LLC (2002- present).
 
Ronald A. Nyberg
(1953)		   Trustee and Chairman of the Nominating and Governance Committee   Since 2014   Current: Partner, Nyberg & Cassioppi, LLC(2000-present).

Former: Executive Vice President, General Counsel, and Corporate Secretary, Van Kampen Investments (1982-1999).		   94   Current: Edward-Elmhurst Healthcare System(2012-present).
 
Maynard F. Oliverius
(1943)		   Trustee and Vice Chairman of the Contracts Review Committee   Since 1998   Retired.

Former: President and CEO, Stormont-Vail HealthCare (1996-2012).		   88   None.
 
Ronald E. Toupin, Jr.
(1958)		   Trustee and Chairman of the Board   Since 2014   Current: Portfolio Consultant (2010-present).   91   Former: Bennett Group of Funds (2011-2013).
            Former: Vice President, Manager and Portfolio Manager, Nuveen Asset Management(1998-1999); Vice President, Nuveen Investment Advisory Corp. (1992-1999);Vice President and Manager, Nuveen Unit Investment Trusts (1991-1999); and Assistant Vice President and Portfolio Manager, Nuveen Unit Investment Trusts (1988-1999), each of John Nuveen & Co., Inc. (1982-1999).        
INTERESTED TRUSTEE                    
 
Donald C. Cacciapaglia***   
(1951)		 President, Chief Executive Officer and Trustee   Since 2012   Current: President and CEO, certain other funds in the Fund Complex (2012-present); Vice Chairman, Guggenheim Investments (2010-present).

Former: Chairman and CEO, Channel Capital Group, Inc. (2002-2010).		   220   Current: Delaware Life(2013-present); Guggenheim Life and Annuity Company(2011-present); Paragon Life Insurance Company of Indiana(2011-present).
                     

*   The business address of each Trustee is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
**   Each Trustee serves an indefinite term, until his successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.
***   This Trustee is deemed to be an "interested person" of the Funds under the 1940 Act by reason of his position with the Funds’ Investment Manager and/or the parent of the Investment Manager.

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 23

INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) (concluded)    
 

Name, Address*
and Year of Birth		     Position(s) Held
with the Trust		   Term of Office
and Length of
Time Served**		   Principal Occupations
During Past Five Years
   
 
 
OFFICERS

Joseph M. Arruda
(1966)		     Assistant Treasurer   Since 2010   Current: Assistant Treasurer, certain other funds in the Fund Complex (2006-present); Vice President, Security Investors, LLC (2010-present); CFO and Manager, Guggenheim Specialized Products, LLC (2009-present).

Former: Vice President, Security Global Investors, LLC (2010-2011); Vice President, Rydex Advisors, LLC (2010); Vice President, Rydex Advisors II, LLC (2010).
 
William H. Belden, III
(1965)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (2006-present); Managing Director, Guggenheim Funds Investment Advisors, LLC (2005-present).

Former: Vice President of Management, Northern Trust Global Investments (1999-2005).
 
Mark J. Furjanic
(1959)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2005-present); Assistant Treasurer, certain other funds in the Fund Complex (2008-present).

Former: Senior Manager, Ernst & Young LLP (1999-2005).
 
James Howley
(1972)		     Assistant Treasurer   Since 2014   Current: Director, Guggenheim Investments (2004-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2006-present).

Former: Manager, Mutual Fund Administration of Van Kampen Investments, Inc. (1996-2004).
 
Amy J. Lee
(1961)		     Vice President and
Chief Legal Officer		   Since 1987
(Secretary) Since 2007
(Vice President)		   Current: Chief Legal Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (2012-present).

Former: Vice President, Associate General Counsel and Assistant Secretary, Security Benefit Life Insurance Company and Security Benefit Corporation (2004-2012).
 
Mark E. Mathiasen
(1978)		     Secretary   Since 2014   Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
 
Michael P. Megaris
(1984)		     Assistant Secretary   Since 2014   Current: Assistant Secretary, certain other funds in the Fund Complex (April 2014-present); Associate, Guggenheim Investments (2012-present).

Former: J.D., University of Kansas School of Law (2009-2012).
 
Elisabeth Miller
(1968)		     Chief Compliance Officer   Since 2012   Current: CCO, certain other funds in the Fund Complex (2012-present); CCO, Security Investors, LLC (2012-present); CCO, Guggenheim Funds Investment Advisors, LLC (2012-present); Vice President, Guggenheim Funds Distributors, LLC (March 2014-present).

Former: CCO, Guggenheim Distributors, LLC (2009-March 2014); Senior Manager, Security Investors, LLC(2004-2009); Senior Manager, Guggenheim Distributors, LLC (2004-2009).
 
Alison Santay
(1974)		     AML Officer   Since 2013   Current: AML Officer, certain other funds in the Fund Complex (2010-present); Director and AML Officer, Rydex Fund Services, LLC (2010-present); AML Officer, Security Investors, LLC (2010-present); Director, Shareholder Risk and Compliance, Rydex Fund Services, LLC (2004-present).

Former: AML Officer, Guggenheim Distributors, LLC (2013-March 2014).
 
Kimberly Scott
(1974)		     Assistant Treasurer   Since 2014   Current: Vice President, Guggenheim Investments (2012-present) ; Assistant Treasurer, certain other funds in the Fund Complex (2012-present).

Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van Kampen Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen Investments, Inc./Morgan Stanley Investment Management (2005-2009).
 
Bryan Stone
(1979)		     Vice President   Since 2014   Current: Vice President, certain other funds in the Fund Complex (April 2014-present); Director, Guggenheim Investments (2013-present).

Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
 
John L. Sullivan
(1955)		     Chief Financial Officer and Treasurer   Since 2014   Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex(2010-present); Senior Managing Director, Guggenheim Investments (2010-present).

Former: Managing Director and CCO, each of the funds in the Van Kampen Investments fund complex(2004-2010); Managing Director and Head of Fund Accounting and Administration, Morgan Stanley Investment Management (2002-2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
               

*   The business address of each officer is c/o Guggenheim Investments, 805 King Farm Boulevard, Suite 600, Rockville, Maryland 20850.
**   Each officer serves an indefinite term, until his or her successor is duly elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation.

 
24 | THE GUGGENHEIM FUNDS ANNUAL REPORT    

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited)    
 

Rydex Funds, Guggenheim Funds, Rydex Investments, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Security Distributors, Inc., Guggenheim Partners Investment Managers, LLC, and Rydex Advisory Services (Collectively “Guggenheim Investments”).

Our Commitment to You

When you become a Guggenheim Investments investor, you entrust us with not only your hard-earned money but also with personal and financial information about you. We recognize that your relationship with us is based on trust and that you expect us to act responsibly and in your best interests. Because we have access to this private information about you, we hold ourselves to the highest standards in its safekeeping and use. This means, most importantly, that we do not sell client information to anyone—whether it is your personal information or if you are a current or former Guggenheim Investments client.

The Information We Collect About You

In the course of doing business with shareholders and investors, we collect nonpublic personal information about you. You typically provide personal information when you complete a Guggenheim Investments account application or when you request a transaction that involves Rydex and Guggenheim Investments funds or one of the Guggenheim Investments affiliated companies. “Nonpublic personal information” is personally identifiable private information about you. For example, it includes information regarding your name and address, Social Security or taxpayer identification number, assets, income, account balance, bank account information and investment activity (e.g., purchase and redemption history).

How We Handle Your Personal Information

As emphasized above, we do not sell information about current or former clients or their accounts to third parties. Nor do we share such information, except when necessary to complete transactions at your request or to make you aware of related investment products and services that we offer. Additional details about how we handle your personal information are provided below. To complete certain transactions or account changes that you direct, it may be necessary to provide identifying information to companies, individuals or groups that are not affiliated with Guggenheim Investments. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we will need to provide certain information about you to that company to complete the transaction. To alert you to other Guggenheim Investments investment products and services, we may share your information within the Guggenheim Investments family of affiliated companies. This would include, for example, sharing your information within Guggenheim Investments so we can make you aware of new Rydex and Guggenheim Investments funds or the services offered through another Guggenheim Investments affiliated company. In certain instances, we may contract with nonaffiliated companies to perform services for us. Where necessary, we will disclose information we have about you to these third parties. In all such cases, we provide the third party with only the information necessary to carry out its assigned responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. In certain instances, we may share information with other financial institutions regarding individuals and entities in response to the U.S.A. Patriot Act. Finally, we will release information about you if you direct us to do so, if we are compelled by law to do so or in other circumstances permitted by law.

Opt Out Provisions

We do not sell your personal information to anyone. The law allows you to “opt out” of only certain kinds of information sharing with third parties. The firm does not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.

How We Protect Privacy Online

Our concern for the privacy of our shareholders also extends to those who use our web site, guggenheiminvestments.com. Our web site uses some of the most secure forms of online communication available, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These technologies provide a high level of security and privacy when you access your account information or initiate online transactions. The Guggenheim Investments web site offers customized features that require our use of “http cookies”—tiny pieces of information that we ask your browser to store. However, we make very limited use of these cookies. We only use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your email address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.

How We Safeguard Your Personal Information

We restrict access to nonpublic personal information about shareholders to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.

 
    THE GUGGENHEIM FUNDS ANNUAL REPORT | 25

GUGGENHEIM INVESTMENTS PRIVACY POLICIES (Unaudited) (concluded)    
 

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.

 
26 | THE GUGGENHEIM FUNDS ANNUAL REPORT    

 

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Item 2.   Code of Ethics.

The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.

Item 3.   Audit Committee Financial Expert.

The registrant’s Board of Trustees has determined that Maynard Oliverius, a member of the Audit Committee of the Board, is an audit committee financial expert. Mr. Oliverius is “independent” for purposes of this item.

Item 4.   Principal Accountant Fees and Services.

(a)   Audit Fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the registrant’s principal accountant (the “Auditor”) for the audit of the registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $336,500 in 2013 and $439,950 in 2014. Prior year balances have been adjusted to reflect fees of the Predecessor Funds.
     
(b)   Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item 4 were $0 in 2013 and $0 in 2014. These services consisted of financial reporting advisory services.
     
    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 were $35,000 in 2013 and $35,000 in 2014, which related to the review of the transfer agent function.
    __________
     
(c)   Tax Fees. The aggregate fees billed to the registrant in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $105,300 in 2013 and $129,360 in 2014. These services consisted of (i) preparation of U.S. federal, state and excise tax returns;


    (ii) U.S. federal and state tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired and (iv) review of U.S. federal excise distribution calculations.
     
    The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee were $0 in 2013 and $0 in 2014.
    __________
     
(d)   All Other Fees. The aggregate fees billed to the registrant in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $0 in 2013 and $0 in 2014.
     
    The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (d) of this Item, which required pre-approval by the Audit Committee were $0 in 2013 and $0 in 2014.
    __________

(e)   (1)   Audit Committee Pre-Approval Policies and Procedures. The registrant’s Audit Committee has established policies and procedures for pre-approval of the auditor’s engagements for audit and non-audit services to the registrant. Pre-approval considerations include whether the proposed services are compatible with maintaining the auditor’s independence as specified in applicable rules.
         
(e)   (2)   Percentage of Non-Audit Services Approved under (c)(7)(i)(C). The percentage of the services described in each of (b) through (d) of this Item 4 (only those that relate to the registrant) that were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X was 0%, 0% and 0%, respectively.
         
(f)   Not applicable.
         
(g)   Non-Audit Fees. The aggregate non-audit fees were for audit-related and tax services rendered to the registrant, and rendered to Service Affiliates, for the Reporting Periods were $140,300 in 2013 and $164,360 in 2014.
         
(h)   Auditor Independence. The registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young, LLP to the registrant’s investment adviser (not including any subadviser 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 that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young, LLP’s independence.


Item 5.   Audit Committee of Listed Registrants.
     
    Not applicable.
     
Item 6.   Investments.
     
    The Schedule of Investments is included 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)   Not applicable.
       
  (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)                           Guggenheim Funds Trust  
     

By (Signature and Title)*     /s/ Donald C. Cacciapaglia  
     
      Donald C. Cacciapaglia, President and Chief Executive Officer  

Date__December 9, 2014________________________________________________________________

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*     /s/ Donald C. Cacciapaglia  
     
      Donald C. Cacciapaglia, President and Chief Executive Officer  

Date__December 9, 2014__________________________________________________________________

By (Signature and Title)*     /s/ John L. Sullivan  
     
      John L. Sullivan, Chief Financial Officer, Chief  

Accounting Officer and Treasurer
Date__December 9, 2014____________________________________________
*  Print the name and title of each signing officer under his or her signature.