UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811- 02753
Guggenheim Variable Funds Trust
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Guggenheim Variable Funds Trust
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-301-296-5100
Date of fiscal year end: December 31
Date of reporting period: January 1, 2021 - December 31, 2021
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. |
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12.31.2021
Guggenheim Variable Funds Trust Annual Report
Series | |||
Series A | (StylePlus—Large Core Series) | ||
Series B | (Large Cap Value Series) | ||
Series D | (World Equity Income Series) | ||
Series E | (Total Return Bond Series) | ||
Series F | (Floating Rate Strategies Series) | ||
Series J | (StylePlus—Mid Growth Series) | ||
Series N | (Managed Asset Allocation Series) | ||
Series O | (All Cap Value Series) | ||
Series P | (High Yield Series) | ||
Series Q | (Small Cap Value Series) | ||
Series V | (SMid Cap Value Series) | ||
Series X | (StylePlus—Small Growth Series) | ||
Series Y | (StylePlus—Large Growth Series) | ||
Series Z | (Alpha Opportunity Series) | ||
GuggenheimInvestments.com | GVFT-ANN-1221x1222 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 7 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) | 9 |
SERIES B (LARGE CAP VALUE SERIES) | 18 |
SERIES D (WORLD EQUITY INCOME SERIES) | 27 |
SERIES E (TOTAL RETURN BOND SERIES) | 37 |
SERIES F (FLOATING RATE STRATEGIES SERIES) | 60 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) | 74 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) | 84 |
SERIES O (ALL CAP VALUE SERIES) | 93 |
SERIES P (HIGH YIELD SERIES) | 102 |
SERIES Q (SMALL CAP VALUE SERIES) | 118 |
SERIES V (SMID CAP VALUE SERIES) | 127 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) | 137 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) | 147 |
SERIES Z (ALPHA OPPORTUNITY SERIES) | 156 |
NOTES TO FINANCIAL STATEMENTS | 174 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 200 |
OTHER INFORMATION | 201 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 203 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 209 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 1 |
| December 31, 2021 |
Dear Shareholder:
Security Investors, LLC and Guggenheim Partners Investment Management, LLC (the “Investment Advisers”) are pleased to present the annual shareholder report for funds that are part of the Guggenheim Variable Funds Trust (the “Funds”). This report covers performance of the Funds for the annual period ended December 31, 2021.
The Investment Advisers are 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 Advisers.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Performance Report and Fund Profile for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Security Investors, LLC
Guggenheim Partners Investment Management, LLC
January 31, 2022
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.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
COVID-19. The outbreak of COVID-19 and the recovery response causes at times disruption to consumer demand, economic output, and supply chains. There are still travel restrictions, quarantines, and disparate global vaccine distributions. As with other serious economic disruptions, governmental authorities and regulators have responded to this situation with significant fiscal and monetary policy changes. These include providing direct capital infusions into companies, introducing new monetary programs, and considerably lowering interest rates. In some cases, these responses resulted in negative interest rates and higher inflation. Recently, the U.S. and other governments have also made investments and engaged in infrastructure modernization projects that have also increased public debt and spending. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets, reduce market liquidity, continue to cause higher inflation, heighten investor uncertainty, and adversely affect the value of the Funds’ investments and the performance of the Funds. These actions also contribute to a risk that asset prices have a higher degree of correlation than historically seen across markets and asset classes. The duration and extent of COVID-19 over the long term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
2 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| December 31, 2021 |
The Series StylePlus Funds 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. ● 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. ● 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 Funds 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 Funds’ use of leverage, through borrowings or instruments such as derivatives, may cause the Funds to be more volatile than if they had not been leveraged. ● The Funds’ investments in other investment vehicles subject the Funds to those risks and expenses affecting the investment vehicle. ● The Funds 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 Funds 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 Funds’ exposure to high yield securities may subject the Funds to greater volatility. ● The Funds may invest in bank loans and asset-backed securities, including mortgage backed, which involve special types of risks. ● The Funds 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 Funds are not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series Value Funds may not be suitable for all investors. ● An investment in the Funds will fluctuate and is subject to investment risks, which means investors could lose money. The intrinsic value of the underlying stocks may never be realized or the stocks may decline in value. Investments in small- and/or mid-sized company securities may present additional risks such as less predictable earnings, higher volatility and less liquidity than larger, more established companies. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series D (World Equity Income Series) may not be suitable for all investors. ● Investments in securities in general are subject to market risks that may cause their prices to fluctuate over time. ●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. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series E (Total Return Bond Series) may not be suitable for all investors. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● 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 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 risk). ● 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.
The Series F (Floating Rate Strategies Series) 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 may use 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 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 risk). ● 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.
The Series N (Managed Asset Allocation Series) may not be suitable for all investors. ● The value of an investment in the Fund will fluctuate and is subject to investment risks, which means investors could lose money. The Fund could lose money if the issuer of a bond or a counterparty to a derivatives transaction or other transaction is unable to repay interest and principal on time or defaults. The issuer of a bond could also suffer a decrease in quality rating, which would affect the volatility and liquidity
THE GUGGENHEIM FUNDS ANNUAL REPORT | 3 |
| December 31, 2021 |
of the bond. Derivatives may pose risks in addition to those associated with investing directly in securities or other investments, including the risk that the Fund will be unable to sell, unwind or value the derivative because of an illiquid market, the risk that the derivative is not well correlated with underlying investments or the Fund’s other portfolio holdings, and the risk that the counterparty is unwilling or unable to meet its obligation. The use of derivatives by the Fund to hedge risk may reduce the opportunity for gain by offsetting the positive effect of favorable price movements. Furthermore, if the Investment Manager is incorrect about its expectations of market conditions, the use of derivatives could result in a loss, which in some cases may be unlimited. Foreign securities carry additional risks when compared to U.S. securities, including currency fluctuations, adverse political and economic developments, unreliable or untimely information, less liquidity, limited legal recourse and higher transactional costs. The Investment Manager may not be able to cause certain of the underlying funds’ performance to match or correlate to that of the underlying funds’ respective underlying index or benchmark, either on a daily or aggregate basis. Factors such as underlying fund expenses, imperfect correlation between an underlying fund’s investments and those of its underlying index or underlying benchmark, rounding of share prices, changes to the composition of the underlying index or underlying benchmark, regulatory policies, high portfolio turnover rate, and the use of leverage all contribute to tracking error. Tracking error may cause an underlying fund’s and, thus the Fund’s, performance to be less than you expect. ● Please read the prospectus for more detailed information regarding these and other risks.
The Series P (High Yield Series) may not be suitable for all investors. ● The Fund’s market value will change in response to interest rate changes and market conditions among other factors. In general, bond prices rise when interest rates fall and vice versa. ● The Fund’s exposure to high yield securities may subject the Fund to greater volatility. ● The Fund may invest in derivative instruments, which may be more volatile and less liquid, increasing the risk of loss when compared to traditional securities. Certain of the derivative instruments are also subject to the risks of counterparty default and adverse tax treatment. ●The Fund’s use of leverage, through borrowings or instruments such as derivatives, may cause the Fund to be more volatile than if it had not been leveraged. ● 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.
The Series Z (Alpha Opportunity Series) may not be suitable for all investors. ● Investments in securities and derivatives, in general, are subject to market risks that may cause their prices to fluctuate over time. An investment in the Fund may lose money. There can be no guarantee the Fund will achieve it investment objective. ●The Fund’s use of derivatives such as futures, options and swap agreements may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. ● Certain of the derivative instruments, such as swaps and structured notes, are also subject to the risks of counterparty default and adverse tax treatment. ●The more the Fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments. ● The Fund’s use of short selling involves increased risk and costs, including paying more for a security than it received from its sale and the risk of unlimited losses. ●In certain circumstances the Fund may be subject to liquidity risk and it may be difficult for the Fund to purchase and sell particular investments within a reasonable time at a fair price. ● The Fund’s fixed income investments will change in value in response to interest rate changes and other factors. ●Please read the prospectus for more detailed information regarding these and other risks.
4 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | December 31, 2021 |
During the 12-month period ended December 31, 2021, the S&P 500 Index reached all-time highs as investors largely brushed off concerns about new COVID-19 variants, global supply chain disruptions, inflationary fears, and other worrying factors that resulted in little more than brief selloffs before the index resumed its upward march.
The economic recovery made considerable progress in 2021 with the help of COVID-19 vaccines and enormous policy stimulus. We expect policymakers, led by the Federal Reserve (the “Fed”), will begin to scale back their support in 2022. However, because of their dovish policy framework, the Fed is deliberately “behind the curve.” As such, we expect real interest rates could remain negative in the near term, supporting above-potential economic growth and risk asset returns. Eventually an overheated economy will require that the Fed apply the brakes more firmly, but we believe that will be a greater concern in 2023.
U.S. real gross domestic product (“GDP”) slowed to 2.3% in the third quarter of 2021, but output has now fully recovered and now exceeds its supply side potential. We believe growth could bounce back to a robust 6–7% in the fourth quarter and remain well above potential in 2022, which would ensure a continued rapid decline in the unemployment rate.
A rapidly tightening labor market will put further pressure on wages, which are already surging. The Employment Cost Index, which is a measure of wage growth given that it controls for compositional changes (e.g. low paid industries losing jobs disproportionately), saw the largest quarterly gain in over 30 years in the third quarter reading. The share of businesses reporting plans to raise wages is also spiking, which suggests that further wage gains are in the pipeline.
As a result, the inflation narrative is evolving from a focus on the series of “transitory” shocks of 2021 to a focus on accelerating wage growth and housing inflation. While we believe that overall inflation will slow in 2022 as durable goods prices recede, core inflation should remain meaningfully above the Fed’s 2.0% target. We therefore expect that the Fed will deliver four rate increases in 2022, starting in March, and begin the process of quantitative tightening.
A key risk to our positive outlook is China, where massive property and credit imbalances threaten to unravel. Real GDP growth in 2021 slowed to a pace of just 4.0%, the weakest in the modern era excluding the first half of 2020. However, Chinese policymakers appear ready to step in to support faster growth. Separately, while the Omicron variant of COVID-19 has produced record cases, reduced severity and vaccines/treatments may portend only a modest drag on growth.
For the 12-month period ended December 31, 2021, the S&P 500® Index* returned 28.71%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 11.26%. The return of the MSCI Emerging Markets Index* was -2.54%.
In the bond market, the Bloomberg U.S. Aggregate Bond Index* posted a -1.54% return for the 12-month period, while the Bloomberg U.S. Corporate High Yield Index* returned 5.28%. The return of the ICE Bank of America (“BofA”) 3-Month U.S. Treasury Bill Index* was 0.05% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 5 |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | December 31, 2021 |
Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market.
ICE BofA 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
MSCI 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.
Morningstar Long/Short Equity Category Average represents long-short portfolios which hold sizable stakes in both long and short positions in equities and related derivatives. Some funds that fall into this category will shift their exposure to long and short positions depending on their macro outlook or the opportunities they uncover through bottom-up research. Some funds may simply hedge long stock positions through exchange traded funds or derivatives. At least 75% of the assets are in equity securities or derivatives.
Russell 3000® Index measures the performance of the largest 3,000 U.S. companies, representing approximately 98% of the investable U.S. equity market.
Russell 3000® Value Index measures the performance of the broad value segment of the U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 2500® Value Index measures the performance of the small- to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth value.
Russell 1000® Value Index: A measure of the performance for the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.
Russell Midcap® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
6 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning June 30, 2021 and ending December 31, 2021.
The following tables illustrate the Funds’ 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 fifth 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 the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 |
| ||||
Series A (StylePlus—Large Core Series) | 0.85% | 11.31% | $ 1,000.00 | $ 1,113.10 | $ 4.53 |
Series B (Large Cap Value Series) | 0.79% | 7.36% | 1,000.00 | 1,073.60 | 4.13 |
Series D (World Equity Income Series) | 0.89% | 4.80% | 1,000.00 | 1,048.00 | 4.59 |
Series E (Total Return Bond Series) | 0.78% | 0.29% | 1,000.00 | 1,002.90 | 3.94 |
Series F (Floating Rate Strategies Series) | 1.16% | 1.05% | 1,000.00 | 1,010.50 | 5.88 |
Series J (StylePlus—Mid Growth Series) | 0.89% | 2.37% | 1,000.00 | 1,023.70 | 4.54 |
Series N (Managed Asset Allocation Series) | 0.97% | 4.52% | 1,000.00 | 1,045.20 | 5.00 |
Series O (All Cap Value Series) | 0.87% | 5.88% | 1,000.00 | 1,058.80 | 4.51 |
Series P (High Yield Series) | 1.08% | 1.92% | 1,000.00 | 1,019.20 | 5.50 |
Series Q (Small Cap Value Series) | 1.13% | 2.31% | 1,000.00 | 1,023.10 | 5.76 |
Series V (SMid Cap Value Series) | 0.90% | 2.90% | 1,000.00 | 1,029.00 | 4.60 |
Series X (StylePlus—Small Growth Series) | 1.01% | (3.38%) | 1,000.00 | 966.20 | 5.01 |
Series Y (StylePlus—Large Growth Series) | 0.88% | 12.70% | 1,000.00 | 1,127.00 | 4.72 |
Series Z (Alpha Opportunity Series) | 2.01% | 7.02% | 1,000.00 | 1,070.20 | 10.49 |
| |||||
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Series A (StylePlus—Large Core Series) | 0.85% | 5.00% | $ 1,000.00 | $ 1,020.92 | $ 4.33 |
Series B (Large Cap Value Series) | 0.79% | 5.00% | 1,000.00 | 1,021.22 | 4.02 |
Series D (World Equity Income Series) | 0.89% | 5.00% | 1,000.00 | 1,020.72 | 4.53 |
Series E (Total Return Bond Series) | 0.78% | 5.00% | 1,000.00 | 1,021.27 | 3.97 |
Series F (Floating Rate Strategies Series) | 1.16% | 5.00% | 1,000.00 | 1,019.36 | 5.90 |
Series J (StylePlus—Mid Growth Series) | 0.89% | 5.00% | 1,000.00 | 1,020.72 | 4.53 |
Series N (Managed Asset Allocation Series) | 0.97% | 5.00% | 1,000.00 | 1,020.32 | 4.94 |
Series O (All Cap Value Series) | 0.87% | 5.00% | 1,000.00 | 1,020.82 | 4.43 |
Series P (High Yield Series) | 1.08% | 5.00% | 1,000.00 | 1,019.76 | 5.50 |
Series Q (Small Cap Value Series) | 1.13% | 5.00% | 1,000.00 | 1,019.51 | 5.75 |
Series V (SMid Cap Value Series) | 0.90% | 5.00% | 1,000.00 | 1,020.67 | 4.58 |
Series X (StylePlus—Small Growth Series) | 1.01% | 5.00% | 1,000.00 | 1,020.11 | 5.14 |
Series Y (StylePlus—Large Growth Series) | 0.88% | 5.00% | 1,000.00 | 1,020.77 | 4.48 |
Series Z (Alpha Opportunity Series) | 2.01% | 5.00% | 1,000.00 | 1,015.07 | 10.21 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. This ratio represents net expenses, which may include expenses that are excluded from the expense limitation agreement and affiliated waivers. Excluding these expenses, the net expense ratios for the period would be: |
Fund | 12/31/21 | |
Series A (StylePlus—Large Core Series) | 0.83% | |
Series B (Large Cap Value Series) | 0.78% | |
Series D (World Equity Income Series) | 0.89% | |
Series E (Total Return Bond Series) | 0.78% | |
Series F (Floating Rate Strategies Series) | 1.14% | |
Series J (StylePlus—Mid Growth Series) | 0.88% | |
Series O (All Cap Value Series) | 0.86% | |
Series P (High Yield Series) | 1.06% | |
Series Q (Small Cap Value Series) | 1.12% | |
Series V (SMid Cap Value Series) | 0.89% | |
Series X (StylePlus—Small Growth Series) | 1.00% | |
Series Y (StylePlus—Large Growth Series) | 0.87% | |
Series Z (Alpha Opportunity Series) | 2.00% |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses shown do not include fees charged by insurance companies. |
3 | Actual cumulative return at net asset value for the period June 30, 2021 to December 31, 2021. |
8 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series A (StylePlus TM—Large Core Series) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series A (StylePlus—Large Core Series) returned 28.48%, compared with the 28.71% return of its benchmark, the S&P 500 Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the S&P 500 Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed-income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed-income overlay.
Performance Review and Positioning
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed-income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund performed in line with the S&P 500 Index for the fiscal year ended December 31, 2021. The fixed income sleeve contributed to total return, as positions in the Guggenheim Ultra Short Duration Fund and the Guggenheim Strategy Funds, net of the investment income earned by these positions, were positive for the period. The actively managed equity sleeve contributed to performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, also contributed to performance for the period.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES A (STYLEPLUS—LARGE CORE SERIES)
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: May 1, 1979 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund III | 30.1% |
Guggenheim Variable Insurance Strategy Fund III | 25.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 20.1% |
Guggenheim Strategy Fund II | 6.2% |
Microsoft Corp. | 1.3% |
Apple, Inc. | 1.2% |
Alphabet, Inc. — Class C | 0.6% |
Amazon.com, Inc. | 0.5% |
Cisco Systems, Inc. | 0.3% |
Accenture plc — Class A | 0.3% |
Top Ten Total | 85.6% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
10 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series A (StylePlus—Large Core Series) | 28.48% | 17.76% | 15.93% |
S&P 500 Index | 28.71% | 18.47% | 16.55% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 17.3% | ||||||||
Technology - 5.6% | ||||||||
Microsoft Corp. | 10,423 | $ | 3,505,464 | |||||
Apple, Inc. | 18,933 | 3,361,933 | ||||||
Accenture plc — Class A | 1,870 | 775,208 | ||||||
QUALCOMM, Inc. | 3,986 | 728,920 | ||||||
Broadcom, Inc. | 1,089 | 724,632 | ||||||
Intel Corp. | 13,924 | 717,086 | ||||||
International Business Machines Corp. | 4,743 | 633,949 | ||||||
Texas Instruments, Inc. | 3,107 | 585,576 | ||||||
NetApp, Inc. | 5,563 | 511,740 | ||||||
HP, Inc. | 11,497 | 433,092 | ||||||
Seagate Technology Holdings plc | 3,809 | 430,341 | ||||||
Akamai Technologies, Inc.* | 3,608 | 422,280 | ||||||
Hewlett Packard Enterprise Co. | 26,541 | 418,552 | ||||||
Zebra Technologies Corp. — Class A* | 674 | 401,165 | ||||||
Skyworks Solutions, Inc. | 2,447 | 379,628 | ||||||
NVIDIA Corp. | 1,285 | 377,931 | ||||||
Cerner Corp. | 2,687 | 249,542 | ||||||
Oracle Corp. | 2,587 | 225,612 | ||||||
Advanced Micro Devices, Inc.* | 1,377 | 198,150 | ||||||
KLA Corp. | 374 | 160,861 | ||||||
Total Technology | 15,241,662 | |||||||
Consumer, Non-cyclical - 3.0% | ||||||||
Pfizer, Inc. | 11,321 | 668,505 | ||||||
AbbVie, Inc. | 4,843 | 655,742 | ||||||
Philip Morris International, Inc. | 6,740 | 640,300 | ||||||
Bristol-Myers Squibb Co. | 10,010 | 624,123 | ||||||
Amgen, Inc. | 2,732 | 614,618 | ||||||
Gilead Sciences, Inc. | 7,912 | 574,490 | ||||||
Waters Corp.* | 1,406 | 523,876 | ||||||
Gartner, Inc.* | 1,526 | 510,173 | ||||||
Laboratory Corporation of America Holdings* | 1,613 | 506,821 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 662 | 500,188 | ||||||
Quest Diagnostics, Inc. | 2,856 | 494,116 | ||||||
Hologic, Inc.* | 6,288 | 481,409 | ||||||
Regeneron Pharmaceuticals, Inc.* | 648 | 409,225 | ||||||
United Rentals, Inc.* | 870 | 289,092 | ||||||
Avery Dennison Corp. | 1,080 | 233,895 | ||||||
UnitedHealth Group, Inc. | 284 | 142,608 | ||||||
Johnson & Johnson | 810 | 138,567 | ||||||
Total Consumer, Non-cyclical | 8,007,748 | |||||||
Consumer, Cyclical - 2.6% | ||||||||
Lowe’s Companies, Inc. | 2,677 | 691,951 | ||||||
Lennar Corp. — Class A | 4,644 | 539,447 | ||||||
AutoZone, Inc.* | 256 | 536,676 | ||||||
O’Reilly Automotive, Inc.* | 757 | 534,616 | ||||||
Yum! Brands, Inc. | 3,841 | 533,361 | ||||||
Tesla, Inc.* | 498 | 526,276 | ||||||
LKQ Corp. | 8,560 | 513,857 | ||||||
NVR, Inc.* | 85 | 502,254 | ||||||
Whirlpool Corp. | 2,030 | 476,360 | ||||||
Target Corp. | 2,056 | 475,841 | ||||||
Tapestry, Inc. | 11,681 | 474,249 | ||||||
Domino’s Pizza, Inc. | 828 | 467,265 | ||||||
BorgWarner, Inc. | 9,572 | 431,410 | ||||||
Home Depot, Inc. | 773 | 320,803 | ||||||
Total Consumer, Cyclical | 7,024,366 | |||||||
Communications - 2.5% | ||||||||
Alphabet, Inc. — Class C* | 571 | 1,652,240 | ||||||
Amazon.com, Inc.* | 407 | 1,357,076 | ||||||
Cisco Systems, Inc. | 12,595 | 798,145 | ||||||
Meta Platforms, Inc. — Class A* | 1,817 | 611,148 | ||||||
Motorola Solutions, Inc. | 1,986 | 539,596 | ||||||
eBay, Inc. | 8,069 | 536,588 | ||||||
Juniper Networks, Inc. | 14,354 | 512,582 | ||||||
F5, Inc.* | 942 | 230,517 | ||||||
AT&T, Inc. | 8,142 | 200,293 | ||||||
Arista Networks, Inc.* | 1,185 | 170,344 | ||||||
Total Communications | 6,608,529 | |||||||
Financial - 1.8% | ||||||||
Citigroup, Inc. | 9,964 | 601,726 | ||||||
T. Rowe Price Group, Inc. | 2,722 | 535,254 | ||||||
Capital One Financial Corp. | 3,654 | 530,159 | ||||||
MetLife, Inc. | 8,437 | 527,228 | ||||||
Raymond James Financial, Inc. | 4,937 | 495,675 | ||||||
Everest Re Group Ltd. | 1,773 | 485,660 | ||||||
Cincinnati Financial Corp. | 3,871 | 441,023 | ||||||
Synchrony Financial | 8,481 | 393,433 | ||||||
Berkshire Hathaway, Inc. — Class B* | 1,001 | 299,299 | ||||||
Charles Schwab Corp. | 3,425 | 288,042 | ||||||
JPMorgan Chase & Co. | 1,456 | 230,558 | ||||||
Visa, Inc. — Class A | 653 | 141,512 | ||||||
Total Financial | 4,969,569 | |||||||
Industrial - 1.3% | ||||||||
3M Co. | 3,288 | 584,047 | ||||||
Keysight Technologies, Inc.* | 2,577 | 532,177 | ||||||
General Dynamics Corp. | 2,537 | 528,888 | ||||||
Garmin Ltd. | 3,660 | 498,382 | ||||||
Sealed Air Corp. | 7,260 | 489,832 | ||||||
Snap-on, Inc. | 2,217 | 477,498 | ||||||
Huntington Ingalls Industries, Inc. | 2,523 | 471,145 | ||||||
Total Industrial | 3,581,969 | |||||||
Basic Materials - 0.5% | ||||||||
LyondellBasell Industries N.V. — Class A | 5,550 | 511,877 | ||||||
Celanese Corp. — Class A | 2,990 | 502,499 | ||||||
Nucor Corp. | 3,167 | 361,513 | ||||||
Total Basic Materials | 1,375,889 | |||||||
Total Common Stocks | ||||||||
(Cost $39,185,941) | 46,809,732 | |||||||
MUTUAL FUNDS† - 81.4% | ||||||||
Guggenheim Strategy Fund III1 | 3,240,014 | 81,097,553 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 2,705,982 | 67,541,303 | ||||||
12 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
| Shares | Value | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 5,469,096 | $ | 54,253,430 | |||||
Guggenheim Strategy Fund II1 | 674,457 | 16,780,495 | ||||||
Total Mutual Funds | ||||||||
(Cost $219,579,610) | 219,672,781 | |||||||
MONEY MARKET FUND† - 1.6% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 4,300,523 | 4,300,523 | ||||||
Total Money Market Fund | ||||||||
(Cost $4,300,523) | 4,300,523 | |||||||
Total Investments - 100.3% | ||||||||
(Cost $263,066,074) | $ | 270,783,036 | ||||||
Other Assets & Liabilities, net - (0.3)% | (812,481 | ) | ||||||
Total Net Assets - 100.0% | $ | 269,970,555 | ||||||
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P 500 Index Mini Futures Contracts | 20 | Mar 2022 | $ | 4,759,500 | $ | 100,275 | ||||||||||
Total Return Swap Agreements | |||||||||||||||||||||||
Counterparty | Index | Type | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||||||
Wells Fargo Bank, N.A. | S&P 500 Total Return Index | Pay | 0.58% (Federal Funds Rate + 0.50%) | At Maturity | 04/07/22 | 21,948 | $ | 219,183,263 | $ | 19,979,155 | |||||||||||||
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 13 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 46,809,732 | $ | — | $ | — | $ | 46,809,732 | ||||||||
Mutual Funds | 219,672,781 | — | — | 219,672,781 | ||||||||||||
Money Market Fund | 4,300,523 | — | — | 4,300,523 | ||||||||||||
Equity Futures Contracts** | 100,275 | — | — | 100,275 | ||||||||||||
Equity Index Swap Agreements** | — | 19,979,155 | — | 19,979,155 | ||||||||||||
Total Assets | $ | 270,883,311 | $ | 19,979,155 | $ | — | $ | 290,862,466 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 16,600,429 | $ | 234,073 | $ | — | $ | — | $ | (54,007 | ) | $ | 16,780,495 | 674,457 | $ | 234,562 | ||||||||||||||||
Guggenheim Strategy Fund III | 57,516,275 | 23,804,262 | — | — | (222,984 | ) | 81,097,553 | 3,240,014 | 1,005,220 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 47,177,063 | 15,523,040 | (8,117,999 | ) | 185,697 | (514,371 | ) | 54,253,430 | 5,469,096 | 518,874 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 57,356,264 | 10,398,979 | — | — | (213,940 | ) | 67,541,303 | 2,705,982 | 900,659 | |||||||||||||||||||||||
| $ | 178,650,031 | $ | 49,960,354 | $ | (8,117,999 | ) | $ | 185,697 | $ | (1,005,302 | ) | $ | 219,672,781 | $ | 2,659,315 | |||||||||||||||||
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $43,486,464) | $ | 51,110,255 | ||
Investments in affiliated issuers, at value (cost $219,579,610) | 219,672,781 | |||
Cash | 1,561 | |||
Segregated cash with broker | 250,000 | |||
Unrealized appreciation on OTC swap agreements | 19,979,155 | |||
Prepaid expenses | 6,701 | |||
Receivables: | ||||
Dividends | 283,579 | |||
Interest | 91 | |||
Total assets | 291,304,123 | |||
Liabilities: | ||||
Segregated cash due to broker | 20,280,000 | |||
Payable for: | ||||
Swap settlement | 279,883 | |||
Securities purchased | 269,340 | |||
Fund shares redeemed | 222,814 | |||
Management fees | 95,622 | |||
Distribution and service fees | 56,330 | |||
Fund accounting/administration fees | 16,276 | |||
Trustees’ fees* | 12,949 | |||
Variation margin on futures contracts | 12,750 | |||
Transfer agent/maintenance fees | 2,045 | |||
Miscellaneous | 85,559 | |||
Total liabilities | 21,333,568 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 269,970,555 | ||
Net assets consist of: | ||||
Paid in capital | $ | 183,656,931 | ||
Total distributable earnings (loss) | 86,313,624 | |||
Net assets | $ | 269,970,555 | ||
Capital shares outstanding | 4,753,718 | |||
Net asset value per share | $ | 56.79 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 690,657 | ||
Dividends from securities of affiliated issuers | 2,659,315 | |||
Interest | 1,024 | |||
Total investment income | 3,350,996 | |||
Expenses: | ||||
Management fees | 1,883,112 | |||
Distribution and service fees | 627,704 | |||
Transfer agent/maintenance fees | 25,064 | |||
Fund accounting/administration fees | 171,914 | |||
Professional fees | 76,784 | |||
Interest expense | 19,994 | |||
Custodian fees | 17,132 | |||
Trustees’ fees* | 13,173 | |||
Line of credit fees | 11,115 | |||
Miscellaneous | 6,429 | |||
Total expenses | 2,852,421 | |||
Less: | ||||
Expenses reimbursed by Adviser | (2,857 | ) | ||
Expenses waived by Adviser | (719,139 | ) | ||
Earnings credits applied | (108 | ) | ||
Total waived/reimbursed expenses | (722,104 | ) | ||
Net expenses | 2,130,317 | |||
Net investment income | 1,220,679 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 8,538,357 | |||
Investments in affiliated issuers | 185,697 | |||
Swap agreements | 52,295,640 | |||
Futures contracts | 1,323,011 | |||
Net realized gain | 62,342,705 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,720,405 | |||
Investments in affiliated issuers | (1,005,302 | ) | ||
Swap agreements | (1,710,537 | ) | ||
Futures contracts | 68,935 | |||
Net change in unrealized appreciation (depreciation) | (926,499 | ) | ||
Net realized and unrealized gain | 61,416,206 | |||
Net increase in net assets resulting from operations | $ | 62,636,885 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 15 |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,220,679 | $ | 1,804,148 | ||||
Net realized gain on investments | 62,342,705 | 27,369,160 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (926,499 | ) | 6,844,741 | |||||
Net increase in net assets resulting from operations | 62,636,885 | 36,018,049 | ||||||
Distributions to shareholders | (26,897,830 | ) | (12,350,787 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 2,897,714 | 4,825,074 | ||||||
Distributions reinvested | 26,897,830 | 12,350,787 | ||||||
Cost of shares redeemed | (25,651,784 | ) | (28,837,836 | ) | ||||
Net increase (decrease) from capital share transactions | 4,143,760 | (11,661,975 | ) | |||||
Net increase in net assets | 39,882,815 | 12,005,287 | ||||||
Net assets: | ||||||||
Beginning of year | 230,087,740 | 218,082,453 | ||||||
End of year | $ | 269,970,555 | $ | 230,087,740 | ||||
Capital share activity: | ||||||||
Shares sold | 54,152 | 113,612 | ||||||
Shares issued from reinvestment of distributions | 518,662 | 294,839 | ||||||
Shares redeemed | (478,128 | ) | (678,666 | ) | ||||
Net increase (decrease) in shares | 94,686 | (270,215 | ) | |||||
16 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES A (STYLEPLUS—LARGE CORE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 49.39 | $ | 44.24 | $ | 36.80 | $ | 45.50 | $ | 38.20 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .26 | .38 | .68 | .83 | .62 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 13.22 | 7.46 | 10.06 | (3.10 | ) | 7.76 | ||||||||||||||
Total from investment operations | 13.48 | 7.84 | 10.74 | (2.27 | ) | 8.38 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.41 | ) | (.74 | ) | (.91 | ) | (.75 | ) | (.50 | ) | ||||||||||
Net realized gains | (5.67 | ) | (1.95 | ) | (2.39 | ) | (5.68 | ) | (.58 | ) | ||||||||||
Total distributions | (6.08 | ) | (2.69 | ) | (3.30 | ) | (6.43 | ) | (1.08 | ) | ||||||||||
Net asset value, end of period | $ | 56.79 | $ | 49.39 | $ | 44.24 | $ | 36.80 | $ | 45.50 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 28.48 | % | 18.78 | % | 29.97 | % | (6.56 | %) | 22.22 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 269,971 | $ | 230,088 | $ | 218,082 | $ | 190,644 | $ | 251,795 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.49 | % | 0.88 | % | 1.65 | % | 1.89 | % | 1.48 | % | ||||||||||
Total expensesc | 1.14 | % | 1.22 | % | 1.27 | % | 1.26 | % | 1.12 | % | ||||||||||
Net expensesd,e,f | 0.85 | % | 0.89 | % | 0.95 | % | 0.97 | % | 0.91 | % | ||||||||||
Portfolio turnover rate | 34 | % | 63 | % | 41 | % | 45 | % | 44 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.02% | — |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.84% | 0.87% | 0.89% | 0.91% | 0.90% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 17 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series B (Large Cap Value Series) is managed by a team of seasoned professionals led by David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; James Schier, CFA, Senior Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series B (Large Cap Value Series) returned 27.03%, compared with the Russell 1000® Value Index, which returned 25.16%.
Investment Approach
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 industries in which they operate. In today’s rapidly changing environment marked by very sharp and 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 fundamentals once again become a more dominant factor in the market.
Performance Review and Positioning
Rising interest rates, the reopening of the economy following the pandemic, and a historically wide valuation gap between growth and value sectors were among the factors that, in a reversal from the last few years, saw value stocks rival or outperform growth stocks over the period, particularly in the small capitalization space. Early on, the smallest and most sensitive to an improving economy advanced the most, but larger, more growth-focused names stepped up as the market grew concerned about the Delta variant, peak profitability, rising input prices, logistical challenges, and shortages. The Fund tends to own the smaller and more value-focused companies in the benchmark, and lagged its benchmark at times throughout the period.
The Fund benefited from strong security selection, with Materials and Consumer Discretionary contributing the most at the sector level. In Materials, commodity price inflation on the back of an improving economy benefitted steel names such as Nucor Corp. as well as specialty chemical companies like Huntsman Corp. and Olin Corp. In Consumer Discretionary, the Fund was helped by holdings in sellers of autos and auto parts (LKQ Corp. and Penske Automotive Group, Inc.), and home-related holdings (D.R. Horton and Home Depot).
Selection Energy and Information Technology were also relative contributors to performance. Energy benefitted from the rise in energy prices, and natural gas-oriented Range Resources was the leading contributor in that sector; integrated oil companies Marathon Oil and ConocoPhillips were other sector contributors. Johnson Controls was the leading Tech contributor.
The principal sector detractor for the period was Health Care, mostly due to Encompass Health, which guided earnings lower in the third quarter, and an underweight in Pfizer, which had a strong pipeline and COVID treatments. Industrials was a detractor the period, partly due to weak airlines performance.
Selection was a detractor in Communication Services, offset by an underweighting of the sector as a whole. The main individual detractor was an active overweight position in Verizon Communications. The Fund favored Verizon over AT&T, which underperformed for the period.
While this strategy is balanced relative to the benchmark, the size of companies it owns is typically smaller, given their often-better growth opportunities. The Fund’s largest sector overweights relative to the benchmark were in Energy and Utilities. The Fund’s largest sector underweight was in Industrials. Other sector underweights were Real Estate and Financials.
18 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
The market outlook is continues to be murkier than usual. The expectation of a Federal Reserve that is now biased to being less accommodative and growing geopolitical risks suggest an environment that may constrain the upside for equities. However, record negative real interest rates promise to provide a solid underpinning for equity valuations.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 19 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES B (LARGE CAP VALUE SERIES)
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.
Inception Date: May 1, 1979 |
Ten Largest Holdings (% of Total Net Assets) | |
JPMorgan Chase & Co. | 2.6% |
Micron Technology, Inc. | 2.5% |
Tyson Foods, Inc. — Class A | 2.4% |
Johnson & Johnson | 2.3% |
Berkshire Hathaway, Inc. — Class B | 2.3% |
Wells Fargo & Co. | 2.1% |
Verizon Communications, Inc. | 2.1% |
Bank of America Corp. | 2.0% |
Exelon Corp. | 1.9% |
Chevron Corp. | 1.8% |
Top Ten Total | 22.0% |
“Ten Largest Holdings” excludes any temporary cash investments. | |
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series B (Large Cap Value Series) | 27.03% | 10.63% | 12.30% |
Russell 1000 Value Index | 25.16% | 11.16% | 12.97% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES B (LARGE CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 96.0% | ||||||||
Consumer, Non-cyclical - 20.9% | ||||||||
Tyson Foods, Inc. — Class A | 65,226 | $ | 5,685,098 | |||||
Johnson & Johnson | 32,219 | 5,511,705 | ||||||
Humana, Inc. | 9,178 | 4,257,307 | ||||||
McKesson Corp. | 14,704 | 3,654,973 | ||||||
Archer-Daniels-Midland Co. | 52,046 | 3,517,789 | ||||||
Ingredion, Inc. | 31,921 | 3,084,846 | ||||||
Quest Diagnostics, Inc. | 17,401 | 3,010,547 | ||||||
J M Smucker Co. | 17,762 | 2,412,435 | ||||||
Bunge Ltd. | 25,800 | 2,408,688 | ||||||
Henry Schein, Inc.* | 29,932 | 2,320,628 | ||||||
Merck & Company, Inc. | 29,200 | 2,237,888 | ||||||
Medtronic plc | 21,543 | 2,228,623 | ||||||
Pfizer, Inc. | 29,771 | 1,757,978 | ||||||
HCA Healthcare, Inc. | 6,743 | 1,732,412 | ||||||
Encompass Health Corp. | 25,501 | 1,664,195 | ||||||
Amgen, Inc. | 6,861 | 1,543,519 | ||||||
Procter & Gamble Co. | 8,583 | 1,404,007 | ||||||
Bristol-Myers Squibb Co. | 16,678 | 1,039,873 | ||||||
Total Consumer, Non-cyclical | 49,472,511 | |||||||
Financial - 18.3% | ||||||||
JPMorgan Chase & Co. | 38,094 | 6,032,185 | ||||||
Berkshire Hathaway, Inc. — Class B* | 18,228 | 5,450,172 | ||||||
Wells Fargo & Co. | 103,435 | 4,962,811 | ||||||
Bank of America Corp. | 105,080 | 4,675,009 | ||||||
STAG Industrial, Inc. REIT | 57,864 | 2,775,157 | ||||||
Allstate Corp. | 21,352 | 2,512,063 | ||||||
Charles Schwab Corp. | 27,103 | 2,279,362 | ||||||
Medical Properties Trust, Inc. REIT | 87,952 | 2,078,306 | ||||||
Voya Financial, Inc. | 27,419 | 1,818,154 | ||||||
Regions Financial Corp. | 70,117 | 1,528,551 | ||||||
KeyCorp | 64,668 | 1,495,771 | ||||||
American Tower Corp. — Class A REIT | 4,618 | 1,350,765 | ||||||
Zions Bancorp North America | 20,791 | 1,313,160 | ||||||
Park Hotels & Resorts, Inc. REIT* | 64,125 | 1,210,680 | ||||||
Citigroup, Inc. | 19,340 | 1,167,943 | ||||||
Mastercard, Inc. — Class A | 3,197 | 1,148,746 | ||||||
BOK Financial Corp. | 9,366 | 988,019 | ||||||
Gaming and Leisure Properties, Inc. REIT | 12,532 | 609,807 | ||||||
Total Financial | 43,396,661 | |||||||
Technology - 10.6% | ||||||||
Micron Technology, Inc. | 64,631 | 6,020,378 | ||||||
Apple, Inc. | 16,014 | 2,843,606 | ||||||
QUALCOMM, Inc. | 14,196 | 2,596,023 | ||||||
Skyworks Solutions, Inc. | 15,817 | 2,453,849 | ||||||
DXC Technology Co.* | 75,160 | 2,419,400 | ||||||
Activision Blizzard, Inc. | 35,893 | 2,387,961 | ||||||
Leidos Holdings, Inc. | 23,089 | 2,052,612 | ||||||
Qorvo, Inc.* | 12,467 | 1,949,714 | ||||||
Cerner Corp. | 12,890 | 1,197,094 | ||||||
Amdocs Ltd. | 15,609 | 1,168,178 | ||||||
Total Technology | 25,088,815 | |||||||
Consumer, Cyclical - 10.3% | ||||||||
Walmart, Inc. | 25,244 | 3,652,554 | ||||||
LKQ Corp. | 49,954 | 2,998,739 | ||||||
Whirlpool Corp. | 11,825 | 2,774,854 | ||||||
DR Horton, Inc. | 20,604 | 2,234,504 | ||||||
Lear Corp. | 12,115 | 2,216,439 | ||||||
Southwest Airlines Co.* | 47,188 | 2,021,534 | ||||||
PACCAR, Inc. | 20,253 | 1,787,530 | ||||||
Kohl’s Corp. | 32,735 | 1,616,782 | ||||||
PVH Corp. | 14,248 | 1,519,549 | ||||||
Ralph Lauren Corp. — Class A | 11,569 | 1,375,092 | ||||||
Home Depot, Inc. | 2,909 | 1,207,264 | ||||||
Delta Air Lines, Inc.* | 26,782 | 1,046,640 | ||||||
Total Consumer, Cyclical | 24,451,481 | |||||||
Energy - 8.0% | ||||||||
Chevron Corp. | 36,592 | 4,294,071 | ||||||
ConocoPhillips | 55,659 | 4,017,467 | ||||||
Marathon Oil Corp. | 158,094 | 2,595,904 | ||||||
Range Resources Corp.* | 107,163 | 1,910,716 | ||||||
Coterra Energy, Inc. — Class A | 91,049 | 1,729,931 | ||||||
Kinder Morgan, Inc. | 95,042 | 1,507,366 | ||||||
Patterson-UTI Energy, Inc. | 176,554 | 1,491,881 | ||||||
Pioneer Natural Resources Co. | 7,109 | 1,292,985 | ||||||
Total Energy | 18,840,321 | |||||||
Utilities - 7.7% | ||||||||
Exelon Corp. | 76,577 | 4,423,088 | ||||||
Edison International | 55,980 | 3,820,635 | ||||||
Duke Energy Corp. | 28,440 | 2,983,356 | ||||||
Pinnacle West Capital Corp. | 34,050 | 2,403,589 | ||||||
Black Hills Corp. | 26,749 | 1,887,677 | ||||||
NiSource, Inc. | 65,351 | 1,804,341 | ||||||
PPL Corp. | 33,862 | 1,017,892 | ||||||
Total Utilities | 18,340,578 | |||||||
Communications - 7.7% | ||||||||
Verizon Communications, Inc. | 94,596 | 4,915,208 | ||||||
Cisco Systems, Inc. | 46,985 | 2,977,440 | ||||||
Alphabet, Inc. — Class A* | 859 | 2,488,557 | ||||||
Comcast Corp. — Class A | 47,311 | 2,381,163 | ||||||
T-Mobile US, Inc.* | 15,182 | 1,760,808 | ||||||
Juniper Networks, Inc. | 43,590 | 1,556,599 | ||||||
Walt Disney Co.* | 8,284 | 1,283,109 | ||||||
ViacomCBS, Inc. — Class B | 27,281 | 823,340 | ||||||
Total Communications | 18,186,224 | |||||||
Industrial - 7.2% | ||||||||
Johnson Controls International plc | 46,562 | 3,785,956 | ||||||
FedEx Corp. | 11,555 | 2,988,585 | ||||||
Knight-Swift Transportation Holdings, Inc. | 46,371 | 2,825,849 | ||||||
L3Harris Technologies, Inc. | 10,969 | 2,339,029 | ||||||
Curtiss-Wright Corp. | 14,040 | 1,946,927 | ||||||
Valmont Industries, Inc. | 7,628 | 1,910,814 | ||||||
Advanced Energy Industries, Inc. | 12,693 | 1,155,825 | ||||||
Total Industrial | 16,952,985 | |||||||
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES B (LARGE CAP VALUE SERIES) |
| Shares | Value | ||||||
Basic Materials - 5.3% | ||||||||
Huntsman Corp. | 123,085 | $ | 4,293,205 | |||||
Westlake Chemical Corp. | 30,967 | 3,007,825 | ||||||
Reliance Steel & Aluminum Co. | 10,519 | 1,706,392 | ||||||
Nucor Corp. | 11,318 | 1,291,950 | ||||||
International Flavors & Fragrances, Inc. | 6,793 | 1,023,365 | ||||||
DuPont de Nemours, Inc. | 8,550 | 690,669 | ||||||
Dow, Inc. | 9,877 | 560,223 | ||||||
Total Basic Materials | 12,573,629 | |||||||
Total Common Stocks | ||||||||
(Cost $158,651,935) | 227,303,205 | |||||||
EXCHANGE-TRADED FUNDS† - 1.0% | ||||||||
iShares Russell 1000 Value ETF | 14,571 | 2,446,908 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $2,304,195) | 2,446,908 | |||||||
MONEY MARKET FUND† - 3.0% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%1 | 7,053,625 | 7,053,625 | ||||||
Total Money Market Fund | ||||||||
(Cost $7,053,625) | 7,053,625 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $168,009,755) | $ | 236,803,738 | ||||||
Other Assets & Liabilities, net - 0.0% | 13,326 | |||||||
Total Net Assets - 100.0% | $ | 236,817,064 | ||||||
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 227,303,205 | $ | — | $ | — | $ | 227,303,205 | ||||||||
Exchange-Traded Funds | 2,446,908 | — | — | 2,446,908 | ||||||||||||
Money Market Fund | 7,053,625 | — | — | 7,053,625 | ||||||||||||
Total Assets | $ | 236,803,738 | $ | — | $ | — | $ | 236,803,738 | ||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 23 |
SERIES B (LARGE CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments, at value (cost $168,009,755) | $ | 236,803,738 | ||
Prepaid expenses | 5,163 | |||
Receivables: | ||||
Dividends | 318,981 | |||
Interest | 70 | |||
Total assets | 237,127,952 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 114,915 | |||
Management fees | 82,641 | |||
Distribution and service fees | 49,225 | |||
Professional fees | 29,907 | |||
Fund accounting/administration fees | 14,431 | |||
Trustees’ fees* | 4,592 | |||
Transfer agent/maintenance fees | 2,033 | |||
Miscellaneous | 13,144 | |||
Total liabilities | 310,888 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 236,817,064 | ||
Net assets consist of: | ||||
Paid in capital | $ | 145,192,140 | ||
Total distributable earnings (loss) | 91,624,924 | |||
Net assets | $ | 236,817,064 | ||
Capital shares outstanding | 5,059,604 | |||
Net asset value per share | $ | 46.81 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends | $ | 4,574,352 | ||
Interest | 495 | |||
Total investment income | 4,574,847 | |||
Expenses: | ||||
Management fees | 1,491,300 | |||
Distribution and service fees | 573,576 | |||
Transfer agent/maintenance fees | 25,039 | |||
Fund accounting/administration fees | 158,274 | |||
Professional fees | 73,581 | |||
Trustees’ fees* | 16,826 | |||
Line of credit fees | 10,439 | |||
Custodian fees | 7,546 | |||
Miscellaneous | 11,863 | |||
Total expenses | 2,368,444 | |||
Less: | ||||
Expenses waived by Adviser | (555,924 | ) | ||
Net expenses | 1,812,520 | |||
Net investment income | 2,762,327 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 21,610,319 | |||
Net realized gain | 21,610,319 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 29,706,269 | |||
Net change in unrealized appreciation (depreciation) | 29,706,269 | |||
Net realized and unrealized gain | 51,316,588 | |||
Net increase in net assets resulting from operations | $ | 54,078,915 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
24 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES B (LARGE CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,762,327 | $ | 4,562,466 | ||||
Net realized gain on investments | 21,610,319 | 1,794,553 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 29,706,269 | (5,308,681 | ) | |||||
Net increase in net assets resulting from operations | 54,078,915 | 1,048,338 | ||||||
Distributions to shareholders | (4,639,626 | ) | (17,232,283 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,978,283 | 11,205,807 | ||||||
Distributions reinvested | 4,639,626 | 17,232,283 | ||||||
Cost of shares redeemed | (31,787,831 | ) | (30,674,259 | ) | ||||
Net decrease from capital share transactions | (21,169,922 | ) | (2,236,169 | ) | ||||
Net increase (decrease) in net assets | 28,269,367 | (18,420,114 | ) | |||||
Net assets: | ||||||||
Beginning of year | 208,547,697 | 226,967,811 | ||||||
End of year | $ | 236,817,064 | $ | 208,547,697 | ||||
Capital share activity: | ||||||||
Shares sold | 137,180 | 310,192 | ||||||
Shares issued from reinvestment of distributions | 107,473 | 540,197 | ||||||
Shares redeemed | (729,396 | ) | (902,732 | ) | ||||
Net decrease in shares | (484,743 | ) | (52,343 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 25 |
SERIES B (LARGE CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 37.61 | $ | 40.55 | $ | 36.14 | $ | 43.36 | $ | 39.08 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .52 | .82 | .72 | .65 | .48 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 9.58 | (.51 | ) | 6.93 | (4.42 | ) | 5.52 | |||||||||||||
Total from investment operations | 10.10 | .31 | 7.65 | (3.77 | ) | 6.00 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.90 | ) | (.74 | ) | (.72 | ) | (.58 | ) | (.53 | ) | ||||||||||
Net realized gains | — | b | (2.51 | ) | (2.52 | ) | (2.87 | ) | (1.19 | ) | ||||||||||
Total distributions | (.90 | ) | (3.25 | ) | (3.24 | ) | (3.45 | ) | (1.72 | ) | ||||||||||
Net asset value, end of period | $ | 46.81 | $ | 37.61 | $ | 40.55 | $ | 36.14 | $ | 43.36 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 27.03 | % | 2.21 | % | 21.82 | % | (9.53 | %) | 15.81 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 236,817 | $ | 208,548 | $ | 226,968 | $ | 207,167 | $ | 269,258 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.20 | % | 2.40 | % | 1.86 | % | 1.54 | % | 1.17 | % | ||||||||||
Total expensesd | 1.03 | % | 1.09 | % | 1.07 | % | 1.07 | % | 1.02 | % | ||||||||||
Net expensese,f | 0.79 | % | 0.79 | % | 0.80 | % | 0.80 | % | 0.81 | % | ||||||||||
Portfolio turnover rate | 22 | % | 19 | % | 32 | % | 21 | % | 27 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Distributions from realized gains are less than $0.01 per share. |
c | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
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 these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.79% | 0.79% | 0.80% | 0.80% | 0.79% |
26 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
Guggenheim Series D (World Equity Income Series) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities, and Portfolio Manager; Evan Einstein, Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance for the fiscal year ended December 31, 2021.
For the fiscal year ended December 31, 2021, Series D (World Equity Income Series) returned 21.74%, compared with the 21.82% return of its benchmark, the MSCI World Index.
Investment Approach
The Fund seeks to provide total return, comprised of capital appreciation and income. The Fund seeks to provide a well-diversified equity portfolio optimized across developed markets. Additionally, the Fund opportunistically hedges currency exposure, which may potentially limit volatility and improve total returns. The Fund emphasizes yield by investing in companies that consistently pay and grow dividends. The Fund seeks to invest in stable, well-established, and profitable companies at attractive values.
Performance Review and Positioning
The Fund slightly underperformed the Index after fees but delivered on its mandate to provide current equity income and a stable long-term total return. The Fund also balanced generating income while doing so with moderately lower risk than the benchmark. The Fund tends to underperform relative to its benchmark in times of strong market gains. Compared with the funds in its Morningstar peer group, the Fund ranked in the top 15% based on excess return.
The trailing twelve month income distribution yield of the Fund was 1.41% as of the end of the period. (This was calculated by taking the most recent annual income distribution and dividing by the NAV per share as of 12/31/2021. This rate does not represent the total return of a fund). Besides helping investors navigate the changing rate environment, being cognizant of companies with unsustainable dividends is one of the primary drivers for the Fund’s track record relative to peers.
The Fund utilized foreign currency futures to hedge foreign currency risk on long portfolio securities. The hedge operated effectively. On a standalone basis, the use of futures contributed modestly to performance.
The Fund’s stock selection contributed to return, while sector allocation was a detractor. The leading contributors from a sector perspective were an average underweight position in Communication Services and an overweight in Real Estate as compared to the benchmark. Financials and Information Technology were the largest overall detractors from return, both having lower returns than the corresponding benchmark sectors. Financials was slightly overweight, and Tech was underweight relative to the benchmark.
From a country perspective, the Fund had strong contributions from its holdings in Japan, Ireland and Germany. Despite positive return, the Fund’s holdings in the U.S. underperformed as compared with the benchmark, which along with a slight underweight made it the leading detractor. Australia was the second-largest detractor, where the country was a slight overweight in the portfolio.
Rising interest rates, the reopening of the economy following the pandemic, and a valuation gap between growth and value sectors, particularly in the smaller capitalization space, were among the factors that, in a reversal from the last few years, saw value stocks mostly outperform growth stocks over the period. Although growth companies benefited most from the reopening trade in 2020, rising rates and commodity prices spurred a rotation into value as the period progressed. Sectors such as Financials, Energy, and Real Estate benefited the most in 2021. Holdings in Energy, the smallest sector in the Fund and among the smallest in the benchmark, had the strongest absolute returns for the period.
The top individual holdings for the year were Viacom, Accenture, and Steel Dynamics (all overweight).
The leading detractors from return came from underweights in Nvidia, Alphabet, and Tesla.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 27 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
Although lagging the MSCI World Index in three of four quarters, the Fund delivered positive performance in all but the third quarter of 2021. Compared with the Index, the Fund is positioned more cautiously, as we question whether the recent ascent will continue for much longer. The Fund was most overweight Utilities, Industrials and Energy at the end of the period, and most underweight Technology, Health Care and Consumer Discretionary.
We believe global equities remain a critical allocation in investors’ portfolios. To prepare for the future and the uncertainty it brings, investors often benefit from seeking out dividend yield, but should avoid reaching for yield that may be excessive or unsustainable.
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.
28 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES D (WORLD EQUITY INCOME SERIES)
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 December 31, 2021, the investment diversification of the Fund by Country was as follows:
Country | % of Long-Term | |||
United States | 64.7 | % | ||
Japan | 5.2 | % | ||
United Kingdom | 4.5 | % | ||
Australia | 4.1 | % | ||
Canada | 3.9 | % | ||
Netherlands | 2.8 | % | ||
Sweden | 2.7 | % | ||
Other | 12.1 | % | ||
Total Long-Term Investments | 100.0 | % | ||
Inception Date: April 19, 1984 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 3.1% |
Microsoft Corp. | 3.1% |
Amazon.com, Inc. | 2.4% |
Alphabet, Inc. — Class C | 2.3% |
Johnson & Johnson | 1.4% |
Home Depot, Inc. | 1.3% |
Chevron Corp. | 1.2% |
Exxon Mobil Corp. | 1.2% |
Accenture plc — Class A | 1.2% |
AbbVie, Inc. | 1.2% |
Top Ten Total | 18.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 29 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series D (World Equity Income Series) | 21.74% | 10.74% | 10.30% |
MSCI World Index | 21.82% | 15.03% | 12.70% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
30 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES D (WORLD EQUITY INCOME SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.9% | ||||||||
Financial - 21.2% | ||||||||
American Tower Corp. — Class A REIT | 4,400 | $ | 1,287,000 | |||||
BNP Paribas S.A. | 17,400 | 1,203,777 | ||||||
AXA S.A. | 39,200 | 1,168,547 | ||||||
Prudential Financial, Inc. | 10,100 | 1,093,224 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 4,900 | 1,092,504 | ||||||
Goldman Sachs Group, Inc. | 2,800 | 1,071,140 | ||||||
Australia & New Zealand Banking Group Ltd. | 52,200 | 1,043,545 | ||||||
Allianz AG | 4,400 | 1,040,141 | ||||||
Allstate Corp. | 8,500 | 1,000,025 | ||||||
Commonwealth Bank of Australia | 13,300 | 976,164 | ||||||
Swedbank AB — Class A | 46,300 | 932,260 | ||||||
Daiwa House REIT Investment Corp. | 300 | 908,380 | ||||||
Skandinaviska Enskilda Banken AB — Class A | 64,100 | 891,985 | ||||||
Assicurazioni Generali SpA | 40,000 | 848,360 | ||||||
Admiral Group plc | 18,100 | 772,515 | ||||||
T. Rowe Price Group, Inc. | 3,800 | 747,232 | ||||||
EXOR N.V. | 8,300 | 746,093 | ||||||
Phoenix Group Holdings plc | 77,600 | 685,487 | ||||||
REA Group Ltd. | 5,600 | 682,206 | ||||||
Nordea Bank Abp | 53,900 | 658,563 | ||||||
NN Group N.V. | 11,900 | 644,990 | ||||||
Dexus REIT | 78,000 | 630,303 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 18,100 | 620,082 | ||||||
Citigroup, Inc. | 9,379 | 566,398 | ||||||
Public Storage REIT | 1,500 | 561,840 | ||||||
Western Union Co. | 30,900 | 551,256 | ||||||
Nasdaq, Inc. | 2,600 | 546,026 | ||||||
JPMorgan Chase & Co. | 3,300 | 522,555 | ||||||
Truist Financial Corp. | 8,500 | 497,675 | ||||||
Partners Group Holding AG | 300 | 497,457 | ||||||
Canadian Apartment Properties REIT | 10,400 | 493,291 | ||||||
Carlyle Group, Inc. | 8,700 | 477,630 | ||||||
National Australia Bank Ltd. | 21,100 | 442,209 | ||||||
Berkshire Hathaway, Inc. — Class B* | 1,300 | 388,700 | ||||||
Essex Property Trust, Inc. REIT | 1,000 | 352,230 | ||||||
Zurich Insurance Group AG | 800 | 351,174 | ||||||
Travelers Companies, Inc. | 2,100 | 328,503 | ||||||
AvalonBay Communities, Inc. REIT | 1,300 | 328,367 | ||||||
VICI Properties, Inc. REIT | 10,300 | 310,133 | ||||||
Daiwa Securities Group, Inc. | 52,100 | 293,647 | ||||||
Swiss Re AG | 2,600 | 257,281 | ||||||
Amundi S.A.1 | 3,100 | 256,039 | ||||||
Schroders plc | 5,100 | 245,465 | ||||||
Medical Properties Trust, Inc. REIT | 10,300 | 243,389 | ||||||
Total Financial | 29,255,788 | |||||||
Technology - 18.0% | ||||||||
Apple, Inc. | 24,277 | 4,310,867 | ||||||
Microsoft Corp. | 12,665 | 4,259,493 | ||||||
Accenture plc — Class A | 3,994 | 1,655,713 | ||||||
ASML Holding N.V. | 1,800 | 1,448,156 | ||||||
Texas Instruments, Inc. | 7,200 | 1,356,984 | ||||||
Intel Corp. | 23,667 | 1,218,850 | ||||||
QUALCOMM, Inc. | 6,400 | 1,170,368 | ||||||
Oracle Corp. | 13,300 | 1,159,893 | ||||||
International Business Machines Corp. | 8,524 | 1,139,318 | ||||||
NetApp, Inc. | 10,800 | 993,492 | ||||||
KLA Corp. | 2,300 | 989,253 | ||||||
Hewlett Packard Enterprise Co. | 51,800 | 816,886 | ||||||
NVIDIA Corp. | 2,600 | 764,686 | ||||||
Broadridge Financial Solutions, Inc. | 3,300 | 603,306 | ||||||
Broadcom, Inc. | 800 | 532,328 | ||||||
Intuit, Inc. | 800 | 514,576 | ||||||
Capgemini SE | 1,800 | 441,598 | ||||||
Paychex, Inc. | 3,100 | 423,150 | ||||||
HP, Inc. | 10,400 | 391,768 | ||||||
Seagate Technology Holdings plc | 3,400 | 384,132 | ||||||
SCSK Corp. | 13,100 | 260,532 | ||||||
Total Technology | 24,835,349 | |||||||
Consumer, Non-cyclical - 11.7% | ||||||||
Johnson & Johnson | 11,400 | 1,950,198 | ||||||
AbbVie, Inc. | 12,208 | 1,652,963 | ||||||
Philip Morris International, Inc. | 14,900 | 1,415,500 | ||||||
Bristol-Myers Squibb Co. | 20,794 | 1,296,506 | ||||||
Merck & Company, Inc. | 16,300 | 1,249,232 | ||||||
CVS Health Corp. | 11,500 | 1,186,340 | ||||||
Cigna Corp. | 5,100 | 1,171,113 | ||||||
Amgen, Inc. | 5,100 | 1,147,347 | ||||||
Kellogg Co. | 13,990 | 901,236 | ||||||
Cardinal Health, Inc. | 16,200 | 834,138 | ||||||
Cooper Companies, Inc. | 1,500 | 628,410 | ||||||
Archer-Daniels-Midland Co. | 8,925 | 603,241 | ||||||
Quest Diagnostics, Inc. | 3,100 | 536,331 | ||||||
AmerisourceBergen Corp. — Class A | 3,100 | 411,959 | ||||||
Imperial Brands plc | 18,000 | 393,373 | ||||||
J M Smucker Co. | 2,100 | 285,222 | ||||||
Bunge Ltd. | 2,800 | 261,408 | ||||||
Humana, Inc. | 531 | 246,310 | ||||||
Total Consumer, Non-cyclical | 16,170,827 | |||||||
Consumer, Cyclical - 10.9% | ||||||||
Home Depot, Inc. | 4,400 | 1,826,044 | ||||||
Ferguson plc | 6,900 | 1,222,861 | ||||||
Mitsubishi Corp. | 38,500 | 1,221,617 | ||||||
Volvo AB — Class B | 47,300 | 1,096,484 | ||||||
ITOCHU Corp. | 35,800 | 1,094,265 | ||||||
Tesla, Inc.* | 1,034 | 1,092,710 | ||||||
PACCAR, Inc. | 11,500 | 1,014,990 | ||||||
Hasbro, Inc. | 8,700 | 885,486 | ||||||
Cummins, Inc. | 3,900 | 850,746 | ||||||
Best Buy Company, Inc. | 8,300 | 843,280 | ||||||
Whirlpool Corp. | 3,586 | 841,491 | ||||||
Persimmon plc | 20,900 | 807,227 | ||||||
McDonald’s Corp. | 2,600 | 696,982 | ||||||
BorgWarner, Inc. | 12,400 | 558,868 | ||||||
Dollar General Corp. | 2,100 | 495,243 | ||||||
Lowe’s Companies, Inc. | 1,000 | 258,480 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 31 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES D (WORLD EQUITY INCOME SERIES) |
| Shares | Value | ||||||
Target Corp. | 1,000 | $ | 231,440 | |||||
Total Consumer, Cyclical | 15,038,214 | |||||||
Communications - 10.2% | ||||||||
Amazon.com, Inc.* | 979 | 3,264,319 | �� | |||||
Alphabet, Inc. — Class C* | 1,106 | 3,200,311 | ||||||
Verizon Communications, Inc. | 27,931 | 1,451,295 | ||||||
Motorola Solutions, Inc. | 4,400 | 1,195,480 | ||||||
Nippon Telegraph & Telephone Corp. | 36,400 | 996,220 | ||||||
KDDI Corp. | 33,900 | 990,241 | ||||||
Thomson Reuters Corp. | 8,200 | 981,239 | ||||||
Meta Platforms, Inc. — Class A* | 2,844 | 956,579 | ||||||
Liberty Global plc — Class C* | 28,300 | 794,947 | ||||||
Telefonaktiebolaget LM Ericsson — Class B | 28,200 | 311,159 | ||||||
Total Communications | 14,141,790 | |||||||
Industrial - 8.2% | ||||||||
Northrop Grumman Corp. | 3,119 | 1,207,271 | ||||||
3M Co. | 6,690 | 1,188,345 | ||||||
Lockheed Martin Corp. | 3,322 | 1,180,672 | ||||||
Illinois Tool Works, Inc. | 4,400 | 1,085,920 | ||||||
Waste Connections, Inc. | 6,200 | 844,874 | ||||||
Lennox International, Inc. | 2,300 | 746,028 | ||||||
CK Infrastructure Holdings Ltd. | 116,600 | 742,569 | ||||||
Aurizon Holdings Ltd. | 283,100 | 717,985 | ||||||
Deutsche Post AG | 8,500 | 547,120 | ||||||
Rockwell Automation, Inc. | 1,500 | 523,275 | ||||||
Hexagon AB — Class B | 28,200 | 447,920 | ||||||
Kuehne + Nagel International AG | 1,300 | 419,585 | ||||||
TE Connectivity Ltd. | 2,600 | 419,484 | ||||||
Union Pacific Corp. | 1,600 | 403,088 | ||||||
Poste Italiane SpA1 | 28,200 | 370,478 | ||||||
Packaging Corporation of America | 1,800 | 245,070 | ||||||
Huntington Ingalls Industries, Inc. | 1,300 | 242,762 | ||||||
Total Industrial | 11,332,446 | |||||||
Energy - 6.6% | ||||||||
Chevron Corp. | 14,700 | 1,725,045 | ||||||
Exxon Mobil Corp. | 28,000 | 1,713,320 | ||||||
TC Energy Corp. | 22,300 | 1,037,796 | ||||||
Suncor Energy, Inc. | 39,300 | 983,954 | ||||||
Valero Energy Corp. | 12,900 | 968,919 | ||||||
ENEOS Holdings, Inc. | 205,000 | 766,423 | ||||||
Marathon Petroleum Corp. | 11,300 | 723,087 | ||||||
Tourmaline Oil Corp. | 20,514 | 662,742 | ||||||
Phillips 66 | 7,400 | 536,204 | ||||||
Total Energy | 9,117,490 | |||||||
Utilities - 6.3% | ||||||||
Southern Co. | 17,500 | 1,200,150 | ||||||
Hong Kong & China Gas Company Ltd. | 642,700 | 1,000,798 | ||||||
National Grid plc | 67,000 | 960,262 | ||||||
Exelon Corp. | 16,500 | 953,040 | ||||||
CLP Holdings Ltd. | 93,200 | 941,425 | ||||||
Consolidated Edison, Inc. | 9,500 | 810,540 | ||||||
EDP - Energias de Portugal S.A. | 138,600 | 762,426 | ||||||
UGI Corp. | 15,900 | 729,969 | ||||||
Snam SpA | 79,900 | 482,092 | ||||||
Power Assets Holdings Ltd. | 74,100 | 461,927 | ||||||
SSE plc | 18,000 | 401,407 | ||||||
Total Utilities | 8,704,036 | |||||||
Basic Materials - 4.8% | ||||||||
Fortescue Metals Group Ltd. | 84,500 | 1,179,598 | ||||||
Rio Tinto plc | 17,400 | 1,151,019 | ||||||
LyondellBasell Industries N.V. — Class A | 11,500 | 1,060,645 | ||||||
Celanese Corp. — Class A | 5,900 | 991,554 | ||||||
FMC Corp. | 6,700 | 736,263 | ||||||
International Paper Co. | 15,600 | 732,888 | ||||||
Steel Dynamics, Inc. | 7,200 | 446,904 | ||||||
Nutrien Ltd. | 5,100 | 383,590 | ||||||
Total Basic Materials | 6,682,461 | |||||||
Total Common Stocks | ||||||||
(Cost $120,599,637) | 135,278,401 | |||||||
EXCHANGE-TRADED FUNDS† - 1.4% | ||||||||
SPDR S&P 500 ETF Trust | 2,082 | 988,867 | ||||||
iShares MSCI EAFE ETF | 12,003 | 944,396 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $1,916,234) | 1,933,263 | |||||||
MONEY MARKET FUND† - 0.6% | ||||||||
Goldman Sachs Financial Square Treasury Instruments Fund — Institutional Shares, 0.01%2 | 777,492 | 777,492 | ||||||
Total Money Market Fund | ||||||||
(Cost $777,492) | 777,492 | |||||||
Total Investments - 99.9% | ||||||||
(Cost $123,293,363) | $ | 137,989,156 | ||||||
Other Assets & Liabilities, net - 0.1% | 204,068 | |||||||
Total Net Assets - 100.0% | $ | 138,193,224 | ||||||
32 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES D (WORLD EQUITY INCOME SERIES) |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $626,517 (cost $620,425), or 0.5% of total net assets. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 135,278,401 | $ | — | $ | — | $ | 135,278,401 | ||||||||
Exchange-Traded Funds | 1,933,263 | — | — | 1,933,263 | ||||||||||||
Money Market Fund | 777,492 | — | — | 777,492 | ||||||||||||
Total Assets | $ | 137,989,156 | $ | — | $ | — | $ | 137,989,156 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 33 |
SERIES D (WORLD EQUITY INCOME SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments, at value (cost $123,293,363) | $ | 137,989,156 | ||
Foreign currency, at value (cost 4,245) | 7,332 | |||
Cash | 625 | |||
Segregated cash with broker | 89,100 | |||
Prepaid expenses | 3,654 | |||
Receivables: | ||||
Dividends | 165,857 | |||
Foreign tax reclaims | 159,719 | |||
Interest | 5 | |||
Fund shares sold | 1 | |||
Total assets | 138,415,449 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 50,530 | |||
Fund shares redeemed | 50,093 | |||
Professional fees | 41,669 | |||
Distribution and service fees | 28,658 | |||
Custodian fees | 17,354 | |||
Fund accounting/administration fees | 9,134 | |||
Trustees’ fees* | 7,024 | |||
Transfer agent/maintenance fees | 2,236 | |||
Miscellaneous | 15,527 | |||
Total liabilities | 222,225 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 138,193,224 | ||
Net assets consist of: | ||||
Paid in capital | $ | 96,453,735 | ||
Total distributable earnings (loss) | 41,739,489 | |||
Net assets | $ | 138,193,224 | ||
Capital shares outstanding | 7,790,518 | |||
Net asset value per share | $ | 17.74 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $258,345) | $ | 3,945,344 | ||
Total investment income | 3,945,344 | |||
Expenses: | ||||
Management fees | 949,855 | |||
Distribution and service fees | 339,233 | |||
Transfer agent/maintenance fees | 25,147 | |||
Fund accounting/administration fees | 96,890 | |||
Professional fees | 74,430 | |||
Custodian fees | 39,362 | |||
Trustees’ fees* | 20,071 | |||
Line of credit fees | 6,274 | |||
Interest expense | 154 | |||
Miscellaneous | 4,474 | |||
Total expenses | 1,555,890 | |||
Less: | ||||
Expenses waived by Adviser | (347,403 | ) | ||
Net expenses | 1,208,487 | |||
Net investment income | 2,736,857 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 30,357,224 | |||
Futures contracts | 80,880 | |||
Foreign currency transactions | (18,982 | ) | ||
Net realized gain | 30,419,122 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (6,798,078 | ) | ||
Foreign currency translations | (18,463 | ) | ||
Net change in unrealized appreciation (depreciation) | (6,816,541 | ) | ||
Net realized and unrealized gain | 23,602,581 | |||
Net increase in net assets resulting from operations | $ | 26,339,438 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
34 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES D (WORLD EQUITY INCOME SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,736,857 | $ | 1,985,000 | ||||
Net realized gain (loss) on investments | 30,419,122 | (3,566,875 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (6,816,541 | ) | 8,231,802 | |||||
Net increase in net assets resulting from operations | 26,339,438 | 6,649,927 | ||||||
Distributions to shareholders | (2,031,098 | ) | (4,694,939 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,327,206 | 2,006,847 | ||||||
Distributions reinvested | 2,031,098 | 4,694,939 | ||||||
Cost of shares redeemed | (19,480,103 | ) | (16,408,213 | ) | ||||
Net decrease from capital share transactions | (12,121,799 | ) | (9,706,427 | ) | ||||
Net increase (decrease) in net assets | 12,186,541 | (7,751,439 | ) | |||||
Net assets: | ||||||||
Beginning of year | 126,006,683 | 133,758,122 | ||||||
End of year | $ | 138,193,224 | $ | 126,006,683 | ||||
Capital share activity: | ||||||||
Shares sold | 320,264 | 149,287 | ||||||
Shares issued from reinvestment of distributions | 119,758 | 362,544 | ||||||
Shares redeemed | (1,170,420 | ) | (1,246,184 | ) | ||||
Net decrease in shares | (730,398 | ) | (734,353 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 35 |
SERIES D (WORLD EQUITY INCOME SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.79 | $ | 14.45 | $ | 12.96 | $ | 14.52 | $ | 12.98 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .34 | .22 | .33 | .33 | .33 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.86 | .66 | 2.36 | (1.47 | ) | 1.60 | ||||||||||||||
Total from investment operations | 3.20 | .88 | 2.69 | (1.14 | ) | 1.93 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.25 | ) | (.40 | ) | (.40 | ) | (.42 | ) | (.39 | ) | ||||||||||
Net realized gains | — | (.14 | ) | (.80 | ) | — | — | |||||||||||||
Total distributions | (.25 | ) | (.54 | ) | (1.20 | ) | (.42 | ) | (.39 | ) | ||||||||||
Net asset value, end of period | $ | 17.74 | $ | 14.79 | $ | 14.45 | $ | 12.96 | $ | 14.52 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 21.74 | % | 6.65 | % | 21.40 | % | (8.17 | %) | 15.06 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 138,193 | $ | 126,007 | $ | 133,758 | $ | 125,312 | $ | 161,111 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.02 | % | 1.70 | % | 2.37 | % | 2.29 | % | 2.38 | % | ||||||||||
Total expensesc | 1.15 | % | 1.20 | % | 1.19 | % | 1.17 | % | 1.12 | % | ||||||||||
Net expensesd,e | 0.89 | % | 0.89 | % | 0.90 | % | 0.90 | % | 0.90 | % | ||||||||||
Portfolio turnover rate | 185 | % | 196 | % | 139 | % | 134 | % | 112 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.89% | 0.89% | 0.90% | 0.90% | 0.88% |
36 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series E (Total Return Bond Series) 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 Chief Investment Officer, Fixed Income; Steven H. Brown, CFA, Senior Managing Director and Portfolio Manager; and Adam J. Bloch, 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 December 31, 2021.
For the one-year period ended December 31, 2021, Total Return Bond Series E returned -0.43%, compared with the -1.54% return of its benchmark, the Bloomberg U.S. Aggregate Bond Index.
Investment Approach
The Fund seeks to provide total return, comprised of current income and capital appreciation. The Fund employs a diversified, multi-sector strategy focused on under-researched areas of the fixed income universe, including sectors not included in benchmark indices. The Fund takes an actively managed approach, offering an opportunity to potentially capitalize on changing relative values in fixed-income sectors and access to Guggenheim’s unique fixed income process and philosophy founded on the principles of behavioral finance.
Performance Review and Positioning
Interest rates rose during the period, given rising concerns over inflation, while credit spreads continued to grind tighter on the back of accommodative fiscal and monetary policy. Outperformance versus the benchmark was driven by a combination of spread tightening and greater carry (the excess return accruing to higher yielding securities over lower yielding securities, assuming prices remain constant), which was partially offset by the Fund’s overweight duration positioning. The Fund’s overweight allocation to credit has been the largest driver of outperformance on the year, as credit continues its grind tighter on optimism in economic growth recovery and improving credit fundamentals. Measured on an absolute return basis, sectors with floating rate coupons like bank loans and much of structured credit have been standouts in performance, as they have benefitted from spread compression while being somewhat insulated from rising rates. The Fund’s allocation to these sectors coupled with its underweight duration positioning at the front-end and belly of the yield curve helped mitigate the performance impact from the flattening in the yield curve.
The Fund remains overweight investment grade corporates, which comprised 29% of the Fund at period end. The sector contributed positively to performance on a duration-adjusted basis and relative to the benchmark through combination of income and spread tightening. Investment grade corporate credit spreads have benefitted from the back-up in rates, as yield-focused buyers find the higher-yielding profiles more attractive. In particular, the pace of flows into the investment grade corporate sector from overseas buyers has been greater than usual given the attractiveness of the currency hedge-adjusted yields attainable in the sector fostered by higher rates. We continue to remain constructive on the sector given the supportive macro backdrop and low probability of any sustained selloff. However, we have incrementally reduced our exposure at the margin, rotating out of tighter spread names with limited total return potential in favor for higher carry sectors like structured credit.
Structured credit accounted for approximately 27% of the Fund at period end. The sector broadly and across sub-sectors continued to contribute positively and provided for outperformance relative to the benchmark. Spreads have now largely recovered from the shock of COVID-19, though still offer compelling relative value within the fixed income universe. Primary markets have been very active over the year, particularly in the collateralized loan obligation (“CLO”) sector, which is on track for a record-setting year, having already priced $125 billion in new issue deals and $311 billion in total deals (including refinancings, resets, and re-issues). Spreads have been relatively muted in response to the massive amount of issuance, which speaks to volume of demand from investors in search of higher carry assets. We continue to look to invest in structurally senior securitized credit, as the sector continues to showcase wider spreads compared to similarly rated corporates. As such, we expect spreads could compress further as the economy rebounds and investors seek out the higher yields and carry offered by the sector.
Below-investment-grade corporate credit, including both high yield corporates and bank loans, comprised roughly 15% percent of the Fund at period end. The Fund’s below-investment-grade allocation has continued to benefit from a combination of spread tightening and carry, contributing significantly to the portfolio’s return for the year. While we remain positive on long-term economic fundamentals and associated outlook for a low default rate, we have begun to pare exposure recently, as we have increasingly become cautious of valuations and the potential for seasonal weakness. Despite this, we still view the expected loss-adjusted return potential, primarily via carry, favorably within the context of the Fund and therefore continue to anticipate a continued meaningful portfolio allocation.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 37 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
Overweight duration positioning negatively impacted performance for the period. U.S. Treasury yields rose as the 10- year ended the period about 60 basis points higher at 1.52% though the fund benefitted from its curve positioning as front-end and intermediate interest rates rose even more, led by the 5-year which ended the year 90 basis points higher. Overall Fund duration ended the period at 7.1 years versus the benchmark’s duration of 6.7 years, though the Fund was nearly 1-year underweight the front-end and intermediate points on the curve . We continue to remain optimistic on U.S. economic growth given potential for additional fiscal stimulus and believe that interest rates will remain relatively range bound as the Fed seeks to remain accommodative to ensure the economic recovery can continue amid the termination of certain fiscal stimulus measures and potential for increasing spread of the COVID-19 Delta variant headed into year end.
Given the current monetary and fiscal backdrop, we continue to view the credit default environment as benign and predict rates are likely to remain low and range bound for some time. As such, we continue to believe a portfolio allowance for both higher credit and duration risk is warranted. As credit spreads have neared historic tights, however, it has become increasingly important to ensure portfolios are prudently positioned as we seek out relative value across sectors. At this particular moment in the credit cycle against the backdrop of current valuations, we see value in rotating into higher carry instruments while maintaining similar credit quality where possible and shortening spread duration to lessen the Fund’s emphasis on credit spread compression.
During the reporting period, the Fund used forwards, options, and swaps to help manage duration positioning, foreign exchange risk, and credit exposure. Over the period, the Fund’s use of derivatives, which were primarily used as hedges, detracted from performance.
While 2022 is likely to prove a more challenging investment environment as volatility returns, we believe there are plenty of attractive investment opportunities across underexplored corporate and structured credit markets for those who do their research and have strong sourcing capabilities.
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.
38 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES)
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: April 26, 1985 |
Ten Largest Holdings (% of Total Net Assets) | |
U.S. Treasury Notes, 1.38% | 6.4% |
Guggenheim Total Return Bond Fund — R6-Class | 4.0% |
U.S. Treasury Bonds, 2.00% | 2.6% |
Octagon Investment Partners 49 Ltd., 1.67% | 1.0% |
Fannie Mae Principal Strips | 0.9% |
Pershing Square Tontine Holdings Ltd. — Class A | 0.9% |
Freddie Mac Principal Strips | 0.9% |
Tennessee Valley Authority, 4.25% | 0.8% |
Delta Air Lines, Inc., 7.00% | 0.7% |
Store Master Funding I-VII, 3.96% | 0.7% |
Top Ten Total | 18.9% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 39 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series E (Total Return Bond Series) | (0.43%) | 5.10% | 4.90% |
Bloomberg U.S. Aggregate Bond Index | (1.54%) | 3.57% | 2.90% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
AAA | 24.9% |
AA | 9.0% |
A | 12.5% |
BBB | 25.0% |
BB | 8.2% |
B | 4.4% |
CCC | 0.4% |
CC | 1.4% |
C | 0.2% |
NR2 | 4.0% |
Other Instruments | 10.0% |
Total Investments | 100.0% |
* | 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 Bloomberg 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is 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 ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
2 | NR (not rated) securities do not necessarily indicate low credit quality. |
40 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 1.3% | ||||||||
| �� | ||||||||
Financial - 1.3% | ||||||||
Pershing Square Tontine Holdings Ltd. — Class A*,1 | 76,590 | $ | 1,510,355 | |||||
KKR Acquisition Holdings I Corp. — Class A*,1 | 33,829 | 329,495 | ||||||
RXR Acquisition Corp. — Class A*,1 | 7,752 | 75,582 | ||||||
TPG Pace Beneficial II Corp.*,1 | 6,675 | 65,415 | ||||||
MSD Acquisition Corp. — Class A*,1 | 4,876 | 48,272 | ||||||
AfterNext HealthTech Acquisition Corp. — Class A*,1 | 4,100 | 39,975 | ||||||
Conyers Park III Acquisition Corp. — Class A*,1 | 3,800 | 37,050 | ||||||
Colicity, Inc. — Class A*,1 | 2,716 | 26,481 | ||||||
Acropolis Infrastructure Acquisition Corp. — Class A*,1 | 2,700 | 26,163 | ||||||
Blue Whale Acquisition Corp.*,1 | 2,200 | 21,318 | ||||||
Waverley Capital Acquisition Corp. 1*,1 | 1,500 | 14,835 | ||||||
Waverley Capital Acquisition Corp. 1 - Class A*,1 | 1,500 | 14,550 | ||||||
Total Financial | 2,209,491 | |||||||
Communications - 0.0% | ||||||||
Figs, Inc. — Class A*,2 | 1,346 | 37,095 | ||||||
Vacasa, Inc. — Class A* | 3,356 | 27,922 | ||||||
Total Communications | 65,017 | |||||||
Total Common Stocks | ||||||||
(Cost $2,246,787) | 2,274,508 | |||||||
PREFERRED STOCKS†† - 5.0% | ||||||||
Financial - 5.0% | ||||||||
Equitable Holdings, Inc. | ||||||||
4.95%3 | 550,000 | 576,125 | ||||||
4.30% | 12,000 | 303,000 | ||||||
First Republic Bank | ||||||||
4.25% | 24,000 | 616,800 | ||||||
4.13% | 6,000 | 151,860 | ||||||
4.50%* | 2,000 | 52,000 | ||||||
Citigroup, Inc. | ||||||||
3.88%3 | 600,000 | 600,000 | ||||||
4.00%3 | 200,000 | 201,500 | ||||||
Wells Fargo & Co. | ||||||||
4.70% | 16,000 | 412,800 | ||||||
3.90%*,3 | 350,000 | 359,625 | ||||||
Markel Corp. | ||||||||
6.00%3 | 660,000 | 723,525 | ||||||
Bank of America Corp. | ||||||||
4.13% | 16,000 | 406,560 | ||||||
4.38% | 12,000 | 306,960 | ||||||
Bank of New York Mellon Corp. | ||||||||
3.75%*,3 | 400,000 | 401,428 | ||||||
4.70%*,3 | 140,000 | 149,345 | ||||||
Charles Schwab Corp. | ||||||||
4.00%*,3 | 500,000 | 505,000 | ||||||
JPMorgan Chase & Co. | ||||||||
3.65%*,3 | 250,000 | 249,375 | ||||||
4.63% | 8,000 | 208,880 | ||||||
MetLife, Inc. | ||||||||
3.85%*,3 | 400,000 | 408,000 | ||||||
Public Storage | ||||||||
4.63% | 12,755 | 341,579 | ||||||
4.13% | 2,323 | 58,702 | ||||||
W R Berkley Corp. | ||||||||
4.13% due 03/30/61 | 11,288 | 288,070 | ||||||
4.25% due 09/30/60 | 1,845 | 48,874 | ||||||
Arch Capital Group Ltd. | ||||||||
4.55% | 10,000 | 258,600 | ||||||
American Financial Group, Inc. | ||||||||
4.50% due 09/15/60 | 8,968 | 242,046 | ||||||
RenaissanceRe Holdings Ltd. | ||||||||
4.20% | 8,000 | 200,720 | ||||||
CNO Financial Group, Inc. | ||||||||
5.13% due 11/25/60 | 6,000 | 159,300 | ||||||
Goldman Sachs Group, Inc. | ||||||||
3.80%3 | 150,000 | 149,250 | ||||||
Kuvare US Holdings, Inc. | ||||||||
7.00% due 02/17/51*,3,4 | 100,000 | 108,500 | ||||||
Assurant, Inc. | ||||||||
5.25% due 01/15/61 | 4,000 | 107,880 | ||||||
Selective Insurance Group, Inc. | ||||||||
4.60% | 4,000 | 103,600 | ||||||
Total Preferred Stocks | ||||||||
(Cost $8,429,475) | 8,699,904 | |||||||
WARRANTS† - 0.0% | ||||||||
Pershing Square Tontine Holdings, Ltd. | ||||||||
Expiring 07/24/25*,1 | 8,510 | 11,234 | ||||||
KKR Acquisition Holdings I Corp. - Class A | ||||||||
Expiring 12/31/27*,1 | 8,457 | 8,445 | ||||||
Ginkgo Bioworks Holdings, Inc. | ||||||||
Expiring 12/31/27* | 684 | 1,532 | ||||||
MSD Acquisition Corp. | ||||||||
Expiring 05/13/23*,1 | 974 | 1,115 | ||||||
Conyers Park III Acquisition Corp. | ||||||||
Expiring 08/12/28* | 1,266 | 1,114 | ||||||
RXR Acquisition Corp. | ||||||||
Expiring 03/08/26*,1 | 1,547 | 1,083 | ||||||
AfterNext HealthTech Acquisition Corp. | ||||||||
Expiring 07/09/23* | 1,366 | 956 | ||||||
Acropolis Infrastructure Acquisition Corp. | ||||||||
Expiring 03/31/26*,1 | 900 | 721 | ||||||
Blue Whale Acquisition Corp. | ||||||||
Expiring 07/30/26*,1 | 550 | 467 | ||||||
Colicity, Inc. | ||||||||
Expiring 12/31/27*,1 | 542 | 417 | ||||||
Waverley Capital Acquisition Corp. 1 - Class A | ||||||||
Expiring 04/30/27*,1 | 500 | 320 | ||||||
Total Warrants | ||||||||
(Cost $65,230) | 27,404 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 41 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Shares | Value | ||||||
MUTUAL FUNDS† - 4.0% | ||||||||
Guggenheim Total Return Bond Fund — R6-Class5 | 243,796 | $ | 6,967,697 | |||||
Total Mutual Funds | ||||||||
(Cost $6,491,508) | 6,967,697 | |||||||
MONEY MARKET FUND† - 1.3% | ||||||||
Dreyfus Treasury Obligations Cash Management Fund, 0.01%6 | 2,275,205 | 2,275,205 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,275,205) | 2,275,205 | |||||||
Face | ||||||||
| CORPORATE BONDS†† - 40.4% | ||||||||
| Financial - 16.9% | ||||||||
| Pershing Square Holdings Ltd. | ||||||||
3.25% due 11/15/304 | 1,000,000 | 1,002,468 | ||||||
| 3.25% due 10/01/31 | 1,000,000 | 1,001,092 | ||||||
| Wells Fargo & Co. | ||||||||
3.07% due 04/30/413 | 1,100,000 | 1,128,077 | ||||||
| Nationwide Mutual Insurance Co. | ||||||||
4.35% due 04/30/504 | 950,000 | 1,088,118 | ||||||
| Liberty Mutual Group, Inc. | ||||||||
4.30% due 02/01/614 | 700,000 | 658,000 | ||||||
3.95% due 05/15/604 | 280,000 | 307,413 | ||||||
| Bank of America Corp. | ||||||||
2.59% due 04/29/313 | 890,000 | 899,056 | ||||||
| Reliance Standard Life Global Funding II | ||||||||
2.75% due 05/07/254 | 800,000 | 828,936 | ||||||
| Reinsurance Group of America, Inc. | ||||||||
| 3.15% due 06/15/30 | 750,000 | 781,198 | ||||||
| Arch Capital Group Ltd. | ||||||||
| 3.64% due 06/30/50 | 700,000 | 748,850 | ||||||
| Macquarie Bank Ltd. | ||||||||
3.05% due 03/03/363,4 | 450,000 | 443,622 | ||||||
3.62% due 06/03/304 | 290,000 | 302,569 | ||||||
| Wilton RE Ltd. | ||||||||
6.00% †††,3,4,7 | 700,000 | 736,092 | ||||||
| American International Group, Inc. | ||||||||
| 4.38% due 06/30/50 | 550,000 | 685,583 | ||||||
| GLP Capital Limited Partnership / GLP Financing II, Inc. | ||||||||
| 5.30% due 01/15/29 | 300,000 | 340,560 | ||||||
| 4.00% due 01/15/31 | 290,000 | 309,427 | ||||||
| Citigroup, Inc. | ||||||||
2.57% due 06/03/313 | 590,000 | 595,103 | ||||||
| Intercontinental Exchange, Inc. | ||||||||
| 2.65% due 09/15/40 | 600,000 | 579,409 | ||||||
| Fidelity National Financial, Inc. | ||||||||
| 3.40% due 06/15/30 | 300,000 | 316,709 | ||||||
| 2.45% due 03/15/31 | 230,000 | 225,703 | ||||||
| Nippon Life Insurance Co. | ||||||||
2.75% due 01/21/513,4 | 350,000 | 343,000 | ||||||
2.90% due 09/16/513,4 | 200,000 | 197,777 | ||||||
| Deloitte LLP | ||||||||
3.56% due 05/07/30††† | 500,000 | 517,380 | ||||||
| Maple Grove Funding Trust I | ||||||||
4.16% due 08/15/514 | 500,000 | 514,828 | ||||||
| Iron Mountain, Inc. | ||||||||
5.25% due 07/15/304 | 250,000 | 263,455 | ||||||
5.63% due 07/15/324 | 125,000 | 133,773 | ||||||
4.50% due 02/15/314 | 100,000 | 101,069 | ||||||
| Host Hotels & Resorts, LP | ||||||||
| 3.50% due 09/15/30 | 435,000 | 446,545 | ||||||
| 2.90% due 12/15/31 | 50,000 | 48,238 | ||||||
| JPMorgan Chase & Co. | ||||||||
2.96% due 05/13/313 | 230,000 | 238,136 | ||||||
4.49% due 03/24/313 | 200,000 | 231,442 | ||||||
| Fairfax Financial Holdings Ltd. | ||||||||
| 3.38% due 03/03/31 | 450,000 | 463,190 | ||||||
| Crown Castle International Corp. | ||||||||
| 2.90% due 04/01/41 | 250,000 | 243,132 | ||||||
| 3.30% due 07/01/30 | 201,000 | 212,016 | ||||||
| Global Atlantic Finance Co. | ||||||||
4.70% due 10/15/513,4 | 250,000 | 253,564 | ||||||
3.13% due 06/15/314 | 200,000 | 197,976 | ||||||
| Macquarie Group Ltd. | ||||||||
2.87% due 01/14/333,4 | 250,000 | 249,244 | ||||||
2.69% due 06/23/323,4 | 200,000 | 199,468 | ||||||
| OneAmerica Financial Partners, Inc. | ||||||||
4.25% due 10/15/504 | 410,000 | 444,481 | ||||||
| Safehold Operating Partnership, LP | ||||||||
| 2.85% due 01/15/32 | 271,000 | 265,650 | ||||||
| 2.80% due 06/15/31 | 180,000 | 177,588 | ||||||
| Massachusetts Mutual Life Insurance Co. | ||||||||
3.20% due 12/01/614 | 450,000 | 443,172 | ||||||
| Ares Finance Company II LLC | ||||||||
3.25% due 06/15/304 | 410,000 | 422,613 | ||||||
| National Australia Bank Ltd. | ||||||||
2.99% due 05/21/314 | 400,000 | 401,161 | ||||||
| Alleghany Corp. | ||||||||
| 3.63% due 05/15/30 | 370,000 | 401,123 | ||||||
| United Wholesale Mortgage LLC | ||||||||
5.50% due 04/15/294 | 300,000 | 294,375 | ||||||
5.50% due 11/15/254 | 100,000 | 101,875 | ||||||
| Standard Chartered plc | ||||||||
4.64% due 04/01/313,4 | 350,000 | 396,009 | ||||||
| First American Financial Corp. | ||||||||
| 4.00% due 05/15/30 | 360,000 | 394,031 | ||||||
| Rocket Mortgage LLC / Rocket Mortgage Company-Issuer, Inc. | ||||||||
3.88% due 03/01/314 | 350,000 | 355,250 | ||||||
| Brookfield Finance, Inc. | ||||||||
| 3.50% due 03/30/51 | 280,000 | 293,422 | ||||||
| 4.70% due 09/20/47 | 50,000 | 61,400 | ||||||
| Belrose Funding Trust | ||||||||
2.33% due 08/15/304 | 320,000 | 313,752 | ||||||
| LPL Holdings, Inc. | ||||||||
4.00% due 03/15/294 | 300,000 | 307,125 | ||||||
42 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| KKR Group Finance Company VIII LLC | ||||||||
3.50% due 08/25/504 | 290,000 | $ | 303,467 | |||||
| ABN AMRO Bank N.V. | ||||||||
2.47% due 12/13/293,4 | 300,000 | 299,999 | ||||||
| Jefferies Group LLC | ||||||||
| 2.75% due 10/15/32 | 300,000 | 296,705 | ||||||
| Everest Reinsurance Holdings, Inc. | ||||||||
| 3.50% due 10/15/50 | 280,000 | 293,719 | ||||||
| SBA Communications Corp. | ||||||||
3.13% due 02/01/294 | 250,000 | 240,000 | ||||||
| 3.88% due 02/15/27 | 50,000 | 51,500 | ||||||
| UBS Group AG | ||||||||
2.10% due 02/11/323,4 | 300,000 | 290,326 | ||||||
| Assured Guaranty US Holdings, Inc. | ||||||||
| 3.15% due 06/15/31 | 150,000 | 154,865 | ||||||
| 3.60% due 09/15/51 | 100,000 | 103,987 | ||||||
| Jefferies Finance LLC / JFIN Company-Issuer Corp. | ||||||||
5.00% due 08/15/284 | 250,000 | 256,250 | ||||||
| Kennedy-Wilson, Inc. | ||||||||
| 4.75% due 03/01/29 | 150,000 | 153,375 | ||||||
| 4.75% due 02/01/30 | 100,000 | 101,370 | ||||||
| Stewart Information Services Corp. | ||||||||
| 3.60% due 11/15/31 | 250,000 | 253,142 | ||||||
| Societe Generale S.A. | ||||||||
2.89% due 06/09/323,4 | 250,000 | 249,379 | ||||||
| FS KKR Capital Corp. | ||||||||
| 2.63% due 01/15/27 | 250,000 | 246,718 | ||||||
| Westpac Banking Corp. | ||||||||
3.02% due 11/18/363 | 150,000 | 148,216 | ||||||
| 2.96% due 11/16/40 | 100,000 | 98,079 | ||||||
| Assurant, Inc. | ||||||||
| 2.65% due 01/15/32 | 250,000 | 245,174 | ||||||
| AmFam Holdings, Inc. | ||||||||
2.81% due 03/11/314 | 200,000 | 204,213 | ||||||
| Primerica, Inc. | ||||||||
| 2.80% due 11/19/31 | 200,000 | 202,155 | ||||||
| NFP Corp. | ||||||||
6.88% due 08/15/284 | 200,000 | 200,516 | ||||||
| Hunt Companies, Inc. | ||||||||
5.25% due 04/15/294 | 200,000 | 197,000 | ||||||
| Americo Life, Inc. | ||||||||
3.45% due 04/15/314 | 200,000 | 194,385 | ||||||
| Lincoln National Corp. | ||||||||
| 4.38% due 06/15/50 | 150,000 | 181,811 | ||||||
| Raymond James Financial, Inc. | ||||||||
| 3.75% due 04/01/51 | 150,000 | 165,674 | ||||||
| Kemper Corp. | ||||||||
| 2.40% due 09/30/30 | 170,000 | 164,671 | ||||||
| Prudential Financial, Inc. | ||||||||
3.70% due 10/01/503 | 130,000 | 131,506 | ||||||
| PartnerRe Finance B LLC | ||||||||
4.50% due 10/01/503 | 110,000 | 115,738 | ||||||
| Nasdaq, Inc. | ||||||||
| 3.25% due 04/28/50 | 110,000 | 111,842 | ||||||
| Western & Southern Life Insurance Co. | ||||||||
3.75% due 04/28/614 | 100,000 | 111,425 | ||||||
| Penn Mutual Life Insurance Co. | ||||||||
3.80% due 04/29/614 | 100,000 | 108,183 | ||||||
| Cushman & Wakefield US Borrower LLC | ||||||||
6.75% due 05/15/284 | 95,000 | 101,650 | ||||||
| Jefferies Group LLC / Jefferies Group Capital Finance, Inc. | ||||||||
| 2.63% due 10/15/31 | 100,000 | 98,357 | ||||||
| Home Point Capital, Inc. | ||||||||
5.00% due 02/01/264 | 100,000 | 92,750 | ||||||
| Apollo Management Holdings, LP | ||||||||
2.65% due 06/05/304 | 90,000 | 90,769 | ||||||
| Brown & Brown, Inc. | ||||||||
| 2.38% due 03/15/31 | 90,000 | 87,661 | ||||||
| American Equity Investment Life Holding Co. | ||||||||
| 5.00% due 06/15/27 | 69,000 | 78,130 | ||||||
| CNO Financial Group, Inc. | ||||||||
| 5.25% due 05/30/29 | 50,000 | 57,420 | ||||||
| Brookfield Finance LLC | ||||||||
| 3.45% due 04/15/50 | 50,000 | 52,059 | ||||||
| Weyerhaeuser Co. | ||||||||
| 4.00% due 04/15/30 | 43,000 | 47,954 | ||||||
| Total Financial | 29,487,385 | |||||||
| Consumer, Non-cyclical - 5.6% | ||||||||
| CoStar Group, Inc. | ||||||||
2.80% due 07/15/304 | 740,000 | 740,175 | ||||||
| Altria Group, Inc. | ||||||||
| 3.70% due 02/04/51 | 550,000 | 512,666 | ||||||
| 3.40% due 05/06/30 | 170,000 | 175,888 | ||||||
| 4.45% due 05/06/50 | 50,000 | 51,578 | ||||||
| Mozart Debt Merger Sub, Inc. | ||||||||
3.88% due 04/01/294 | 550,000 | 548,059 | ||||||
| Johns Hopkins University | ||||||||
| 2.81% due 01/01/60 | 500,000 | 512,363 | ||||||
| BAT Capital Corp. | ||||||||
| 3.98% due 09/25/50 | 300,000 | 288,373 | ||||||
| 4.70% due 04/02/27 | 190,000 | 209,009 | ||||||
| Children’s Hospital Corp. | ||||||||
| 2.59% due 02/01/50 | 500,000 | 478,237 | ||||||
| Quanta Services, Inc. | ||||||||
| 2.90% due 10/01/30 | 467,000 | 474,910 | ||||||
| Royalty Pharma plc | ||||||||
| 3.55% due 09/02/50 | 310,000 | 307,356 | ||||||
| 2.20% due 09/02/30 | 160,000 | 154,870 | ||||||
| Kraft Heinz Foods Co. | ||||||||
| 4.38% due 06/01/46 | 180,000 | 210,780 | ||||||
| 4.88% due 10/01/49 | 75,000 | 94,196 | ||||||
| 5.50% due 06/01/50 | 50,000 | 67,694 | ||||||
| 5.00% due 06/04/42 | 50,000 | 62,198 | ||||||
| DaVita, Inc. | ||||||||
3.75% due 02/15/314 | 303,000 | 295,222 | ||||||
4.63% due 06/01/304 | 113,000 | 115,684 | ||||||
| Global Payments, Inc. | ||||||||
| 2.90% due 05/15/30 | 210,000 | 213,812 | ||||||
| 2.90% due 11/15/31 | 140,000 | 142,000 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| Smithfield Foods, Inc. | ||||||||
2.63% due 09/13/314 | 250,000 | $ | 241,883 | |||||
3.00% due 10/15/304 | 110,000 | 109,549 | ||||||
| US Foods, Inc. | ||||||||
6.25% due 04/15/254 | 200,000 | 208,250 | ||||||
4.75% due 02/15/294 | 89,000 | 90,446 | ||||||
| California Institute of Technology | ||||||||
| 3.65% due 09/01/19 | 225,000 | 261,777 | ||||||
| Post Holdings, Inc. | ||||||||
4.50% due 09/15/314 | 250,000 | 248,125 | ||||||
| BECLE, S.A.B. DE C.V | ||||||||
2.50% due 10/14/314 | 250,000 | 245,985 | ||||||
| Triton Container International Ltd. | ||||||||
3.15% due 06/15/314 | 200,000 | 201,699 | ||||||
| JBS USA LUX S.A. / JBS USA Food Company / JBS USA Finance, Inc. | ||||||||
3.00% due 05/15/324 | 200,000 | 200,000 | ||||||
| TriNet Group, Inc. | ||||||||
3.50% due 03/01/294 | 200,000 | 199,250 | ||||||
| Kimberly-Clark de Mexico SAB de CV | ||||||||
2.43% due 07/01/314 | 200,000 | 197,642 | ||||||
| Central Garden & Pet Co. | ||||||||
4.13% due 04/30/314 | 100,000 | 100,500 | ||||||
| 4.13% due 10/15/30 | 75,000 | 75,656 | ||||||
| Spectrum Brands, Inc. | ||||||||
| 5.75% due 07/15/25 | 150,000 | 153,187 | ||||||
| Hologic, Inc. | ||||||||
3.25% due 02/15/294 | 150,000 | 150,000 | ||||||
| Universal Health Services, Inc. | ||||||||
2.65% due 10/15/304 | 150,000 | 148,786 | ||||||
| Transurban Finance Company Pty Ltd. | ||||||||
2.45% due 03/16/314 | 150,000 | 148,545 | ||||||
| Endo Luxembourg Finance Company I SARL / Endo US, Inc. | ||||||||
6.13% due 04/01/294 | 150,000 | 147,000 | ||||||
| Avantor Funding, Inc. | ||||||||
4.63% due 07/15/284 | 125,000 | 130,312 | ||||||
| Gartner, Inc. | ||||||||
3.75% due 10/01/304 | 100,000 | 102,240 | ||||||
| Block, Inc. | ||||||||
2.75% due 06/01/264 | 100,000 | 100,119 | ||||||
| GXO Logistics, Inc. | ||||||||
2.65% due 07/15/314 | 100,000 | 98,766 | ||||||
| Syneos Health, Inc. | ||||||||
3.63% due 01/15/294 | 100,000 | 98,750 | ||||||
| Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
4.50% due 07/15/294 | 100,000 | 98,374 | ||||||
| Service Corporation International | ||||||||
| 3.38% due 08/15/30 | 100,000 | 98,157 | ||||||
| Prime Security Services Borrower LLC / Prime Finance, Inc. | ||||||||
3.38% due 08/31/274 | 100,000 | 96,539 | ||||||
| Tenet Healthcare Corp. | ||||||||
4.63% due 06/15/284 | 75,000 | 77,062 | ||||||
| Kronos Acquisition Holdings, Inc. / KIK Custom Products, Inc. | ||||||||
5.00% due 12/31/264 | 50,000 | 49,392 | ||||||
| Total Consumer, Non-cyclical | 9,733,061 | |||||||
| Industrial - 4.5% | ||||||||
| Boeing Co. | ||||||||
| 5.15% due 05/01/30 | 970,000 | 1,130,148 | ||||||
| 5.81% due 05/01/50 | 490,000 | 663,522 | ||||||
| 5.71% due 05/01/40 | 490,000 | 629,360 | ||||||
| 2.20% due 02/04/26 | 200,000 | 199,952 | ||||||
| Stadco LA, LLC | ||||||||
3.75% due 05/15/56††† | 500,000 | 494,327 | ||||||
| Amsted Industries, Inc. | ||||||||
4.63% due 05/15/304 | 470,000 | 481,750 | ||||||
| Cellnex Finance Company S.A. | ||||||||
3.88% due 07/07/414 | 450,000 | 430,344 | ||||||
| Crown Americas LLC / Crown Americas Capital Corporation VI | ||||||||
| 4.75% due 02/01/26 | 400,000 | 410,000 | ||||||
| TD SYNNEX Corp. | ||||||||
2.65% due 08/09/314 | 250,000 | 240,335 | ||||||
2.38% due 08/09/284 | 150,000 | 145,605 | ||||||
| Flowserve Corp. | ||||||||
| 3.50% due 10/01/30 | 270,000 | 278,934 | ||||||
| 2.80% due 01/15/32 | 100,000 | 97,301 | ||||||
| Owens Corning | ||||||||
| 3.88% due 06/01/30 | 320,000 | 348,997 | ||||||
| Vontier Corp. | ||||||||
2.95% due 04/01/314 | 350,000 | 346,692 | ||||||
| Textron, Inc. | ||||||||
| 2.45% due 03/15/31 | 350,000 | 343,942 | ||||||
| Acuity Brands Lighting, Inc. | ||||||||
| 2.15% due 12/15/30 | 350,000 | 341,154 | ||||||
| Ardagh Packaging Finance plc / Ardagh Holdings USA, Inc. | ||||||||
4.13% due 08/15/264 | 250,000 | 255,625 | ||||||
| Standard Industries, Inc. | ||||||||
4.38% due 07/15/304 | 125,000 | 127,563 | ||||||
3.38% due 01/15/314 | 125,000 | 120,411 | ||||||
| GATX Corp. | ||||||||
| 4.00% due 06/30/30 | 140,000 | 155,854 | ||||||
| 3.50% due 03/15/28 | 50,000 | 53,710 | ||||||
| Weir Group plc | ||||||||
2.20% due 05/13/264 | 200,000 | 197,208 | ||||||
| Howmet Aerospace, Inc. | ||||||||
| 6.75% due 01/15/28 | 145,000 | 171,997 | ||||||
| Norfolk Southern Corp. | ||||||||
| 4.10% due 05/15/21 | 50,000 | 56,528 | ||||||
| Berry Global, Inc. | ||||||||
| 1.57% due 01/15/26 | 50,000 | 48,926 | ||||||
| Graphic Packaging International LLC | ||||||||
3.50% due 03/01/294 | 11,000 | 10,918 | ||||||
| Total Industrial | 7,781,103 | |||||||
44 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| Communications - 3.9% | ||||||||
| ViacomCBS, Inc. | ||||||||
| 4.95% due 01/15/31 | 617,000 | $ | 735,007 | |||||
| 4.95% due 05/19/50 | 320,000 | 407,919 | ||||||
| Charter Communications Operating LLC / Charter Communications Operating Capital | ||||||||
| 2.80% due 04/01/31 | 625,000 | 618,433 | ||||||
| 2.25% due 01/15/29 | 100,000 | 97,570 | ||||||
| 3.90% due 06/01/52 | 50,000 | 50,138 | ||||||
| Level 3 Financing, Inc. | ||||||||
3.63% due 01/15/294 | 330,000 | 313,500 | ||||||
4.25% due 07/01/284 | 288,000 | 285,120 | ||||||
3.75% due 07/15/294 | 100,000 | 95,000 | ||||||
| British Telecommunications plc | ||||||||
4.88% due 11/23/813,4 | 350,000 | 352,314 | ||||||
| 9.63% due 12/15/30 | 100,000 | 146,437 | ||||||
| T-Mobile USA, Inc. | ||||||||
| 3.88% due 04/15/30 | 335,000 | 366,407 | ||||||
| 2.88% due 02/15/31 | 50,000 | 49,380 | ||||||
2.70% due 03/15/324 | 10,000 | 10,062 | ||||||
| AT&T, Inc. | ||||||||
| 2.75% due 06/01/31 | 410,000 | 418,304 | ||||||
| CSC Holdings LLC | ||||||||
4.13% due 12/01/304 | 200,000 | 195,250 | ||||||
3.38% due 02/15/314 | 200,000 | 187,250 | ||||||
| Virgin Media Secured Finance plc | ||||||||
4.50% due 08/15/304 | 300,000 | 301,893 | ||||||
| McGraw-Hill Education, Inc. | ||||||||
5.75% due 08/01/284 | 300,000 | 297,000 | ||||||
| Cable One, Inc. | ||||||||
4.00% due 11/15/304 | 300,000 | 294,000 | ||||||
| UPC Broadband Finco BV | ||||||||
4.88% due 07/15/314 | 250,000 | 255,000 | ||||||
| Vodafone Group plc | ||||||||
4.13% due 06/04/813 | 250,000 | 247,490 | ||||||
| Virgin Media Vendor Financing Notes IV DAC | ||||||||
5.00% due 07/15/284 | 200,000 | 201,509 | ||||||
| Altice France S.A. | ||||||||
5.13% due 07/15/294 | 200,000 | 195,090 | ||||||
| Sirius XM Radio, Inc. | ||||||||
4.13% due 07/01/304 | 180,000 | 180,000 | ||||||
| Radiate Holdco LLC / Radiate Finance, Inc. | ||||||||
4.50% due 09/15/264 | 150,000 | 151,500 | ||||||
| Go Daddy Operating Company LLC / GD Finance Co., Inc. | ||||||||
3.50% due 03/01/294 | 150,000 | 148,852 | ||||||
| Lamar Media Corp. | ||||||||
| 3.63% due 01/15/31 | 100,000 | 97,380 | ||||||
| CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
4.25% due 02/01/314 | 50,000 | 50,439 | ||||||
| Switch Ltd. | ||||||||
3.75% due 09/15/284 | 50,000 | 50,375 | ||||||
| Total Communications | 6,798,619 | |||||||
| Consumer, Cyclical - 3.4% | ||||||||
| Marriott International, Inc. | ||||||||
| 4.63% due 06/15/30 | 340,000 | 382,482 | ||||||
| 3.50% due 10/15/32 | 330,000 | 345,594 | ||||||
| 5.75% due 05/01/25 | 250,000 | 281,410 | ||||||
| 2.85% due 04/15/31 | 170,000 | 169,480 | ||||||
| 2.75% due 10/15/33 | 100,000 | 97,004 | ||||||
| Delta Air Lines, Inc. | ||||||||
7.00% due 05/01/254 | 1,070,000 | 1,223,448 | ||||||
| Hyatt Hotels Corp. | ||||||||
| 5.38% due 04/23/25 | 220,000 | 243,859 | ||||||
| 5.75% due 04/23/30 | 190,000 | 226,643 | ||||||
| Hilton Domestic Operating Company, Inc. | ||||||||
3.75% due 05/01/294 | 400,000 | 403,000 | ||||||
| Choice Hotels International, Inc. | ||||||||
| 3.70% due 01/15/31 | 360,000 | 381,647 | ||||||
| Mileage Plus Holdings LLC / Mileage Plus Intellectual Property Assets Ltd. | ||||||||
6.50% due 06/20/274 | 350,000 | 373,625 | ||||||
| 1011778 BC ULC / New Red Finance, Inc. | ||||||||
4.00% due 10/15/304 | 300,000 | 294,750 | ||||||
3.88% due 01/15/284 | 55,000 | 55,702 | ||||||
| Delta Air Lines Inc. / SkyMiles IP Ltd. | ||||||||
4.50% due 10/20/254 | 300,000 | 315,304 | ||||||
| PetSmart, Inc. / PetSmart Finance Corp. | ||||||||
4.75% due 02/15/284 | 250,000 | 256,562 | ||||||
| Walgreens Boots Alliance, Inc. | ||||||||
| 4.10% due 04/15/50 | 198,000 | 221,939 | ||||||
| United Airlines, Inc. | ||||||||
4.38% due 04/15/264 | 150,000 | 156,410 | ||||||
| Scotts Miracle-Gro Co. | ||||||||
4.00% due 04/01/314 | 150,000 | 148,125 | ||||||
| British Airways Class A Pass Through Trust | ||||||||
2.90% due 03/15/354 | 99,990 | 99,594 | ||||||
| Allison Transmission, Inc. | ||||||||
3.75% due 01/30/314 | 100,000 | 97,500 | ||||||
| WMG Acquisition Corp. | ||||||||
3.00% due 02/15/314 | 75,000 | 71,812 | ||||||
| Aramark Services, Inc. | ||||||||
5.00% due 02/01/284 | 10,000 | 10,338 | ||||||
| Total Consumer, Cyclical | 5,856,228 | |||||||
| Energy - 2.4% | ||||||||
| Galaxy Pipeline Assets Bidco Ltd. | ||||||||
3.25% due 09/30/404 | 700,000 | 706,670 | ||||||
2.94% due 09/30/404 | 350,000 | 348,325 | ||||||
| BP Capital Markets plc | ||||||||
4.88%3,7 | 880,000 | 950,400 | ||||||
| Qatar Energy | ||||||||
3.30% due 07/12/514 | 250,000 | 257,342 | ||||||
3.13% due 07/12/414 | 250,000 | 252,654 | ||||||
| Sabine Pass Liquefaction LLC | ||||||||
| 4.50% due 05/15/30 | 400,000 | 451,209 | ||||||
| Occidental Petroleum Corp. | ||||||||
| 4.63% due 06/15/45 | 200,000 | 207,500 | ||||||
| 3.00% due 02/15/27 | 70,000 | 71,050 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 45 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| ITT Holdings LLC | ||||||||
6.50% due 08/01/294 | 250,000 | $ | 247,500 | |||||
| Magellan Midstream Partners, LP | ||||||||
| 3.25% due 06/01/30 | 190,000 | 199,548 | ||||||
| Valero Energy Corp. | ||||||||
| 2.15% due 09/15/27 | 140,000 | 139,465 | ||||||
| Midwest Connector Capital Company LLC | ||||||||
4.63% due 04/01/294 | 110,000 | 118,398 | ||||||
| NuStar Logistics, LP | ||||||||
| 5.63% due 04/28/27 | 100,000 | 105,750 | ||||||
| DCP Midstream Operating, LP | ||||||||
| 3.25% due 02/15/32 | 100,000 | 100,750 | ||||||
| Parkland Corp. | ||||||||
4.63% due 05/01/304 | 100,000 | 99,375 | ||||||
| Total Energy | 4,255,936 | |||||||
| Technology - 1.6% | ||||||||
| Broadcom, Inc. | ||||||||
| 4.15% due 11/15/30 | 484,000 | 536,783 | ||||||
2.45% due 02/15/314 | 300,000 | 294,154 | ||||||
3.19% due 11/15/364 | 26,000 | 25,955 | ||||||
| NetApp, Inc. | ||||||||
| 2.70% due 06/22/30 | 412,000 | 412,314 | ||||||
| Qorvo, Inc. | ||||||||
| 4.38% due 10/15/29 | 170,000 | 180,412 | ||||||
3.38% due 04/01/314 | 100,000 | 101,794 | ||||||
| CDW LLC / CDW Finance Corp. | ||||||||
| 3.57% due 12/01/31 | 250,000 | 260,096 | ||||||
| Oracle Corp. | ||||||||
| 3.95% due 03/25/51 | 250,000 | 259,527 | ||||||
| Citrix Systems, Inc. | ||||||||
| 1.25% due 03/01/26 | 250,000 | 243,470 | ||||||
| Leidos, Inc. | ||||||||
| 2.30% due 02/15/31 | 250,000 | 240,695 | ||||||
| Boxer Parent Company, Inc. | ||||||||
7.13% due 10/02/254 | 100,000 | 104,875 | ||||||
| MSCI, Inc. | ||||||||
3.63% due 09/01/304 | 75,000 | 76,687 | ||||||
3.88% due 02/15/314 | 15,000 | 15,619 | ||||||
| Twilio, Inc. | ||||||||
| 3.63% due 03/15/29 | 38,000 | 38,336 | ||||||
| Total Technology | 2,790,717 | |||||||
| Basic Materials - 1.2% | ||||||||
| Newcrest Finance Pty Ltd. | ||||||||
3.25% due 05/13/304 | 460,000 | 481,765 | ||||||
4.20% due 05/13/504 | 220,000 | 249,171 | ||||||
| Anglo American Capital plc | ||||||||
5.63% due 04/01/304 | 200,000 | 236,970 | ||||||
2.63% due 09/10/304 | 200,000 | 196,112 | ||||||
| Alcoa Nederland Holding BV | ||||||||
5.50% due 12/15/274 | 200,000 | 214,000 | ||||||
| Minerals Technologies, Inc. | ||||||||
5.00% due 07/01/284 | 190,000 | 196,944 | ||||||
| INEOS Quattro Finance 2 plc | ||||||||
3.38% due 01/15/264 | 150,000 | 150,548 | ||||||
| Yamana Gold, Inc. | ||||||||
2.63% due 08/15/314 | 150,000 | 143,971 | ||||||
| Reliance Steel & Aluminum Co. | ||||||||
| 2.15% due 08/15/30 | 100,000 | 97,166 | ||||||
| Valvoline, Inc. | ||||||||
4.25% due 02/15/304 | 50,000 | 51,011 | ||||||
| Total Basic Materials | 2,017,658 | |||||||
| Utilities - 0.9% | ||||||||
| Cheniere Corpus Christi Holdings LLC | ||||||||
3.52% due 12/31/39††† | 800,000 | 805,007 | ||||||
| AES Corp. | ||||||||
3.95% due 07/15/304 | 220,000 | 234,388 | ||||||
| NRG Energy, Inc. | ||||||||
2.45% due 12/02/274 | 200,000 | 198,172 | ||||||
| Enel Finance International N.V. | ||||||||
2.88% due 07/12/414 | 200,000 | 191,755 | ||||||
| Clearway Energy Operating LLC | ||||||||
3.75% due 02/15/314 | 100,000 | 99,750 | ||||||
| Xcel Energy, Inc. | ||||||||
| 2.35% due 11/15/31 | 60,000 | 59,679 | ||||||
| American Transmission Systems, Inc. | ||||||||
2.65% due 01/15/324 | 50,000 | 50,464 | ||||||
| Total Utilities | 1,639,215 | |||||||
| Total Corporate Bonds | ||||||||
| (Cost $68,070,595) | 70,359,922 | |||||||
| ASSET-BACKED SECURITIES†† - 19.3% | ||||||||
| Collateralized Loan Obligations - 12.6% | ||||||||
| Octagon Investment Partners 49 Ltd. | ||||||||
2021-5A, 1.67% (3 Month USD LIBOR + 1.55%, Rate Floor: 1.55%) due 01/15/334,8 | 1,750,000 | 1,740,387 | ||||||
| LoanCore Issuer Ltd. | ||||||||
2019-CRE2, 1.61% (1 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 05/15/364,8 | 550,000 | 549,809 | ||||||
2018-CRE1, 1.61% (1 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 05/15/284,8 | 500,000 | 500,000 | ||||||
2021-CRE6, 2.41% (1 Month USD LIBOR + 2.30%, Rate Floor: 2.30%) due 11/15/384 | 500,000 | 498,649 | ||||||
| BXMT Ltd. | ||||||||
2020-FL2, 1.32% (30 Day Average U.S. Secured Overnight Financing Rate + 1.26%, Rate Floor: 1.15%) due 02/15/384,8 | 1,000,000 | 997,081 | ||||||
2020-FL3, 2.72% (30 Day Average U.S. Secured Overnight Financing Rate + 2.66%, Rate Floor: 2.55%) due 11/15/374,8 | 250,000 | 250,032 | ||||||
| Cerberus Loan Funding XXX, LP | ||||||||
2020-3A, 1.97% (3 Month USD LIBOR + 1.85%, Rate Floor: 1.85%) due 01/15/334,8 | 1,000,000 | 1,004,945 | ||||||
46 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| Woodmont Trust | ||||||||
2020-7A, 2.02% (3 Month USD LIBOR + 1.90%, Rate Floor: 1.90%) due 01/15/324,8 | 1,000,000 | $ | 1,004,458 | |||||
| ABPCI Direct Lending Fund CLO II LLC | ||||||||
2021-1A, 1.73% (3 Month USD LIBOR + 1.60%, Rate Floor: 1.60%) due 04/20/324,8 | 1,000,000 | 999,901 | ||||||
| LCCM 2021-FL3 Trust | ||||||||
2021-FL3, 1.55% (1 Month USD LIBOR + 1.45%, Rate Floor: 1.45%) due 11/15/384,8 | 600,000 | 599,601 | ||||||
2021-FL3, 1.90% (1 Month USD LIBOR + 1.80%, Rate Floor: 1.80%) due 11/15/384,8 | 400,000 | 399,383 | ||||||
| MidOcean Credit CLO VII | ||||||||
2020-7A, 1.57% (3 Month USD LIBOR + 1.45%, Rate Floor: 0.00%) due 07/15/294,8 | 1,000,000 | 995,951 | ||||||
| Golub Capital Partners CLO 36M Ltd. | ||||||||
2018-36A, 1.44% (3 Month USD LIBOR + 1.30%, Rate Floor: 0.00%) due 02/05/314,8 | 850,000 | 846,561 | ||||||
| Dryden 37 Senior Loan Fund | ||||||||
2015-37A, due 01/15/314,9 | 1,000,000 | 840,504 | ||||||
| Golub Capital Partners CLO 33M Ltd. | ||||||||
2021-33A, 2.04% (3 Month USD LIBOR + 1.86%, Rate Floor: 1.86%) due 08/25/334,8 | 750,000 | 749,997 | ||||||
| STWD Ltd. | ||||||||
2019-FL1, 1.71% (30 Day Average U.S. Secured Overnight Financing Rate + 1.71%, Rate Floor: 1.60%) due 07/15/384,8 | 750,000 | 748,691 | ||||||
| Dryden 33 Senior Loan Fund | ||||||||
2020-33A, 1.52% (3 Month USD LIBOR + 1.40%, Rate Floor: 1.40%) due 04/15/294,8 | 750,000 | 748,665 | ||||||
| Fortress Credit Opportunities XI CLO Ltd. | ||||||||
2018-11A, 1.42% (3 Month USD LIBOR + 1.30%, Rate Floor: 0.00%) due 04/15/314,8 | 750,000 | 748,538 | ||||||
| ABPCI Direct Lending Fund CLO I LLC | ||||||||
2021-1A, 1.83% (3 Month USD LIBOR + 1.70%, Rate Floor: 1.70%) due 07/20/334,8 | 500,000 | 502,211 | ||||||
| THL Credit Lake Shore MM CLO I Ltd. | ||||||||
2021-1A, 1.82% (3 Month USD LIBOR + 1.70%, Rate Floor: 1.70%) due 04/15/334,8 | 500,000 | 501,247 | ||||||
| Golub Capital Partners CLO 16 Ltd. | ||||||||
2021-16A, 1.73% (3 Month USD LIBOR + 1.61%, Rate Floor: 1.61%) due 07/25/334,8 | 500,000 | 500,943 | ||||||
| Cerberus Loan Funding XXXIII, LP | ||||||||
2021-3A, 1.97% (3 Month USD LIBOR + 1.85%, Rate Floor: 1.85%) due 07/23/334,8 | 500,000 | 500,923 | ||||||
| Cerberus Loan Funding XXVI, LP | ||||||||
2021-1A, 1.62% (3 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 04/15/314,8 | 500,000 | 500,547 | ||||||
| ABPCI Direct Lending Fund CLO V Ltd. | ||||||||
2021-5A, 1.63% (3 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 04/20/314,8 | 500,000 | 500,097 | ||||||
| Wellfleet CLO Ltd. | ||||||||
2020-2A, 1.19% (3 Month USD LIBOR + 1.06%, Rate Floor: 0.00%) due 10/20/294,8 | 500,000 | 500,040 | ||||||
| Cerberus Loan Funding XXXVI, LP | ||||||||
2021-6A, 1.53% (3 Month USD LIBOR + 1.40%, Rate Floor: 1.40%) due 11/22/334,8 | 500,000 | 499,999 | ||||||
| CHCP Ltd. | ||||||||
2021-FL1, 2.27% (30 Day Average U.S. Secured Overnight Financing Rate + 2.21%, Rate Floor: 2.10%) due 02/15/384,8 | 500,000 | 497,973 | ||||||
| KREF | ||||||||
2021-FL2, 2.11% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 02/15/394,8 | 500,000 | 497,543 | ||||||
| GPMT Ltd. | ||||||||
2019-FL2, 2.00% (1 Month USD LIBOR + 1.90%, Rate Floor: 1.90%) due 02/22/364,8 | 500,000 | 497,067 | ||||||
| HERA Commercial Mortgage Ltd. | ||||||||
2021-FL1, 1.70% (1 Month USD LIBOR + 1.60%, Rate Floor: 1.60%) due 02/18/384,8 | 500,000 | 495,898 | ||||||
| Golub Capital Partners CLO 54M L.P | ||||||||
2021-54A, 2.77% (3 Month USD LIBOR + 2.65%, Rate Floor: 2.65%) due 08/05/334,8 | 500,000 | 495,428 | ||||||
| Treman Park CLO Ltd. | ||||||||
2015-1A, due 10/20/284,9 | 500,000 | 401,523 | ||||||
| ABPCI Direct Lending Fund CLO IV LLC | ||||||||
2.12% (3 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 07/08/29†††,8 | 250,000 | 250,146 | ||||||
| Golub Capital Partners CLO 17 Ltd. | ||||||||
2017-17A, 1.77% (3 Month USD LIBOR + 1.65%, Rate Floor: 0.00%) due 10/25/304,8 | 250,000 | 250,039 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 47 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| Diamond CLO Ltd. | ||||||||
2021-1A, 1.57% (3 Month USD LIBOR + 1.45%, Rate Floor: 1.45%) due 04/25/294,8 | 250,000 | $ | 249,952 | |||||
| Halcyon Loan Advisors Funding Ltd. | ||||||||
2017-3A, 1.02% (3 Month USD LIBOR + 0.90%, Rate Floor: 0.00%) due 10/18/274,8 | 111,009 | 111,002 | ||||||
| Copper River CLO Ltd. | ||||||||
2007-1A, due 01/20/219,10 | 600,000 | 120 | ||||||
| Total Collateralized Loan Obligations | 21,975,851 | |||||||
| Transport-Aircraft - 2.0% | ||||||||
| Lunar 2021-1 Structured Aircraft Portfolio Notes | ||||||||
2021-1, 2.64% due 10/15/464 | 491,963 | 489,154 | ||||||
| Aaset 2021-1 Trust | ||||||||
2021-1A, 2.95% due 11/16/414 | 491,268 | 481,449 | ||||||
| WAVE LLC | ||||||||
2019-1, 3.60% due 09/15/444 | 442,586 | 431,565 | ||||||
| JOL Air Ltd. | ||||||||
2019-1, 3.97% due 04/15/444 | 414,057 | 399,977 | ||||||
| Sapphire Aviation Finance II Ltd. | ||||||||
2020-1A, 3.23% due 03/15/404 | 410,974 | 399,015 | ||||||
| Castlelake Aircraft Structured Trust | ||||||||
2021-1A, 3.47% due 01/15/464 | 380,865 | 385,147 | ||||||
| Raspro Trust | ||||||||
2005-1A, 1.06% (3 Month USD LIBOR + 0.93%, Rate Floor: 0.93%) due 03/23/244,8 | 251,293 | 250,989 | ||||||
| Navigator Aircraft ABS Ltd. | ||||||||
2021-1, 2.77% due 11/15/464 | 248,698 | 247,750 | ||||||
| Sprite Ltd. | ||||||||
2021-1, 3.75% due 11/15/464 | 248,105 | 243,784 | ||||||
| Falcon Aerospace Ltd. | ||||||||
2017-1, 4.58% due 02/15/424 | 146,628 | 145,042 | ||||||
| Total Transport-Aircraft | 3,473,872 | |||||||
| Net Lease - 1.5% | ||||||||
| Store Master Funding I-VII | ||||||||
2016-1A, 3.96% due 10/20/464 | 1,126,188 | 1,164,131 | ||||||
| Capital Automotive REIT | ||||||||
2021-1A, 2.76% due 08/15/514 | 500,000 | 494,102 | ||||||
| CMFT Net Lease Master Issuer LLC | ||||||||
2021-1, 3.44% due 07/20/514 | 400,000 | 389,303 | ||||||
| CARS-DB4, LP | ||||||||
2020-1A, 3.81% due 02/15/504 | 249,271 | 264,792 | ||||||
| CF Hippolyta LLC | ||||||||
2020-1, 2.28% due 07/15/604 | 230,126 | 229,875 | ||||||
| Total Net Lease | 2,542,203 | |||||||
| Collateralized Debt Obligations - 1.5% | ||||||||
| Anchorage Credit Funding Ltd. | ||||||||
2021-13A, 2.88% due 07/27/394 | 1,000,000 | 1,000,144 | ||||||
| Anchorage Credit Funding 4 Ltd. | ||||||||
2021-4A, 2.72% due 04/27/394 | 1,000,000 | 1,000,060 | ||||||
| Anchorage Credit Funding 3 Ltd. | ||||||||
2021-3A, 2.87% due 01/28/394 | 500,000 | 499,975 | ||||||
| Total Collateralized Debt Obligations | 2,500,179 | |||||||
| Whole Business - 0.9% | ||||||||
| Arbys Funding LLC | ||||||||
2020-1A, 3.24% due 07/30/504 | 987,500 | 1,007,245 | ||||||
| ServiceMaster Funding LLC | ||||||||
2020-1, 3.34% due 01/30/514 | 248,125 | 249,697 | ||||||
| SERVPRO Master Issuer LLC | ||||||||
2021-1A, 2.39% due 04/25/514 | 248,750 | 244,433 | ||||||
| Taco Bell Funding LLC | ||||||||
2016-1A, 4.97% due 05/25/464 | 95,500 | 99,640 | ||||||
| Total Whole Business | 1,601,015 | |||||||
| Financial - 0.7% | ||||||||
| Oxford Finance Funding | ||||||||
2020-1A, 3.10% due 02/15/284 | 500,000 | 505,235 | ||||||
| Madison Avenue Secured Funding Trust Series 2021-1 | ||||||||
2021-1, (1 Month USD LIBOR + 1.50%, Rate Floor: 1.50%) due 01/17/234,8 | 450,000 | 450,000 | ||||||
| Nassau LLC | ||||||||
2019-1, 3.98% due 08/15/344 | 203,487 | 205,633 | ||||||
| KKR Core Holding Company LLC | ||||||||
4.00% due 08/12/31††† | 110,000 | 107,732 | ||||||
| Total Financial | 1,268,600 | |||||||
| Transport-Container - 0.1% | ||||||||
| Textainer Marine Containers VII Ltd. | ||||||||
2020-1A, 2.73% due 08/21/454 | 215,662 | 216,173 | ||||||
| Total Asset-Backed Securities | ||||||||
| (Cost $33,517,571) | 33,577,893 | |||||||
| COLLATERALIZED MORTGAGE OBLIGATIONS†† - 10.0% | ||||||||
| Residential Mortgage-Backed Securities - 6.0% | ||||||||
| Starwood Mortgage Residential Trust | ||||||||
2020-1, 2.41% (WAC) due 02/25/504,8 | 924,890 | 928,466 | ||||||
| Ameriquest Mortgage Securities Trust | ||||||||
2006-M3, 0.26% (1 Month USD LIBOR + 0.16%, Rate Floor: 0.16%) due 10/25/368 | 2,196,534 | 925,424 | ||||||
| JP Morgan Mortgage Acquisition Trust | ||||||||
2006-WMC4, 0.22% (1 Month USD LIBOR + 0.12%, Rate Floor: 0.12%) due 12/25/368 | 1,327,372 | 845,230 | ||||||
| FKRT | ||||||||
2.21% due 11/30/58†††,10 | 750,000 | 743,925 | ||||||
| Home Equity Loan Trust | ||||||||
2007-FRE1, 0.29% (1 Month USD LIBOR + 0.19%, Rate Floor: 0.19%) due 04/25/378 | 661,402 | 640,790 | ||||||
| CSMC Trust | ||||||||
2020-RPL5, 3.02% (WAC) due 08/25/604,8 | 593,385 | 596,636 | ||||||
| NovaStar Mortgage Funding Trust Series | ||||||||
2007-2, 0.30% (1 Month USD LIBOR + 0.20%, Rate Cap/Floor: 11.00%/0.20%) due 09/25/378 | 520,075 | 511,724 | ||||||
48 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| LSTAR Securities Investment Ltd. | ||||||||
2021-1, 1.90% (1 Month USD LIBOR + 1.80%, Rate Floor: 1.80%) due 02/01/268,10 | 269,231 | $ | 270,000 | |||||
2021-2, 1.80% (1 Month USD LIBOR + 1.70%, Rate Floor: 1.70%) due 03/02/268,10 | 233,544 | 234,224 | ||||||
| OSAT Trust | ||||||||
2021-RPL1, 2.12% due 05/25/654,11 | 508,626 | 503,937 | ||||||
| Master Asset Backed Securities Trust | ||||||||
2006-WMC4, 0.25% (1 Month USD LIBOR + 0.15%, Rate Floor: 0.15%) due 10/25/368 | 1,170,990 | 502,727 | ||||||
| Legacy Mortgage Asset Trust 2021-GS5 | ||||||||
2021-GS5, 2.25% due 07/25/674,11 | 500,000 | 498,484 | ||||||
| Credit Suisse Mortgage Capital Certificates | ||||||||
2021-RPL9, 2.44% (WAC) due 02/25/614,8 | 495,473 | 495,490 | ||||||
| ZH Trust | ||||||||
2021-1, 2.25% due 02/18/274 | 500,000 | 492,360 | ||||||
| PRPM LLC | ||||||||
2021-5, 1.79% due 06/25/264,11 | 467,613 | 463,094 | ||||||
| Legacy Mortgage Asset Trust | ||||||||
2021-GS3, 1.75% due 07/25/614,11 | 462,024 | 457,693 | ||||||
| HarborView Mortgage Loan Trust | ||||||||
2006-14, 0.25% (1 Month USD LIBOR + 0.15%, Rate Floor: 0.15%) due 01/25/478 | 401,553 | 379,648 | ||||||
| Wachovia Asset Securitization Issuance II LLC Trust | ||||||||
2007-HE2A, 0.23% (1 Month USD LIBOR + 0.13%, Rate Floor: 0.13%) due 07/25/374,8 | 381,819 | 365,048 | ||||||
| American Home Mortgage Investment Trust | ||||||||
2007-1, 2.08% due 05/25/4712 | 1,974,583 | 323,700 | ||||||
| Washington Mutual Mortgage Pass-Through Certificates WMALT Series Trust | ||||||||
2006-AR9, 0.92% (1 Year CMT Rate + 0.84%, Rate Floor: 0.84%) due 11/25/468 | 232,648 | 201,669 | ||||||
| UCFC Manufactured Housing Contract | ||||||||
| 1997-2, 7.38% due 10/15/28 | 54,479 | 54,993 | ||||||
| Morgan Stanley Re-REMIC Trust | ||||||||
2010-R5, 2.42% due 06/26/364 | 46,264 | 43,068 | ||||||
| Total Residential Mortgage-Backed Securities | 10,478,330 | |||||||
| Government Agency - 1.5% | ||||||||
| Fannie Mae | ||||||||
| 3.83% due 05/01/49 | 1,000,000 | 1,150,758 | ||||||
| 2.41% due 12/01/41 | 1,000,000 | 985,212 | ||||||
| Fannie Mae-Aces | ||||||||
1.48% (WAC) due 03/25/358,12 | 3,665,803 | 451,400 | ||||||
| Total Government Agency | 2,587,370 | |||||||
| Military Housing - 1.3% | ||||||||
| GMAC Commercial Mortgage Asset Corp. | ||||||||
2007-HCKM, 6.11% due 08/10/52†††,4 | 933,995 | 1,113,494 | ||||||
| Freddie Mac Military Housing Bonds Resecuritization Trust Certificates | ||||||||
2015-R1, 4.49% (WAC) due 11/25/55†††,4,8 | 930,158 | 1,095,879 | ||||||
| Total Military Housing | 2,209,373 | |||||||
| Commercial Mortgage Backed Securities - 1.2% | ||||||||
| GS Mortgage Securities Trust | ||||||||
2020-GC45, 0.67% (WAC) due 02/13/538,12 | 9,975,846 | 442,144 | ||||||
| BX Commercial Mortgage Trust | ||||||||
2021-VOLT, 2.11% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 09/15/364,8 | 350,000 | 346,910 | ||||||
| Life Mortgage Trust | ||||||||
2021-BMR, 2.46% (1 Month USD LIBOR + 2.35%, Rate Floor: 2.35%) due 03/15/384,8 | 250,000 | 249,360 | ||||||
| Extended Stay America Trust | ||||||||
2021-ESH, 2.36% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 07/15/384,8 | 248,706 | 248,706 | ||||||
| Wells Fargo Commercial Mortgage Trust | ||||||||
2016-NXS5, 1.43% (WAC) due 01/15/598,12 | 3,760,255 | 176,043 | ||||||
| 2015-NXS1, 2.63% due 05/15/48 | 61,601 | 61,578 | ||||||
| CFCRE Commercial Mortgage Trust | ||||||||
2016-C3, 0.99% (WAC) due 01/10/488,12 | 5,528,293 | 193,067 | ||||||
| Citigroup Commercial Mortgage Trust | ||||||||
2016-GC37, 1.69% (WAC) due 04/10/498,12 | 3,218,434 | 187,603 | ||||||
| COMM Mortgage Trust | ||||||||
2015-CR26, 0.92% (WAC) due 10/10/488,12 | 6,107,793 | 175,962 | ||||||
| Total Commercial Mortgage Backed Securities | 2,081,373 | |||||||
| Total Collateralized Mortgage Obligations | ||||||||
| (Cost $17,242,747) | 17,356,446 | |||||||
| U.S. GOVERNMENT SECURITIES†† - 9.9% | ||||||||
| U.S. Treasury Notes | ||||||||
1.38% due 11/15/3113 | 11,209,000 | 11,067,136 | ||||||
| U.S. Treasury Bonds | ||||||||
2.00% due 08/15/5113,16 | 4,500,000 | 4,587,187 | ||||||
| 1.88% due 11/15/51 | 1,000,000 | 996,875 | ||||||
| 1.88% due 02/15/51 | 600,000 | 593,625 | ||||||
| Total U.S. Government Securities | ||||||||
| (Cost $17,234,425) | 17,244,823 | |||||||
| SENIOR FLOATING RATE INTERESTS††,8 - 5.1% | ||||||||
| Consumer, Cyclical - 1.0% | ||||||||
| MB2 Dental Solutions LLC | ||||||||
7.00% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 01/29/27††† | 356,431 | 350,400 | ||||||
7.11% (3 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) due 01/29/27††† | 117,793 | 115,800 | ||||||
| BGIS (BIFM CA Buyer, Inc.) | ||||||||
| 3.86% (1 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 06/01/26 | 295,590 | 292,634 | ||||||
| Zephyr Bidco Ltd. | ||||||||
| 4.93% (1 Month GBP LIBOR + 4.75%, Rate Floor: 4.75%) due 07/23/25 | GBP | 200,000 | 266,977 | |||||
| Mavis Tire Express Services TopCo Corp. | ||||||||
| 4.75% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 05/04/28 | 199,500 | 199,500 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 49 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| CNT Holdings I Corp. | ||||||||
| 4.25% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 11/08/27 | 199,000 | $ | 198,964 | |||||
| Pacific Bells, LLC | ||||||||
| 5.00% (3 Month USD LIBOR + 4.50%, Rate Floor: 5.00%) due 11/10/28 | 148,454 | 147,711 | ||||||
| SP PF Buyer LLC | ||||||||
| 4.60% (1 Month USD LIBOR + 4.50%, Rate Floor: 4.50%) due 12/22/25 | 148,473 | 143,742 | ||||||
| New Trojan Parent, Inc. | ||||||||
| 3.75% (3 Month USD LIBOR + 3.25%, Rate Floor: 3.75%) due 01/06/28 | 99,500 | 99,023 | ||||||
| Total Consumer, Cyclical | 1,814,751 | |||||||
| Industrial - 1.0% | ||||||||
| Charter Next Generation, Inc. | ||||||||
| 4.50% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 12/01/27 | 396,000 | 396,495 | ||||||
| Mileage Plus Holdings LLC | ||||||||
| 6.25% (3 Month USD LIBOR + 5.25%, Rate Floor: 6.25%) due 06/21/27 | 250,000 | 263,282 | ||||||
| American Bath Group LLC | ||||||||
| 4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 11/23/27 | 258,067 | 256,648 | ||||||
| TK Elevator Midco GmbH | ||||||||
| 4.00% (6 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 07/30/27 | 198,007 | 197,980 | ||||||
| Air Canada | ||||||||
| 4.25% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 08/11/28 | 150,000 | 149,383 | ||||||
| Berry Global, Inc. | ||||||||
| 1.86% (2 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 07/01/26 | 134,041 | 133,069 | ||||||
| TransDigm, Inc. | ||||||||
| 2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 12/09/25 | 128,040 | 126,168 | ||||||
| Anchor Packaging LLC | ||||||||
| 4.10% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 07/18/26 | 98,734 | 97,500 | ||||||
| Service Logic Acquisition, Inc. | ||||||||
4.75% (2 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 10/29/27††† | 91,981 | 91,636 | ||||||
| Total Industrial | 1,712,161 | |||||||
| Financial - 0.9% | ||||||||
| Citadel Securities, LP | ||||||||
| 2.60% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 02/02/28 | 446,625 | 443,494 | ||||||
| Jane Street Group LLC | ||||||||
| 2.85% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 01/26/28 | 297,000 | 294,464 | ||||||
| Trans Union LLC | ||||||||
| due 12/01/28 | 200,000 | 199,350 | ||||||
| Higginbotham | ||||||||
6.25% (1 Month USD LIBOR + 5.50%, Rate Floor: 6.25%) due 11/25/26††† | 199,130 | 196,697 | ||||||
| HighTower Holding LLC | ||||||||
| 4.75% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 04/21/28 | 150,000 | 149,625 | ||||||
| USI, Inc. | ||||||||
| 3.47% (3 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 12/02/26 | 148,116 | 146,979 | ||||||
| Duff & Phelps | ||||||||
| 4.75% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 04/09/27 | 98,997 | 99,044 | ||||||
| AmWINS Group, Inc. | ||||||||
| 3.00% (1 Month USD LIBOR + 2.25%, Rate Floor: 3.00%) due 02/21/28 | 99,250 | 98,423 | ||||||
| Total Financial | 1,628,076 | |||||||
| Technology - 0.8% | ||||||||
| Datix Bidco Ltd. | ||||||||
4.96% (6 Month GBP LIBOR + 4.50%, Rate Floor: 4.50%) due 04/28/25††† | GBP | 300,000 | 403,788 | |||||
| Peraton Corp. | ||||||||
| 4.50% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 02/01/28 | 248,125 | 248,036 | ||||||
| Planview Parent, Inc. | ||||||||
| 4.75% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 12/17/27 | 247,500 | 247,396 | ||||||
| Nielsen Finance LLC | ||||||||
| 2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 10/04/23 | 210,946 | 210,741 | ||||||
| Apttus Corp. | ||||||||
| 5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 05/08/28 | 99,750 | 99,833 | ||||||
| Dun & Bradstreet | ||||||||
| 3.35% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 02/06/26 | 98,751 | 98,293 | ||||||
| Total Technology | 1,308,087 | |||||||
| Consumer, Non-cyclical - 0.7% | ||||||||
| Energizer Holdings, Inc. | ||||||||
| 2.75% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.75%) due 12/22/27 | 248,125 | 247,118 | ||||||
| Quirch Foods Holdings LLC | ||||||||
5.50% (1 Month USD LIBOR + 4.50%, Rate Floor: 5.50%) due 10/27/27††† | 199,496 | 199,995 | ||||||
| Southern Veterinary Partners LLC | ||||||||
| 5.00% (3 Month USD LIBOR + 4.00%, Rate Floor: 5.00%) due 10/05/27 | 148,966 | 149,152 | ||||||
| HAH Group Holding Co. LLC | ||||||||
| 6.00% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 10/29/27 | 149,342 | 148,969 | ||||||
| Mission Veterinary Partners | ||||||||
| 4.75% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 04/27/28 | 149,625 | 148,877 | ||||||
| Avantor Funding, Inc. | ||||||||
| 2.75% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.75%) due 11/08/27 | 99,002 | 98,878 | ||||||
| Sunshine Investments B.V. | ||||||||
| 2.91% (3 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 03/28/25 | 98,990 | 98,371 | ||||||
50 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Face | Value | |||||||
| Elanco Animal Health, Inc. | ||||||||
| 1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 08/02/27 | 96,340 | $ | 94,985 | |||||
| National Mentor Holdings, Inc. | ||||||||
| 4.50% ((1 Month USD LIBOR + 3.75%) and (3 Month USD LIBOR + 3.75%), Rate Floor: 4.50%)due 03/02/28 | 95,083 | 93,948 | ||||||
| Total Consumer, Non-cyclical | 1,280,293 | |||||||
| Utilities - 0.2% | ||||||||
| Hamilton Projects Acquiror LLC | ||||||||
| 6.25% (3 Month USD LIBOR + 4.50%, Rate Floor: 5.50%) due 06/17/27 | 386,090 | 385,527 | ||||||
| Basic Materials - 0.2% | ||||||||
| Illuminate Buyer LLC | ||||||||
| 3.60% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 06/30/27 | 235,600 | 233,965 | ||||||
| GrafTech Finance, Inc. | ||||||||
| 3.50% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.50%) due 02/12/25 | 82,355 | 82,251 | ||||||
| Total Basic Materials | 316,216 | |||||||
| Communications - 0.2% | ||||||||
| Syndigo LLC | ||||||||
5.25% (6 Month USD LIBOR + 4.50%, Rate Floor: 5.25%) due 12/15/27††† | 198,500 | 198,004 | ||||||
| Authentic Brands | ||||||||
due 12/10/28††† | 53,731 | 53,462 | ||||||
| Total Communications | 251,466 | |||||||
| Energy - 0.1% | ||||||||
| ITT Holdings LLC | ||||||||
| 3.25% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.25%) due 07/10/28 | 97,755 | 97,169 | ||||||
| Total Senior Floating Rate Interests | ||||||||
| (Cost $8,757,657) | 8,793,746 | |||||||
| FEDERAL AGENCY BONDS†† - 3.6% | ||||||||
| Tennessee Valley Authority | ||||||||
| 4.25% due 09/15/65 | 1,000,000 | 1,459,231 | ||||||
| 5.38% due 04/01/56 | 750,000 | 1,234,350 | ||||||
| Fannie Mae Principal Strips | ||||||||
due 07/15/3714,15 | 2,400,000 | 1,703,208 | ||||||
| Freddie Mac Principal Strips | ||||||||
due 07/15/3214 | 1,950,000 | 1,599,704 | ||||||
| Tennessee Valley Authority Principal Strips | ||||||||
due 01/15/4814,15 | 500,000 | 251,950 | ||||||
| Freddie Mac | ||||||||
due 11/15/3814 | 100,000 | 67,882 | ||||||
| Total Federal Agency Bonds | ||||||||
| (Cost $5,440,270) | 6,316,325 | |||||||
| MUNICIPAL BONDS†† - 1.4% | ||||||||
| New York - 0.5% | ||||||||
| Port Authority of New York & New Jersey Revenue Bonds | ||||||||
| 3.14% due 02/15/51 | 500,000 | 497,284 | ||||||
| Westchester County Local Development Corp. Revenue Bonds | ||||||||
| 3.85% due 11/01/50 | 300,000 | 317,946 | ||||||
| Total New York | 815,230 | |||||||
| California - 0.3% | ||||||||
| Cypress School District General Obligation Unlimited | ||||||||
due 08/01/4814 | 1,000,000 | 428,543 | ||||||
| Newport Mesa Unified School District General Obligation Unlimited | ||||||||
due 08/01/4614 | 700,000 | 297,507 | ||||||
| Total California | 726,050 | |||||||
| Texas - 0.3% | ||||||||
| City of San Antonio Texas Electric & Gas Systems Revenue Revenue Bonds | ||||||||
| 2.91% due 02/01/48 | 500,000 | 503,010 | ||||||
| Illinois - 0.3% | ||||||||
| State of Illinois General Obligation Unlimited | ||||||||
| 5.65% due 12/01/38 | 400,000 | 483,920 | ||||||
| Total Municipal Bonds | ||||||||
| (Cost $2,298,060) | 2,528,210 | |||||||
Notional | ||||||||
| OTC OPTIONS PURCHASED†† - 0.1% | ||||||||
| Call Options on: | ||||||||
| Interest Rate Options | ||||||||
| Bank of America, N.A. 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.40 | 40,900,000 | 79,346 | ||||||
| Morgan Stanley Capital Services LLC 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.40 | 16,900,000 | 32,786 | ||||||
| Goldman Sachs International 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.61 | 14,200,000 | 15,478 | ||||||
| Bank of America, N.A. 2Y-10 CMS CAP Expiring July 2022 with strike price of $0.61 | 4,500,000 | 4,905 | ||||||
| Total OTC Options Purchased | ||||||||
| (Cost $162,795) | 132,515 | |||||||
| Total Investments - 101.4% | ||||||||
| (Cost $172,232,325) | $ | 176,554,598 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 51 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
| Contracts | Value | |||||||
| LISTED OPTIONS WRITTEN† - 0.0% | ||||||||
| Call Options on: | ||||||||
| Equity Options | ||||||||
| Figs, Inc. Expiring December 2022 with strike price of $55.00 (Notional Value $2,756) | 1 | $ | (175 | ) | ||||
| Figs, Inc. Expiring December 2022 with strike price of $50.00 (Notional Value $5,512) | 2 | (445 | ) | |||||
| Total Listed Options Written | ||||||||
| (Premiums received $3,216) | (620 | ) | ||||||
| Other Assets & Liabilities, net - (1.4)% | (2,351,307 | ) | ||||||
| Total Net Assets - 100.0% | $ | 174,202,671 | ||||||
Centrally Cleared Interest Rate Swap Agreements†† | ||||||||||||||||||||||||||||
Counterparty | Exchange | Floating | Floating | Fixed | Payment | Maturity | Notional | Value | Upfront | Unrealized | ||||||||||||||||||
BofA Securities, Inc. | CME | Pay | Federal Funds Rate | 0.14% | Annually | 05/28/25 | $ | 5,000,000 | $ | (146,585 | ) | $ | 219 | $ | (146,804 | ) | ||||||||||||
Forward Foreign Currency Exchange Contracts†† | ||||||||||||||||||||||||
Counterparty | Currency | Type | Quantity | Contract | Settlement | Unrealized | ||||||||||||||||||
Goldman Sachs International | ILS | Buy | 1,751,300 | 477,073 USD | 01/31/22 | $ | 88,299 | |||||||||||||||||
JPMorgan Chase Bank, N.A. | GBP | Sell | 499,000 | 660,025 USD | 01/14/22 | (14,788 | ) | |||||||||||||||||
Bank of America, N.A. | ILS | Sell | 643,550 | 190,795 USD | 01/31/22 | (16,963 | ) | |||||||||||||||||
Goldman Sachs International | ILS | Sell | 1,107,750 | 327,439 USD | 01/31/22 | (30,176 | ) | |||||||||||||||||
| $ | 26,372 | |||||||||||||||||||||||
~ | The face amount is denominated in U.S. dollars unless otherwise indicated. |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | 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 | Special Purpose Acquisition Company (SPAC). |
2 | All or a portion of this security is pledged as collateral for open call options written contracts at December 31, 2021. |
3 | Security has a fixed rate coupon which will convert to a floating or variable rate coupon on a future date. |
4 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $75,428,015 (cost $74,718,696), or 43.3% of total net assets. |
5 | Affiliated issuer. |
6 | Rate indicated is the 7-day yield as of December 31, 2021. |
7 | Perpetual maturity. |
8 | Variable rate security. Rate indicated is the rate effective at December 31, 2021. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
9 | Security has no stated coupon. However, it is expected to receive residual cash flow payments on defined deal dates. |
10 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) illiquid and restricted securities is $1,248,269 (cost $1,252,767), or 0.7% of total net assets — See Note 9. |
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
11 | Security is a step up/down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity. Rate indicated is the rate at December 31, 2021. See table below for additional step information for each security. |
12 | Security is an interest-only strip. |
13 | All or a portion of this security has been physically segregated or earmarked in connection with reverse repurchase agreements. At December 31, 2021, the total market value of segregated or earmarked security was $15,691,418 — See Note 11. |
14 | Zero coupon rate security. |
15 | Security is a principal-only strip. |
16 | All or a portion of this security is pledged as interest rate swap collateral at December 31,2021. |
BofA — Bank of America | |
CME — Chicago Mercantile Exchange | |
CMS — Constant Maturity Swap | |
CMT — Constant Maturity Treasury | |
GBP — British Pound | |
ILS — Israeli New Shekel | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
REMIC — Real Estate Mortgage Investment Conduit | |
REIT — Real Estate Investment Trust | |
SARL — Société à Responsabilité Limitée | |
WAC — Weighted Average Coupon | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,274,508 | $ | — | $ | — | $ | 2,274,508 | ||||||||
Preferred Stocks | — | 8,699,904 | — | 8,699,904 | ||||||||||||
Warrants | 27,404 | — | — | 27,404 | ||||||||||||
Mutual Funds | 6,967,697 | — | — | 6,967,697 | ||||||||||||
Money Market Fund | 2,275,205 | — | — | 2,275,205 | ||||||||||||
Corporate Bonds | — | 67,807,116 | 2,552,806 | 70,359,922 | ||||||||||||
Asset-Backed Securities | — | 33,220,015 | 357,878 | 33,577,893 | ||||||||||||
Collateralized Mortgage Obligations | — | 14,403,148 | 2,953,298 | 17,356,446 | ||||||||||||
U.S. Government Securities | — | 17,244,823 | — | 17,244,823 | ||||||||||||
Senior Floating Rate Interests | — | 7,183,964 | 1,609,782 | 8,793,746 | ||||||||||||
Federal Agency Bonds | — | 6,316,325 | — | 6,316,325 | ||||||||||||
Municipal Bonds | — | 2,528,210 | — | 2,528,210 | ||||||||||||
Options Purchased | — | 132,515 | — | 132,515 | ||||||||||||
Forward Foreign Currency Exchange Contracts** | — | 88,299 | — | 88,299 | ||||||||||||
Total Assets | $ | 11,544,814 | $ | 157,624,319 | $ | 7,473,764 | $ | 176,642,897 | ||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Options Written | $ | 620 | $ | — | $ | — | $ | 620 | ||||||||
Interest Rate Swap Agreements** | — | 146,804 | — | 146,804 | ||||||||||||
Forward Foreign Currency Exchange Contracts** | — | 61,927 | — | 61,927 | ||||||||||||
Unfunded Loan Commitments (Note 8) | — | — | 4,803 | 4,803 | ||||||||||||
Total Liabilities | $ | 620 | $ | 208,731 | $ | 4,803 | $ | 214,154 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 53 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of the period end, reverse repurchase agreements of $12,707,001 are categorized as Level 2 within the disclosure hierarchy — See Note 4.
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:
Category | Ending Balance at | Valuation Technique | Unobservable Inputs | Input Range | Weighted Average* | |||||||||||||||
Assets: | ||||||||||||||||||||
Asset-Backed Securities | $ | 250,146 | Option Adjusted Spread off third party pricing | Trade Price | — | — | ||||||||||||||
Asset-Backed Securities | 107,732 | Yield Analysis | Yield | 4.1% | — | |||||||||||||||
Collateralized Mortgage Obligations | 1,113,494 | Option Adjusted Spread off the prior month end broker quote | Broker Quote | — | — | |||||||||||||||
Collateralized Mortgage Obligations | 1,095,879 | Option Adjusted Spread off third party pricing | Vendor Price | — | — | |||||||||||||||
Collateralized Mortgage Obligations | 743,925 | Model Price | Market Comparable Yields | 2.6% | — | |||||||||||||||
Corporate Bonds | 1,816,714 | Option Adjusted Spread off the prior month end broker quote | Broker Quote | — | — | |||||||||||||||
Corporate Bonds | 736,092 | Third Party Pricing | Vendor Price | — | — | |||||||||||||||
Senior Floating Rate Interests | 1,066,685 | Yield Analysis | Yield | 4.9%-7.3% | 6.3% | |||||||||||||||
Senior Floating Rate Interests | 543,097 | Third Party Pricing | Broker Quote | — | — | |||||||||||||||
Total Assets | $ | 7,473,764 |
|
|
|
| ||||||||||||||
Liabilities: | ||||||||||||||||||||
Unfunded Loan Commitments | $ | 4,803 | Model Price | Purchase Price | — | — | ||||||||||||||
* | Inputs are weighted by the fair value of the instruments. |
Significant changes in a quote or yield would generally result in significant changes in the fair value of the security.
The Fund’s fair valuation leveling guidelines classify a single daily broker quote, yield, market comparable yields or a vendor price based on a single daily or monthly broker quote, as Level 3, if such a quote or price cannot be supported with other available market information.
Transfer between Level 2 and Level 3 may occur as markets fluctuate and/or the availability of data used in an investment’s valuation changes. For the year ended December 31, 2021, the Fund had securities with a total value of $2,652,405 transfer into Level 3 from Level 2 due to a lack of observable inputs and had securities with a total value of $130,993 transfer out of Level 3 into Level 2 due to the availability of current and reliable market-based data provided by a third-party pricing service which utilizes significant observable inputs.
54 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2021:
Assets | Liabilities | |||||||||||||||||||||||
| Asset-Backed | Collateralized | Corporate | Senior Floating | Total Assets | Unfunded Loan | ||||||||||||||||||
Beginning Balance | $ | 250,000 | $ | — | $ | 2,044,938 | $ | 763,890 | $ | 3,058,828 | $ | (1,282 | ) | |||||||||||
Purchases/(Receipts) | 360,000 | 749,993 | 499,999 | 1,170,734 | 2,780,726 | (5,674 | ) | |||||||||||||||||
(Sales, maturities and paydowns)/Fundings | (250,000 | ) | — | — | (645,907 | ) | (895,907 | ) | 1,245 | |||||||||||||||
Amortization of premiums/discounts | — | — | — | 29,424 | 29,424 | 1,242 | ||||||||||||||||||
Total realized gains (losses) included in earnings | — | — | — | 654 | 654 | 30 | ||||||||||||||||||
Total change in unrealized appreciation (depreciation) included in earnings | (2,122 | ) | (6,068 | ) | 7,869 | (21,052 | ) | (21,373 | ) | (364 | ) | |||||||||||||
Transfers into Level 3 | — | 2,209,373 | — | 443,032 | 2,652,405 | — | ||||||||||||||||||
Transfers out of Level 3 | — | — | — | (130,993 | ) | (130,993 | ) | — | ||||||||||||||||
Ending Balance | $ | 357,878 | $ | 2,953,298 | $ | 2,552,806 | $ | 1,609,782 | $ | 7,473,764 | $ | (4,803 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) for investments in Level 3 securities still held at September 30, 2021 | $ | (2,122 | ) | $ | (6,068 | ) | $ | 7,869 | $ | (1,349 | ) | $ | (1,670 | ) | $ | (329 | ) | |||||||
Step Coupon Bonds
The following table discloses additional information related to step coupon bonds held by the Fund. Certain securities are subject to multiple rate changes prior to maturity. For those securities, a range of rates and corresponding dates have been provided. Rates for all step coupon bonds held by the Fund are scheduled to increase, none are scheduled to decrease.
Name | Coupon Rate at | Next Rate Reset Date | Future Reset Rate(s) | Future Reset Date(s) | ||||||||||||
Legacy Mortgage Asset Trust 2021-GS3, 1.75% due 07/25/61 | 4.75 | % | 05/26/24 | 5.75 | % | 05/26/25 | ||||||||||
Legacy Mortgage Asset Trust 2021-GS5 2021-GS5, 2.25% due 07/25/67 | 5.25 | % | 11/26/24 | 6.25 | % | 11/26/25 | ||||||||||
OSAT Trust 2021-RPL1, 2.12% due 05/25/65 | 5.12 | % | 06/26/24 | 6.12 | % | 06/26/25 | ||||||||||
PRPM LLC 2021-5, 1.79% due 06/25/26 | 4.79 | % | 06/26/24 | 5.79 | % | 06/26/25 | ||||||||||
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 55 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES E (TOTAL RETURN BOND SERIES) |
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | Capital Gain | |||||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 5,097,370 | $ | 4,240 | $ | (5,111,985 | ) | $ | 56,945 | $ | (46,570 | ) | $ | — | — | $ | 4,735 | $ | — | |||||||||||||||||
Guggenheim Total Return Bond Fund — R6-Class | 6,977,737 | 260,090 | — | — | (270,130 | ) | 6,967,697 | 243,796 | 195,654 | 64,953 | ||||||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 2,084,004 | 933 | (2,087,025 | ) | 9,224 | (7,136 | ) | — | — | 1,043 | — | |||||||||||||||||||||||||
| $ | 14,159,111 | $ | 265,263 | $ | (7,199,010 | ) | $ | 66,169 | $ | (323,836 | ) | $ | 6,967,697 | $ | 201,432 | $ | 64,953 | |||||||||||||||||||
56 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES E (TOTAL RETURN BOND SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $165,740,817) | $ | 169,586,901 | ||
Investments in affiliated issuers, at value (cost $6,491,508) | 6,967,697 | |||
Cash | 1,066,007 | |||
Unamortized upfront premiums paid on interest rate swap agreements | 219 | |||
Unrealized appreciation on forward foreign currency exchange contracts | 88,299 | |||
Prepaid expenses | 5,462 | |||
Receivables: | ||||
Securities sold | 9,907,213 | |||
Interest | 886,742 | |||
Fund shares sold | 74,427 | |||
Dividends | 17,257 | |||
Variation margin on interest rate swap agreements | 1,925 | |||
Foreign tax reclaims | 1,518 | |||
Total assets | 188,603,667 | |||
Liabilities: | ||||
Unfunded loan commitments, at value (Note 8) (commitment fees received $4,480) | 4,803 | |||
Reverse repurchase agreements | 12,707,001 | |||
Options written, at value (premiums received $3,216) | 620 | |||
Segregated cash due to broker | 154,910 | |||
Unrealized depreciation on forward foreign currency exchange contracts | 61,927 | |||
Payable for: | ||||
Securities purchased | 1,258,192 | |||
Management fees | 50,188 | |||
Distribution and service fees | 36,677 | |||
Fund shares redeemed | 18,625 | |||
Fund accounting/administration fees | 12,712 | |||
Trustees’ fees* | 4,088 | |||
Transfer agent/maintenance fees | 2,195 | |||
Miscellaneous | 89,058 | |||
Total liabilities | 14,400,996 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 174,202,671 | ||
Net assets consist of: | ||||
Paid in capital | $ | 166,287,334 | ||
Total distributable earnings (loss) | 7,915,337 | |||
Net assets | $ | 174,202,671 | ||
Capital shares outstanding | 10,111,752 | |||
Net asset value per share | $ | 17.23 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 176,484 | ||
Dividends from securities of affiliated issuers | 201,432 | |||
Interest from securities of unaffiliated issuers (net of foreign withholding tax of $1,469) | 5,257,982 | |||
Total investment income | 5,635,898 | |||
Expenses: | ||||
Management fees | 666,651 | |||
Distribution and service fees | 427,340 | |||
Transfer agent/maintenance fees | 25,342 | |||
Fund accounting/administration fees | 119,741 | |||
Professional fees | 105,006 | |||
Custodian fees | 40,759 | |||
Trustees’ fees* | 19,820 | |||
Line of credit fees | 14,655 | |||
Interest expense | 173 | |||
Miscellaneous | 28,535 | |||
Total expenses | 1,448,022 | |||
Less: | ||||
Expenses waived by Adviser | (107,580 | ) | ||
Earnings credits applied | (336 | ) | ||
Total waived expenses | (107,916 | ) | ||
Net expenses | 1,340,106 | |||
Net investment income | 4,295,792 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 2,196,679 | |||
Investments in affiliated issuers | 66,169 | |||
Distributions received from affiliated investment companies | 64,953 | |||
Investments sold short | (19,676 | ) | ||
Swap agreements | (505,716 | ) | ||
Options purchased | 169,266 | |||
Options written | 74,950 | |||
Forward foreign currency exchange contracts | 598,296 | |||
Foreign currency transactions | 185 | |||
Net realized gain | 2,645,106 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (6,334,744 | ) | ||
Investments in affiliated issuers | (323,836 | ) | ||
Swap agreements | (142,645 | ) | ||
Options purchased | (375,189 | ) | ||
Options written | 2,596 | |||
Forward foreign currency exchange contracts | (581,829 | ) | ||
Foreign currency translations | 37 | |||
Net change in unrealized appreciation (depreciation) | (7,755,610 | ) | ||
Net realized and unrealized loss | (5,110,504 | ) | ||
Net decrease in net assets resulting from operations | $ | (814,712 | ) | |
* | 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 | 57 |
SERIES E (TOTAL RETURN BOND SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 4,295,792 | $ | 3,308,697 | ||||
Net realized gain on investments | 2,645,106 | 5,727,546 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (7,755,610 | ) | 9,930,125 | |||||
Net increase (decrease) in net assets resulting from operations | (814,712 | ) | 18,966,368 | |||||
Distributions to shareholders | (7,668,530 | ) | (2,739,180 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 44,222,719 | 76,319,538 | ||||||
Distributions reinvested | 7,668,530 | 2,739,180 | ||||||
Cost of shares redeemed | (46,308,753 | ) | (46,391,432 | ) | ||||
Net increase from capital share transactions | 5,582,496 | 32,667,286 | ||||||
Net increase (decrease) in net assets | (2,900,746 | ) | 48,894,474 | |||||
Net assets: | ||||||||
Beginning of year | 177,103,417 | 128,208,943 | ||||||
End of year | $ | 174,202,671 | $ | 177,103,417 | ||||
Capital share activity: | ||||||||
Shares sold | 2,514,664 | 4,405,043 | ||||||
Shares issued from reinvestment of distributions | 441,990 | 156,346 | ||||||
Shares redeemed | (2,633,591 | ) | (2,723,087 | ) | ||||
Net increase in shares | 323,063 | 1,838,302 | ||||||
58 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES E (TOTAL RETURN BOND SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 18.09 | $ | 16.13 | $ | 15.85 | $ | 16.40 | $ | 16.05 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .44 | .39 | .38 | .46 | .61 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | (.51 | ) | 1.88 | .34 | (.29 | ) | .45 | |||||||||||||
Total from investment operations | (.07 | ) | 2.27 | .72 | .17 | 1.06 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.30 | ) | (.31 | ) | (.44 | ) | (.72 | ) | (.71 | ) | ||||||||||
Net realized gains | (.49 | ) | — | — | — | — | ||||||||||||||
Total distributions | (.79 | ) | (.31 | ) | (.44 | ) | (.72 | ) | (.71 | ) | ||||||||||
Net asset value, end of period | $ | 17.23 | $ | 18.09 | $ | 16.13 | $ | 15.85 | $ | 16.40 | ||||||||||
| ||||||||||||||||||||
Total Returnb | (0.43 | %) | 14.21 | % | 4.49 | % | 1.14 | % | 6.72 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 174,203 | $ | 177,103 | $ | 128,209 | $ | 122,850 | $ | 130,499 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.51 | % | 2.27 | % | 2.33 | % | 2.85 | % | 3.76 | % | ||||||||||
Total expensesc | 0.85 | % | 0.88 | % | 0.94 | % | 0.92 | % | 0.99 | % | ||||||||||
Net expensesd,e,f | 0.78 | % | 0.78 | % | 0.78 | % | 0.78 | % | 0.81 | % | ||||||||||
Portfolio turnover rate | 84 | % | 123 | % | 54 | % | 30 | % | 76 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.00%* | — |
* | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.78% | 0.77% | 0.77% | 0.77% | 0.77% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 59 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series F (Floating Rate Strategies Series) 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 Chief Investment Officer, Fixed Income; and Thomas J. Hauser, Senior Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses the market environment and Series performance for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series F (Floating Rate Strategies Series) returned 2.50%, compared with 5.40% for its benchmark, the Credit Suisse Leveraged Loan Index.
Investment Approach
The Fund seeks to provide a high level of current income while maximizing total return. The Fund seeks to exploit the broader universe of floating rate securities, including bank loans, asset-backed securities, collateralized loan obligations, and mortgage-backed securities and offers access to Guggenheim’s unique fixed income process and philosophy founded on the principles of behavioral finance. The Fund may complement traditional fixed-income allocation, providing diversification (though, diversification neither assures a profit nor eliminates the risk of experiencing investment losses) as well as the potential to maximize income in various rate environments
Performance Review and Positioning
Leveraged credit experienced its seventh straight quarter of positive performance to end 2021. The more muted performance, to some extent, is to be expected at this stage of the recovery; however, the market was also impacted by the continued (direct and indirect) effects of the COVID-19 pandemic as well as volatility around possible Fed tightening. The Credit Suisse Leveraged Loan Index returned 5.40%, while the Bloomberg U.S. Corporate High Yield Index returned 5.28%. The high yield and bank loan markets have produced similar levels of total returns, though volatility has been much lower in the loan market.
Leveraged credit industry returns for the fourth quarter of 2021 continued to be positive across the board. However, returns were in a much narrower band than the earlier part of the year. Similarly, bank loan returns from a ratings perspective were also in a much narrower band. For the quarter, BB-rated names returned 0.64%, B-rated names returned 0.85%, split-B-rated names returned 0.86%, and CCC-rated names gave back some of the strong performance during the first 9 months with returns of -0.21%.
Loan volume continued to be robust during the fourth quarter at $127 billion driven, by mergers & acquisitions and leveraged buy out activity, capping off a record year of issuance at $615 billion. Primary yields to maturity remained steady overall, with B rated instuments still pricing in the 4.5-5% area. Dividend volume remained high at 12% of primary issuance at $15 billion. Unsurprisingly, given strong issuance levels, we have continued to see loans take market share from high yield.
Loan market demand continued to be extremely robust during the fourth quarter. Collateralized loan obligations (“CLOs”) capped off a record year of new issuance, at $186 billion, with a record quarterly issuance at $56 billion. CLO issuance continued to benefit from strong arbitrage economics and some pull-forward demand ahead of the transition from LIBOR to the Secured Overnight Financing Rate. Retail investor demand tends to be correlated with rate expectations; mutual fund flows continued their strong pace with $7.9 billion of inflows during the fourth quarter, which were effectively flat quarter over quarter and brought the full-year total to $33.8 billion.
Despite pressure on earnings from wage inflation and input costs, fundamentals remain very strong across the loan market. Reviewing performance from public filing constituents in the S&P Leveraged Loan Index, third quarter of 2021 (the most recent filing period) year-over-year revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) grew +18% and +13%, respectively. Total leverage is now below pre-pandemic levels, and interest coverage is at record highs of 5.8x, well above its historical average, providing a cash flow buffer in the event of rising rates. We continue to see upgrades with a ~1.7x upgrade to downgrade ratio in the quarter coupled with low distress and default rates as well as minimal near-term maturities. Full-year 2021 ended with a trailing twelve-month default rate of 0.3%, which was the lowest level since 2012. We continue to carefully assess the impacts of rising input prices, prioritizing businesses with pass-through agreements and pricing power.
60 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
The primary contributor to underperformance was the Fund’s conservative positioning. The Fund is overweight BB’s and underweight CCC’s, both of which were a drag on performance during the first nine months of 2021. This reversed slightly during the fourth quarter, but not enough to offset the Fund’s conservative positioning within individual credits. For the year, the three worst-performing names detracted 19 basis points from performance, but there were no other names that had more than one basis point of negative contribution. Conversely, because of its conservative positioning there were no significant individual positive performers in the Fund.
The bank loan market is currently benefitting from robust demand technicals, supportive fundamentals and a growing economy, mitigated somewhat by macroeconomic concerns and declining support from policymakers. We expect mostly coupon-like returns for 2022 punctuated by periods of volatility given macroeconomic dynamics (supply chain / inflation / labor constraints), geopolitical risks, declining policy support, and potential pandemic related issues.
In terms of fundamentals, revenue and EBITDA growth trends can be expected to decline from current levels but remain positive for most of FY 2022. Total leverage should stabilize in the 5x area (similar to 2017-2019), while interest coverage, given rising rates, may decline moderately but remain above the historical average. Given the mostly favorable credit environment, low level of distress and easy capital markets access, we expect defaults to remain low, but trend higher in 2022. Currently, we are expecting the U.S. Federal Reserve (Fed) to hike four times in 2022; however, we expect debt service to remain manageable given the trajectory of corporate earnings and the low cost of capital for borrowers.
We remain focused on the new issue market as the best source of relative value. While CCC spreads widened in the fourth quarter, we continue to remain cautious on the lower end of the credit curve given tight levels; our focus remains on B-rated issuers. Given the quality and positioning of the current portfolios, we are well suited to take advantage of any volatility should it arise in the market.
Even with spreads at historically tight levels, history has shown that they can remain at compressed levels and even tighten further during periods of economic expansion. We believe floating rate loans continue to offer compelling relative value, with supportive technicals and fundamentals as well as a buffer against rising interest rates.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 61 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES)
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.
Inception Date: April 24, 2013 |
Ten Largest Holdings (% of Total Net Assets) | |
SPDR Blackstone Senior Loan ETF | 2.2% |
Energizer Holdings, Inc., 2.75% | 1.1% |
Emerald TopCo, Inc. (Press Ganey), 3.63% | 1.0% |
APi Group DE, Inc., 2.75% | 1.0% |
Ascend Learning LLC, 4.00% | 1.0% |
Quikrete Holdings, Inc. | 1.0% |
Electron BidCo, Inc., 3.75% | 1.0% |
Informatica LLC, 2.88% | 1.0% |
Catalent Pharma Solutions, Inc., 2.50% | 1.0% |
AqGen Island Holdings, Inc., 4.00% | 1.0% |
Top Ten Total | 11.3% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
62 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | Since |
Series F (Floating Rate Strategies Series) | 2.50% | 2.51% | 3.06% |
Credit Suisse Leveraged Loan Index | 5.40% | 4.32% | 4.14% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
BBB | 14.4% |
BB | 34.5% |
B | 40.9% |
CCC | 0.2% |
Other Instruments | 10.0% |
Total Investments | 100.0% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is 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 ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 63 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Shares | Value | |||||||
COMMON STOCKS††† - 0.0% | ||||||||
| Industrial - 0.0% | ||||||||
| BP Holdco LLC* | 11,609 | $ | 8,184 | |||||
| Vector Phoenix Holdings, LP* | 11,609 | 3,193 | ||||||
| API Heat Transfer Parent LLC* | 292,731 | 29 | ||||||
| Total Industrial | 11,406 | |||||||
| Total Common Stocks | ||||||||
| (Cost $88,565) | 11,406 | |||||||
| PREFERRED STOCKS††† - 0.0% | ||||||||
| Industrial - 0.0% | ||||||||
| API Heat Transfer Intermediate* | 36 | — | ||||||
| Total Preferred Stocks | ||||||||
| (Cost $28,949) | — | |||||||
| EXCHANGE-TRADED FUNDS† - 2.2% | ||||||||
| SPDR Blackstone Senior Loan ETF | 24,000 | 1,095,120 | ||||||
| Total Exchange-Traded Funds | ||||||||
| (Cost $1,099,920) | 1,095,120 | |||||||
| MONEY MARKET FUND† - 8.5% | ||||||||
Federated Hermes U.S. Treasury Cash Reserves Fund — Institutional Shares, 0.01%2 | 4,319,254 | 4,319,254 | ||||||
| Total Money Market Fund | ||||||||
| (Cost $4,319,254) | 4,319,254 | |||||||
Face | ||||||||
| SENIOR FLOATING RATE INTERESTS††,4 - 95.4% | ||||||||
| Industrial - 23.1% | ||||||||
| APi Group DE, Inc. | ||||||||
| due 10/07/28 | $ | 500,000 | 499,285 | |||||
| Quikrete Holdings, Inc. | ||||||||
| due 05/22/28 | 500,000 | 498,610 | ||||||
| Beacon Roofing Supply, Inc. | ||||||||
| 2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 05/19/28 | 497,500 | 494,266 | ||||||
| Reynolds Group Holdings, Inc. | ||||||||
| 3.35% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 02/05/26 | 495,000 | 491,753 | ||||||
| Gardner Denver, Inc. | ||||||||
| 1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 03/01/27 | 491,250 | 485,448 | ||||||
| Brown Group Holding LLC | ||||||||
| 3.00% (3 Month USD LIBOR + 2.50%, Rate Floor: 3.00%) due 06/07/28 | 485,574 | 484,360 | ||||||
| Arcline FM Holdings LLC | ||||||||
| due 06/23/28 | 483,788 | 482,578 | ||||||
| TransDigm, Inc. | ||||||||
| 2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 05/30/25 | 488,756 | 481,645 | ||||||
Atlantic Aviation | ||||||||
3.50% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.50%) due 09/22/28 | 450,000 | 448,124 | ||||||
Core & Main, LP | ||||||||
2.60% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 07/27/28 | 448,875 | 445,697 | ||||||
Park River Holdings, Inc. | ||||||||
4.00% (3 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 12/28/27 | 450,000 | 445,428 | ||||||
Gates Global LLC | ||||||||
3.25% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.25%) due 03/31/27 | 446,617 | 445,379 | ||||||
Cushman & Wakefield US Borrower LLC | ||||||||
2.85% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 08/21/25 | 444,347 | 440,934 | ||||||
American Builders & Contractors Supply Co., Inc. | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 01/15/27 | 439,875 | 436,576 | ||||||
Filtration Group Corp. | ||||||||
3.10% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 03/31/25 | 434,025 | 429,819 | ||||||
Genesee & Wyoming, Inc. | ||||||||
2.22% (3 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 12/30/26 | 393,985 | 391,294 | ||||||
LTI Holdings, Inc. | ||||||||
3.60% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 09/08/25 | 390,949 | 385,792 | ||||||
Berry Global, Inc. | ||||||||
1.86% (2 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 07/01/26 | 372,879 | 370,176 | ||||||
WP CPP Holdings LLC | ||||||||
4.75% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.75%) due 04/30/25 | 374,366 | 357,830 | ||||||
Engineered Machinery Holdings, Inc. | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 05/19/28 | 350,000 | 348,632 | ||||||
Standard Industries, Inc. | ||||||||
3.00% (3 Month USD LIBOR + 2.50%, Rate Floor: 3.00%) due 09/22/28 | 320,125 | 320,259 | ||||||
Charter Next Generation, Inc. | ||||||||
4.50% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 12/01/27 | 282,324 | 282,677 | ||||||
BWAY Holding Co. | ||||||||
3.35% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 04/03/24 | 253,442 | 249,821 | ||||||
DG Investment Intermediate Holdings 2, Inc. | ||||||||
4.25% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 03/31/28 | 199,507 | 199,257 | ||||||
American Bath Group LLC | ||||||||
4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 11/23/27 | 199,511 | 198,413 | ||||||
TricorBraun Holdings, Inc. | ||||||||
3.75% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.75%) due 03/03/28 | 199,060 | 197,456 |
64 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
Titan Acquisition Ltd. (Husky) | ||||||||
3.35% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 03/28/25 | $ | 192,499 | $ | 189,077 | ||||
Pro Mach Group, Inc. | ||||||||
5.00% (3 Month USD LIBOR + 4.00%, Rate Floor: 5.00%) due 08/31/28 | 177,654 | 178,098 | ||||||
Mileage Plus Holdings LLC | ||||||||
6.25% (3 Month USD LIBOR + 5.25%, Rate Floor: 6.25%) due 06/21/27 | 150,500 | 158,496 | ||||||
PECF USS Intermediate Holding III Corp. | ||||||||
due 11/04/28 | 155,000 | 155,056 | ||||||
Berlin Packaging LLC | ||||||||
4.25% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 03/13/28 | 150,000 | 149,700 | ||||||
Madison Safety & Flow LLC | ||||||||
due 12/13/28 | 100,000 | 99,906 | ||||||
Air Canada | ||||||||
4.25% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 08/11/28 | 100,000 | 99,589 | ||||||
USIC Holding, Inc. | ||||||||
4.25% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 05/12/28 | 99,750 | 99,519 | ||||||
TK Elevator Midco GmbH | ||||||||
4.00% (6 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 07/30/27 | 99,004 | 98,990 | ||||||
API Heat Transfer | ||||||||
12.00% (in-kind rate was 12.00%) due 01/01/24†††,3 | 195,373 | 63,496 | ||||||
12.00% (in-kind rate was 12.00%) due 10/02/23†††,3 | 35,926 | 25,148 | ||||||
United Airlines, Inc. | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 04/21/28 | 80,829 | 80,939 | ||||||
Total Industrial | 11,709,523 | |||||||
Consumer, Non-cyclical - 19.8% | ||||||||
Energizer Holdings, Inc. | ||||||||
2.75% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.75%) due 12/22/27 | 548,875 | 546,647 | ||||||
Electron BidCo, Inc. | ||||||||
3.75% (3 Month USD LIBOR + 3.25%, Rate Floor: 3.75%) due 11/01/28 | 500,000 | 498,305 | ||||||
Catalent Pharma Solutions, Inc. | ||||||||
2.50% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.50%) due 02/22/28 | 497,494 | 497,618 | ||||||
VC GB Holdings I Corp. | ||||||||
4.00% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 07/21/28 | 500,000 | 495,470 | ||||||
Aramark Services, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 03/11/25 | 500,000 | 493,280 | ||||||
DaVita, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 08/12/26 | 491,228 | 488,335 | ||||||
Froneri US, Inc. | ||||||||
2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 01/29/27 | 492,500 | 485,507 | ||||||
Bombardier Recreational Products, Inc. | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 05/24/27 | 481,926 | 475,526 | ||||||
Elanco Animal Health, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 08/02/27 | 481,700 | 474,927 | ||||||
JBS USA Lux SA | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 05/01/26 | 463,809 | 462,543 | ||||||
Grifols Worldwide Operations USA, Inc. | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 11/15/27 | 465,476 | 458,493 | ||||||
Hostess Brands LLC | ||||||||
3.00% ((1 Month USD LIBOR + 2.25%) and (3 Month USD LIBOR + 2.25%), Rate Floor: 3.00%)due 08/03/25 | 448,852 | 447,124 | ||||||
Hayward Industries, Inc. | ||||||||
3.00% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.00%) due 05/30/28 | 447,750 | 445,417 | ||||||
National Mentor Holdings, Inc. | ||||||||
4.50% ((1 Month USD LIBOR + 3.75%) and (3 Month USD LIBOR + 3.75%), Rate Floor: 4.50%)due 03/02/28 | 447,535 | 442,178 | ||||||
US Foods, Inc. | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 09/13/26 | 439,875 | 434,596 | ||||||
Medical Solutions Parent Holdings, Inc. | ||||||||
4.00% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 11/01/28 | 420,000 | 419,101 | ||||||
Triton Water Holdings, Inc. | ||||||||
4.00% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 03/31/28 | 398,005 | 393,288 | ||||||
Hearthside Group Holdings LLC | ||||||||
3.79% (1 Month USD LIBOR + 3.69%, Rate Floor: 3.69%) due 05/23/25 | 382,290 | 379,346 | ||||||
Phoenix Newco, Inc. | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 11/15/28 | 250,000 | 249,888 | ||||||
Sigma Holding BV (Flora Food) | ||||||||
3.16% (6 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 07/02/25 | 241,875 | 236,205 | ||||||
Reynolds Consumer Products LLC | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 02/04/27 | 223,058 | 221,623 | ||||||
Avantor Funding, Inc. | ||||||||
2.75% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.75%) due 11/08/27 | 199,500 | 199,251 | ||||||
Icon Luxembourg SARL | ||||||||
2.75% (3 Month USD LIBOR + 2.25%, Rate Floor: 2.75%) due 07/03/28 | 181,368 | 181,292 | ||||||
Aveanna Healthcare LLC | ||||||||
4.25% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 07/17/28 | 162,264 | 161,279 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 65 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
Pearl Intermediate Parent LLC | ||||||||
4.25% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 02/14/25 | $ | 149,618 | $ | 149,431 | ||||
Kronos Acquisition Holdings, Inc. | ||||||||
4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 12/22/26 | 148,875 | 144,177 | ||||||
Endo Luxembourg Finance Company I SARL | ||||||||
5.75% (3 Month USD LIBOR + 5.00%, Rate Floor: 5.75%) due 03/27/28 | 99,250 | 96,322 | ||||||
Osmosis Holdings Australia II Pty Ltd. | ||||||||
4.50% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 07/31/28 | 91,111 | 91,176 | ||||||
Total Consumer, Non-cyclical | 10,068,345 | |||||||
Consumer, Cyclical - 14.3% | ||||||||
BrightView Landscapes LLC | ||||||||
2.63% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 08/15/25 | 498,708 | 495,801 | ||||||
Hilton Worldwide Finance LLC | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 06/22/26 | 500,000 | 495,465 | ||||||
AlixPartners, LLP | ||||||||
3.25% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.25%) due 02/04/28 | 496,499 | 494,196 | ||||||
Station Casinos LLC | ||||||||
2.50% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.50%) due 02/08/27 | 498,716 | 494,068 | ||||||
Wyndham Hotels & Resorts, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 05/30/25 | 494,223 | 488,485 | ||||||
Power Solutions (Panther) | ||||||||
3.35% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 04/30/26 | 485,995 | 482,714 | ||||||
PCI Gaming Authority, Inc. | ||||||||
2.50% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 05/29/26 | 473,016 | 470,575 | ||||||
Packers Holdings LLC | ||||||||
4.00% (3 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 03/09/28 | 472,593 | 469,158 | ||||||
First Brands Group LLC | ||||||||
6.00% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 03/30/27 | 446,883 | 448,227 | ||||||
Stars Group (Amaya) | ||||||||
2.47% (3 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 07/21/26 | 448,875 | 446,976 | ||||||
Go Daddy Operating Company LLC | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 02/15/24 | 393,115 | 390,386 | ||||||
Alterra Mountain Co. | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 08/17/28 | 355,874 | 354,984 | ||||||
PetSmart LLC | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 02/11/28 | 349,125 | 349,345 | ||||||
1011778 BC Unlimited Liability Co. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 11/19/26 | 343,000 | 337,855 | ||||||
IBC Capital Ltd. | ||||||||
3.97% (3 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 09/11/23 | 335,913 | 332,806 | ||||||
Burlington Stores, Inc. | ||||||||
2.11% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 06/24/28 | 248,750 | 247,091 | ||||||
Mavis Tire Express Services TopCo Corp. | ||||||||
4.75% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 05/04/28 | 149,625 | 149,625 | ||||||
WIRB - Copernicus Group, Inc. | ||||||||
due 01/08/27 | 100,000 | 99,969 | ||||||
Rent-A-Center, Inc. | ||||||||
3.75% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.75%) due 02/17/28 | 99,250 | 98,940 | ||||||
WW International, Inc. | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 04/13/28 | 94,500 | 93,437 | ||||||
EG Finco Ltd. | ||||||||
4.22% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 02/07/25 | 37,672 | 37,489 | ||||||
Total Consumer, Cyclical | 7,277,592 | |||||||
Communications - 12.4% | ||||||||
CSC Holdings LLC | ||||||||
2.36% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 07/17/25 | 504,359 | 496,163 | ||||||
Radiate Holdco LLC | ||||||||
4.00% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 09/25/26 | 497,000 | 494,982 | ||||||
Level 3 Financing, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 03/01/27 | 500,000 | 493,125 | ||||||
SFR Group S.A. | ||||||||
3.81% (3 Month USD LIBOR + 3.69%, Rate Floor: 3.69%) due 02/02/26 | 476,400 | 471,755 | ||||||
UPC Broadband Holding BV | ||||||||
3.11% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 01/31/29 | 450,000 | 448,218 | ||||||
WMG Acquisition Corp. | ||||||||
2.23% (1 Month USD LIBOR + 2.13%, Rate Floor: 2.13%) due 01/20/28 | 447,365 | 445,352 | ||||||
Playtika Holding Corp. | ||||||||
2.85% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 03/13/28 | 447,744 | 445,318 | ||||||
Virgin Media Bristol LLC | ||||||||
2.61% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 01/31/28 | 415,406 | 411,339 | ||||||
Zayo Group Holdings, Inc. | ||||||||
3.10% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 03/09/27 | 401,527 | 395,837 | ||||||
Ziggo Financing Partnership | ||||||||
2.61% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 04/30/28 | 400,000 | 395,332 | ||||||
66 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
Telenet Financing USD LLC | ||||||||
2.11% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 04/30/28 | $ | 400,000 | $ | 392,500 | ||||
McGraw Hill LLC | ||||||||
5.25% (1 Month USD LIBOR + 4.75%, Rate Floor: 5.25%) due 07/28/28 | 349,125 | 347,163 | ||||||
Xplornet Communications, Inc. | ||||||||
4.50% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 10/02/28 | 299,254 | 298,630 | ||||||
Internet Brands, Inc. | ||||||||
3.60% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 09/13/24 | 244,774 | 243,367 | ||||||
Altice US Finance I Corp. | ||||||||
2.36% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 01/15/26 | 194,500 | 191,680 | ||||||
Authentic Brands | ||||||||
4.00% (3 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 09/27/24 | 160,683 | 159,937 | ||||||
Cengage Learning Acquisitions, Inc. | ||||||||
5.75% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.75%) due 07/14/26 | 149,625 | 149,890 | ||||||
GTT Communications, Inc. | ||||||||
2.87% (3 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 05/30/25††† | 11,679 | — | ||||||
Total Communications | 6,280,588 | |||||||
Financial - 12.3% | ||||||||
HUB International Ltd. | ||||||||
2.87% (3 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 04/25/25 | 488,636 | 482,641 | ||||||
4.00% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 04/25/25 | 99,884 | 99,790 | ||||||
AqGen Island Holdings, Inc. | ||||||||
4.00% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 08/02/28 | 500,000 | 497,375 | ||||||
USI, Inc. | ||||||||
3.22% (3 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 05/16/24 | 498,698 | 494,514 | ||||||
Alliant Holdings Intermediate LLC | ||||||||
4.25% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 05/09/25 | 498,708 | 493,322 | ||||||
AmWINS Group, Inc. | ||||||||
3.00% (1 Month USD LIBOR + 2.25%, Rate Floor: 3.00%) due 02/21/28 | 495,752 | 491,612 | ||||||
NFP Corp. | ||||||||
3.35% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.25%) due 02/15/27 | 485,441 | 477,024 | ||||||
Nexus Buyer LLC | ||||||||
3.85% (1 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 11/09/26 | 446,582 | 444,108 | ||||||
Trans Union LLC | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 11/16/26 | 444,312 | 439,869 | ||||||
Virtu Financial, Inc. | ||||||||
3.10% (1 Month USD LIBOR + 3.00%, Rate Floor: 3.00%) due 03/01/26 | 417,000 | 415,670 | ||||||
FleetCor Technologies Operating Company LLC | ||||||||
due 04/28/28 | 400,000 | 394,900 | ||||||
Focus Financial Partners LLC | ||||||||
2.10% (1 Month USD LIBOR + 2.00%, Rate Floor: 2.00%) due 07/03/24 | 394,885 | 391,185 | ||||||
LPL Holdings, Inc. | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 11/12/26 | 348,659 | 346,191 | ||||||
Citadel Securities, LP | ||||||||
2.60% (1 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 02/02/28 | 248,125 | 246,386 | ||||||
Aretec Group, Inc. | ||||||||
4.35% (1 Month USD LIBOR + 4.25%, Rate Floor: 4.25%) due 10/01/25 | 242,500 | 242,398 | ||||||
Franchise Group, Inc. | ||||||||
5.50% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.50%) due 03/10/26 | 203,861 | 203,251 | ||||||
Jane Street Group LLC | ||||||||
2.85% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 01/26/28 | 79,587 | 78,907 | ||||||
Total Financial | 6,239,143 | |||||||
Technology - 8.5% | ||||||||
Emerald TopCo, Inc. (Press Ganey) | ||||||||
3.63% (3 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 07/24/26 | 505,707 | 503,021 | ||||||
Ascend Learning LLC | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 11/18/28 | 500,000 | 498,855 | ||||||
Informatica LLC | ||||||||
2.88% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 10/27/28 | 500,000 | 497,770 | ||||||
Boxer Parent Co., Inc. | ||||||||
3.97% (3 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 10/02/25 | 468,860 | 465,578 | ||||||
RealPage, Inc. | ||||||||
due 04/24/28 | 400,000 | 398,564 | ||||||
WEX, Inc. | ||||||||
2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 03/31/28 | 397,000 | 394,519 | ||||||
Peraton Corp. | ||||||||
4.50% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 02/01/28 | 297,750 | 297,643 | ||||||
Epicor Software | ||||||||
4.00% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 07/30/27 | 248,741 | 248,396 | ||||||
Project Ruby Ultimate Parent Corp. | ||||||||
4.00% (1 Month USD LIBOR + 3.25%, Rate Floor: 4.00%) due 03/10/28 | 198,500 | 198,169 | ||||||
Polaris Newco LLC | ||||||||
4.50% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 06/02/28 | 149,627 | 149,486 | ||||||
Conair Holdings LLC | ||||||||
4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 05/17/28 | 149,625 | 149,544 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 67 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
| Face | Value | ||||||
Atlas CC Acquisition Corp. | ||||||||
5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 05/25/28 | $ | 149,250 | $ | 149,390 | ||||
Sabre GLBL, Inc. | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 12/17/27 | 149,250 | 147,198 | ||||||
TIBCO Software, Inc. | ||||||||
3.86% (1 Month USD LIBOR + 3.75%, Rate Floor: 3.75%) due 06/30/26 | 135,930 | 134,790 | ||||||
CoreLogic, Inc. | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 06/02/28 | 99,750 | 99,550 | ||||||
Total Technology | 4,332,473 | |||||||
Basic Materials - 3.0% | ||||||||
Messer Industries USA, Inc. | ||||||||
2.72% (3 Month USD LIBOR + 2.50%, Rate Floor: 2.50%) due 03/02/26 | 491,551 | 487,201 | ||||||
Illuminate Buyer LLC | ||||||||
3.60% (1 Month USD LIBOR + 3.50%, Rate Floor: 3.50%) due 06/30/27 | 426,208 | 423,250 | ||||||
Asplundh Tree Expert LLC | ||||||||
1.85% (1 Month USD LIBOR + 1.75%, Rate Floor: 1.75%) due 09/07/27 | 244,381 | 243,228 | ||||||
INEOS Ltd. | ||||||||
3.25% (1 Month USD LIBOR + 2.75%, Rate Floor: 3.25%) due 01/29/26 | 149,250 | 148,722 | ||||||
W.R. Grace Holdings LLC | ||||||||
4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 09/22/28 | 100,000 | 100,075 | ||||||
Alpha 3 BV (Atotech) | ||||||||
3.00% (1 Month USD LIBOR + 2.50%, Rate Floor: 3.00%) due 03/20/28 | 99,750 | 99,500 | ||||||
Total Basic Materials | 1,501,976 | |||||||
Energy - 2.0% | ||||||||
DT Midstream, Inc. | ||||||||
2.50% ((3 Month USD LIBOR + 2.00%) and (6 Month USD LIBOR + 2.00%), Rate Floor: 2.50%)due 06/26/28 | 447,755 | 448,388 | ||||||
Buckeye Partners LP | ||||||||
2.35% (1 Month USD LIBOR + 2.25%, Rate Floor: 2.25%) due 11/01/26 | 394,015 | 392,270 | ||||||
TransMontaigne Operating Company LP | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 11/17/28 | 200,000 | 200,750 | ||||||
Total Energy | 1,041,408 | |||||||
Total Senior Floating Rate Interests | ||||||||
(Cost $48,709,228) | 48,451,048 | |||||||
Total Investments - 106.1% | ||||||||
(Cost $54,245,916) | $ | 53,876,828 | ||||||
Other Assets & Liabilities, net - (6.1)% | (3,108,336 | ) | ||||||
Total Net Assets - 100.0% | $ | 50,768,492 | ||||||
* | 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 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
3 | Payment-in-kind security. |
4 | Variable rate security. Rate indicated is the rate effective at December 31, 2021. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
LIBOR — London Interbank Offered Rate | |
SARL — Société à Responsabilité Limitée | |
See Sector Classification in Other Information section. |
68 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | — | $ | — | $ | 11,406 | $ | 11,406 | ||||||||
Preferred Stocks | — | — | — | * | — | |||||||||||
Exchange-Traded Funds | 1,095,120 | — | — | 1,095,120 | ||||||||||||
Money Market Fund | 4,319,254 | — | — | 4,319,254 | ||||||||||||
Senior Floating Rate Interests | — | 48,362,404 | 88,644 | 48,451,048 | ||||||||||||
Total Assets | $ | 5,414,374 | $ | 48,362,404 | $ | 100,050 | $ | 53,876,828 | ||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Unfunded Loan Commitments (Note 8) | $ | — | $ | — | $ | 1,735 | $ | 1,735 | ||||||||
* | Security has a market value of $0. |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:
Category | Ending Balance at | Valuation Technique | Unobservable Inputs | Input Range | Weighted Average* | |||||||||||||||
Assets: | ||||||||||||||||||||
Common Stocks | $ | 11,377 | Enterprise Value | Valuation Multiple | 2.8x-12.8x | 5.6x | ||||||||||||||
Common Stocks | 29 | Model Price | Liquidation Value | — | — | |||||||||||||||
Senior Floating Rate Interests | 88,644 | Third Party Pricing | Broker Quote | — | — | |||||||||||||||
Total Assets | $ | 100,050 |
|
|
|
| ||||||||||||||
Liabilities: | ||||||||||||||||||||
Unfunded Loan Commitments | $ | 1,735 | Model Price | Purchase Price | — | — | ||||||||||||||
* | Inputs are weighted by the fair value of the instruments. |
Significant changes in a quote or valuation multiples would generally result in significant changes in the fair value of the security. Any remaining Level 3 securities held by the Fund and excluded from the table above, were not considered material to the Fund.
The Fund’s fair valuation leveling guidelines classify a single daily broker quote, or a vendor price based on a single daily or monthly broker quote, as Level 3, if such a quote or price cannot be supported with other available market information.
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 69 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2021:
Assets | Liabilities | |||||||||||||||||||
| Senior Floating | Common | Preferred | Total Assets | Unfunded Loans | |||||||||||||||
Beginning Balance | $ | 432,181 | $ | 20,114 | $ | 18,500 | $ | 470,795 | $ | (383 | ) | |||||||||
Purchases/(Receipts) | 30,681 | 138 | — | 30,819 | (3,184 | ) | ||||||||||||||
(Sales, maturities and paydowns)/Fundings | (242,772 | ) | (21,491 | ) | — | (264,263 | ) | 83 | ||||||||||||
Amortization of premiums/discounts | 3 | — | — | 3 | 400 | |||||||||||||||
Total realized gains (losses) included in earnings | (2,251 | ) | 18,974 | — | 16,723 | 669 | ||||||||||||||
Total change in unrealized appreciation (depreciation) included in earnings | (129,198 | ) | (6,329 | ) | (18,500 | ) | (154,027 | ) | 680 | |||||||||||
Transfers into Level 3 | — | — | — | — | — | |||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | |||||||||||||||
Ending Balance | $ | 88,644 | $ | 11,406 | $ | — | $ | 100,050 | $ | (1,735 | ) | |||||||||
Net change in unrealized appreciation (depreciation) for investments in Level 3 securities still held at December 31, 2021 | $ | (130,591 | ) | $ | (7,155 | ) | $ | (18,500 | ) | $ | (156,246 | ) | $ | 966 | ||||||
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | |||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||
BP Holdco LLC * | $ | 4,093 | $ | — | $ | — | $ | — | $ | 4,091 | $ | 8,184 | 11,609 | |||||||||||||||
* | Non-income producing security. |
70 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $54,241,817) | $ | 53,868,644 | ||
Investments in affiliated issuers, at value (cost $4,099) | 8,184 | |||
Cash | 61,007 | |||
Prepaid expenses | 5,491 | |||
Receivables: | ||||
Securities sold | 817,783 | |||
Interest | 78,305 | |||
Fund shares sold | 14,969 | |||
Total assets | 54,854,383 | |||
Liabilities: | ||||
Unfunded loan commitments, at value (Note 8) (commitment fees received $2,701) | 1,735 | |||
Payable for: | ||||
Securities purchased | 3,972,227 | |||
Management fees | 20,264 | |||
Distribution and service fees | 10,804 | |||
Fund shares redeemed | 8,142 | |||
Trustees’ fees* | 4,618 | |||
Fund accounting/administration fees | 4,573 | |||
Transfer agent/maintenance fees | 2,092 | |||
Miscellaneous | 61,436 | |||
Total liabilities | 4,085,891 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 50,768,492 | ||
Net assets consist of: | ||||
Paid in capital | $ | 53,807,909 | ||
Total distributable earnings (loss) | (3,039,417 | ) | ||
Net assets | $ | 50,768,492 | ||
Capital shares outstanding | 2,080,959 | |||
Net asset value per share | $ | 24.40 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends | $ | 20,400 | ||
Interest from securities of unaffiliated issuers | 1,580,550 | |||
Total investment income | 1,600,950 | |||
Expenses: | ||||
Management fees | 294,643 | |||
Distribution and service fees | 113,324 | |||
Transfer agent/maintenance fees | 25,235 | |||
Professional fees | 64,407 | |||
Fund accounting/administration fees | 36,344 | |||
Custodian fees | 28,228 | |||
Trustees’ fees* | 18,531 | |||
Line of credit fees | 13,118 | |||
Miscellaneous | 13,192 | |||
Total expenses | 607,022 | |||
Less: | ||||
Expenses reimbursed by Adviser: | (258 | ) | ||
Expenses waived by Adviser | (76,726 | ) | ||
Earnings credits applied | (36 | ) | ||
Total waived expenses | (77,020 | ) | ||
Net expenses | 530,002 | |||
Net investment income | 1,070,948 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | (8,680 | ) | ||
Net realized loss | (8,680 | ) | ||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 13,076 | |||
Investments in affiliated issuers | 4,091 | |||
Net change in unrealized appreciation (depreciation) | 17,167 | |||
Net realized and unrealized gain | 8,487 | |||
Net increase in net assets resulting from operations | $ | 1,079,435 | ||
* | 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 | 71 |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,070,948 | $ | 1,106,221 | ||||
Net realized loss on investments | (8,680 | ) | (2,206,068 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 17,167 | 396,917 | ||||||
Net increase (decrease) in net assets resulting from operations | 1,079,435 | (702,930 | ) | |||||
Distributions to shareholders | (1,106,221 | ) | (2,229,065 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 24,874,622 | 25,343,213 | ||||||
Distributions reinvested | 1,106,221 | 2,229,065 | ||||||
Cost of shares redeemed | (16,189,276 | ) | (29,683,817 | ) | ||||
Net increase (decrease) from capital share transactions | 9,791,567 | (2,111,539 | ) | |||||
Net increase (decrease) in net assets | 9,764,781 | (5,043,534 | ) | |||||
Net assets: | ||||||||
Beginning of year | 41,003,711 | 46,047,245 | ||||||
End of year | $ | 50,768,492 | $ | 41,003,711 | ||||
Capital share activity: | ||||||||
Shares sold | 1,018,724 | 1,049,495 | ||||||
Shares issued from reinvestment of distributions | 45,844 | 94,854 | ||||||
Shares redeemed | (663,701 | ) | (1,237,868 | ) | ||||
Net increase (decrease) in shares | 400,867 | (93,519 | ) | |||||
72 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES F (FLOATING RATE STRATEGIES SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 24.41 | $ | 25.96 | $ | 25.30 | $ | 26.26 | $ | 26.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .58 | .68 | 1.06 | 1.01 | .91 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .02 | (.74 | ) | .85 | (1.21 | ) | (.02 | ) | ||||||||||||
Total from investment operations | .60 | (.06 | ) | 1.91 | (.20 | ) | .89 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.61 | ) | (1.49 | ) | (1.25 | ) | (.76 | ) | (.85 | ) | ||||||||||
Total distributions | (.61 | ) | (1.49 | ) | (1.25 | ) | (.76 | ) | (.85 | ) | ||||||||||
Net asset value, end of period | $ | 24.40 | $ | 24.41 | $ | 25.96 | $ | 25.30 | $ | 26.26 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 2.50 | % | 0.01 | % | 7.60 | % | (0.84 | %) | 3.46 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 50,768 | $ | 41,004 | $ | 46,047 | $ | 58,798 | $ | 51,038 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.36 | % | 2.81 | % | 4.10 | % | 3.85 | % | 3.44 | % | ||||||||||
Total expenses | 1.34 | % | 1.47 | % | 1.38 | % | 1.26 | % | 1.28 | % | ||||||||||
Net expensesc,d,e | 1.17 | % | 1.23 | % | 1.21 | % | 1.16 | % | 1.18 | % | ||||||||||
Portfolio turnover rate | 56 | % | 60 | % | 28 | % | 80 | % | 57 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
1.14% | 1.15% | 1.15% | 1.15% | 1.15% |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.00%* | 0.01% |
* | Less than 0.01%. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 73 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series J (StylePlusTM—Mid Growth Series) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series J (StylePlus—Mid Growth Series) returned 13.69%, compared with the 12.73% return of its benchmark, the Russell Midcap® Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell Midcap Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review and Positioning
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund outperformed the Russell Midcap Growth Index for the fiscal year ended December 31, 2021 by 96 basis points net of fees. The fixed income sleeve contributed to total return, as positions in the Guggenheim Ultra Short Duration Fund and the Guggenheim Strategy Funds, net of the investment income earned by these positions, were positive for the period. The actively managed equity sleeve contributed to performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, also contributed to performance.
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.
74 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES J (STYLEPLUS—MID GROWTH SERIES)
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: October 1, 1992 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund III | 29.4% |
Guggenheim Variable Insurance Strategy Fund III | 23.0% |
Guggenheim Strategy Fund II | 15.6% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 9.5% |
East West Bancorp, Inc. | 0.3% |
Builders FirstSource, Inc. | 0.3% |
Toro Co. | 0.3% |
Steel Dynamics, Inc. | 0.3% |
Maximus, Inc. | 0.2% |
Evercore, Inc. — Class A | 0.2% |
Top Ten Total | 79.1% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 75 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series J (StylePlus—Mid Growth Series) | 13.69% | 18.21% | 15.65% |
Russell Midcap Growth Index | 12.73% | 19.83% | 16.63% |
* | 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 Russell Midcap Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
76 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 17.4% | ||||||||
Technology - 3.7% | ||||||||
Maximus, Inc. | 6,006 | $ | 478,498 | |||||
Genpact Ltd. | 7,356 | 390,456 | ||||||
Manhattan Associates, Inc.* | 2,461 | 382,661 | ||||||
Synaptics, Inc.* | 1,258 | 364,204 | ||||||
NetApp, Inc. | 3,739 | 343,951 | ||||||
Cirrus Logic, Inc.* | 3,651 | 335,965 | ||||||
ACI Worldwide, Inc.* | 8,911 | 309,212 | ||||||
Power Integrations, Inc. | 3,302 | 306,723 | ||||||
Fair Isaac Corp.* | 699 | 303,135 | ||||||
Lattice Semiconductor Corp.* | 3,529 | 271,945 | ||||||
CommVault Systems, Inc.* | 3,794 | 261,482 | ||||||
HP, Inc. | 6,643 | 250,242 | ||||||
Diodes, Inc.* | 2,214 | 243,119 | ||||||
Lumentum Holdings, Inc.* | 2,278 | 240,944 | ||||||
Silicon Laboratories, Inc.* | 1,113 | 229,745 | ||||||
Azenta, Inc. | 2,195 | 226,326 | ||||||
CDK Global, Inc. | 5,139 | 214,502 | ||||||
Skyworks Solutions, Inc. | 1,305 | 202,458 | ||||||
Concentrix Corp. | 1,125 | 200,947 | ||||||
Qualys, Inc.* | 1,431 | 196,362 | ||||||
Teradata Corp.* | 4,380 | 186,019 | ||||||
ExlService Holdings, Inc.* | 1,248 | 180,673 | ||||||
Paychex, Inc. | 1,306 | 178,269 | ||||||
Amkor Technology, Inc. | 6,637 | 164,531 | ||||||
MKS Instruments, Inc. | 827 | 144,039 | ||||||
MaxLinear, Inc. — Class A* | 1,858 | 140,075 | ||||||
SiTime Corp.* | 475 | 138,957 | ||||||
Seagate Technology Holdings plc | 1,131 | 127,780 | ||||||
Zebra Technologies Corp. — Class A* | 195 | 116,064 | ||||||
KLA Corp. | 248 | 106,667 | ||||||
Akamai Technologies, Inc.* | 897 | 104,985 | ||||||
Total Technology | 7,340,936 | |||||||
Consumer, Cyclical - 3.4% | ||||||||
Dick’s Sporting Goods, Inc. | 4,014 | 461,570 | ||||||
Choice Hotels International, Inc. | 2,934 | 457,674 | ||||||
Brunswick Corp. | 4,297 | 432,837 | ||||||
Williams-Sonoma, Inc. | 2,537 | 429,083 | ||||||
Tempur Sealy International, Inc. | 9,079 | 426,985 | ||||||
Boyd Gaming Corp.* | 5,996 | 393,158 | ||||||
Gentex Corp. | 10,472 | 364,949 | ||||||
Deckers Outdoor Corp.* | 945 | 346,163 | ||||||
Jack in the Box, Inc. | 3,923 | 343,184 | ||||||
AutoZone, Inc.* | 163 | 341,712 | ||||||
RH* | 515 | 276,009 | ||||||
Crocs, Inc.* | 2,112 | 270,801 | ||||||
AutoNation, Inc.* | 2,201 | 257,187 | ||||||
Mattel, Inc.* | 11,372 | 245,180 | ||||||
Polaris, Inc. | 2,131 | 234,218 | ||||||
YETI Holdings, Inc.* | 2,405 | 199,206 | ||||||
Wyndham Hotels & Resorts, Inc. | 2,089 | 187,279 | ||||||
Scientific Games Corp. — Class A* | 2,749 | 183,716 | ||||||
O’Reilly Automotive, Inc.* | 258 | 182,207 | ||||||
LKQ Corp. | 2,949 | 177,029 | ||||||
Papa John’s International, Inc. | 1,204 | 160,698 | ||||||
Yum! Brands, Inc. | 1,141 | 158,439 | ||||||
Wingstop, Inc. | 861 | 148,781 | ||||||
Domino’s Pizza, Inc. | 185 | 104,401 | ||||||
Total Consumer, Cyclical | 6,782,466 | |||||||
Industrial - 2.9% | ||||||||
Builders FirstSource, Inc.* | 7,319 | 627,312 | ||||||
Toro Co. | 6,140 | 613,448 | ||||||
Jabil, Inc. | 5,865 | 412,603 | ||||||
Louisiana-Pacific Corp. | 4,647 | 364,092 | ||||||
UFP Industries, Inc. | 3,779 | 347,706 | ||||||
Keysight Technologies, Inc.* | 1,660 | 342,806 | ||||||
Eagle Materials, Inc. | 1,744 | 290,306 | ||||||
Littelfuse, Inc. | 822 | 258,667 | ||||||
Lennox International, Inc. | 758 | 245,865 | ||||||
Lincoln Electric Holdings, Inc. | 1,745 | 243,375 | ||||||
Simpson Manufacturing Company, Inc. | 1,739 | 241,843 | ||||||
Universal Display Corp. | 1,424 | 235,003 | ||||||
Donaldson Company, Inc. | 3,836 | 227,321 | ||||||
Trex Company, Inc.* | 1,678 | 226,580 | ||||||
nVent Electric plc | 5,381 | 204,478 | ||||||
Acuity Brands, Inc. | 865 | 183,138 | ||||||
TopBuild Corp.* | 607 | 167,477 | ||||||
Axon Enterprise, Inc.* | 993 | 155,901 | ||||||
Middleby Corp.* | 753 | 148,160 | ||||||
Sealed Air Corp. | 2,141 | 144,453 | ||||||
Carlisle Companies, Inc. | 404 | 100,241 | ||||||
Total Industrial | 5,780,775 | |||||||
Consumer, Non-cyclical - 2.9% | ||||||||
Molina Healthcare, Inc.* | 1,226 | 389,966 | ||||||
Service Corporation International | 4,424 | 314,060 | ||||||
United Therapeutics Corp.* | 1,447 | 312,668 | ||||||
Hologic, Inc.* | 3,990 | 305,474 | ||||||
Laboratory Corporation of America Holdings* | 903 | 283,732 | ||||||
Waters Corp.* | 759 | 282,803 | ||||||
Halozyme Therapeutics, Inc.* | 6,793 | 273,146 | ||||||
GXO Logistics, Inc.* | 2,740 | 248,874 | ||||||
Neurocrine Biosciences, Inc.* | 2,791 | 237,710 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 312 | 235,738 | ||||||
Tenet Healthcare Corp.* | 2,861 | 233,715 | ||||||
Regeneron Pharmaceuticals, Inc.* | 369 | 233,031 | ||||||
Globus Medical, Inc. — Class A* | 2,920 | 210,824 | ||||||
Quest Diagnostics, Inc. | 1,207 | 208,823 | ||||||
United Rentals, Inc.* | 561 | 186,414 | ||||||
Bruker Corp. | 2,176 | 182,588 | ||||||
Exelixis, Inc.* | 9,797 | 179,089 | ||||||
Integra LifeSciences Holdings Corp.* | 2,575 | 172,499 | ||||||
Tandem Diabetes Care, Inc.* | 1,142 | 171,894 | ||||||
Masimo Corp.* | 586 | 171,569 | ||||||
Arrowhead Pharmaceuticals, Inc.* | 2,468 | 163,628 | ||||||
Repligen Corp.* | 597 | 158,110 | ||||||
PerkinElmer, Inc. | 760 | 152,806 | ||||||
Quidel Corp.* | 917 | 123,786 | ||||||
H&R Block, Inc. | 5,246 | 123,596 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 77 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
| Shares | Value | ||||||
Gartner, Inc.* | 321 | $ | 107,317 | |||||
Incyte Corp.* | 1,399 | 102,687 | ||||||
Total Consumer, Non-cyclical | 5,766,547 | |||||||
Financial - 2.5% | ||||||||
East West Bancorp, Inc. | 8,018 | 630,832 | ||||||
Evercore, Inc. — Class A | 3,448 | 468,411 | ||||||
UMB Financial Corp. | 4,338 | 460,305 | ||||||
Interactive Brokers Group, Inc. — Class A | 5,608 | 445,387 | ||||||
Hancock Whitney Corp. | 7,849 | 392,607 | ||||||
PacWest Bancorp | 8,308 | 375,272 | ||||||
ServisFirst Bancshares, Inc. | 4,046 | 343,667 | ||||||
Raymond James Financial, Inc. | 3,332 | 334,533 | ||||||
Cathay General Bancorp | 7,132 | 306,605 | ||||||
Synovus Financial Corp. | 5,512 | 263,860 | ||||||
Affiliated Managers Group, Inc. | 1,474 | 242,488 | ||||||
Camden Property Trust REIT | 1,111 | 198,513 | ||||||
Home BancShares, Inc. | 6,911 | 168,283 | ||||||
First American Financial Corp. | 1,957 | 153,096 | ||||||
Wintrust Financial Corp. | 1,623 | 147,401 | ||||||
Rexford Industrial Realty, Inc. REIT | 865 | 70,160 | ||||||
Total Financial | 5,001,420 | |||||||
Basic Materials - 1.1% | ||||||||
Steel Dynamics, Inc. | 8,659 | 537,464 | ||||||
Valvoline, Inc. | 10,643 | 396,878 | ||||||
Olin Corp. | 5,824 | 334,997 | ||||||
Ingevity Corp.* | 4,322 | 309,887 | ||||||
Cleveland-Cliffs, Inc.* | 13,343 | 290,477 | ||||||
Nucor Corp. | 1,212 | 138,350 | ||||||
Celanese Corp. — Class A | 606 | 101,844 | ||||||
Total Basic Materials | 2,109,897 | |||||||
Communications - 0.6% | ||||||||
Motorola Solutions, Inc. | 1,259 | 342,070 | ||||||
Ciena Corp.* | 4,313 | 331,972 | ||||||
F5, Inc.* | 612 | 149,762 | ||||||
VeriSign, Inc.* | 589 | 149,500 | ||||||
Arista Networks, Inc.* | 792 | 113,850 | ||||||
FactSet Research Systems, Inc. | 209 | 101,576 | ||||||
Total Communications | 1,188,730 | |||||||
Energy - 0.3% | ||||||||
Targa Resources Corp. | 6,073 | 317,253 | ||||||
Antero Midstream Corp. | 19,026 | 184,172 | ||||||
Total Energy | 501,425 | |||||||
Total Common Stocks | ||||||||
(Cost $31,686,846) | 34,472,196 | |||||||
MUTUAL FUNDS† - 77.5% | ||||||||
Guggenheim Strategy Fund III1 | 2,334,842 | 58,441,099 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 1,828,721 | 45,644,872 | ||||||
Guggenheim Strategy Fund II1 | 1,250,262 | 31,106,522 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 1,895,373 | 18,802,104 | ||||||
Total Mutual Funds | ||||||||
(Cost $154,115,256) | 153,994,597 | |||||||
MONEY MARKET FUND† - 5.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 10,414,010 | 10,414,010 | ||||||
Total Money Market Fund | ||||||||
(Cost $10,414,010) | 10,414,010 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $196,216,112) | $ | 198,880,803 | ||||||
Other Assets & Liabilities, net - (0.1)% | (253,370 | ) | ||||||
Total Net Assets - 100.0% | $ | 198,627,433 | ||||||
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 5 | Mar 2022 | $ | 1,419,250 | $ | 47,290 | ||||||||||
S&P 500 Index Mini Futures Contracts | 2 | Mar 2022 | 475,950 | 10,028 | ||||||||||||
NASDAQ-100 Index Mini Futures Contracts | 2 | Mar 2022 | 653,010 | 9,888 | ||||||||||||
| $ | 2,548,210 | $ | 67,206 | |||||||||||||
Total Return Swap Agreements | |||||||||||||||||||||||
Counterparty | Index | Type | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||||||
Wells Fargo Bank, N.A. | Russell MidCap Growth Index Total Return | Pay | 0.34% (Federal Funds Rate + 0.26%) | At Maturity | 04/07/22 | 29,180 | $ | 163,051,420 | $ | 5,052,896 | |||||||||||||
78 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 34,472,196 | $ | — | $ | — | $ | 34,472,196 | ||||||||
Mutual Funds | 153,994,597 | — | — | 153,994,597 | ||||||||||||
Money Market Fund | 10,414,010 | — | — | 10,414,010 | ||||||||||||
Equity Futures Contracts** | 67,206 | — | — | 67,206 | ||||||||||||
Equity Index Swap Agreements** | — | 5,052,896 | — | 5,052,896 | ||||||||||||
Total Assets | $ | 198,948,009 | $ | 5,052,896 | $ | — | $ | 204,000,905 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 79 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 19,620,773 | $ | 11,596,685 | $ | — | $ | — | $ | (110,936 | ) | $ | 31,106,522 | 1,250,262 | $ | 372,541 | ||||||||||||||||
Guggenheim Strategy Fund III | 40,513,796 | 18,130,595 | — | — | (203,292 | ) | 58,441,099 | 2,334,842 | 781,178 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 53,557,922 | 13,729,164 | (48,287,974 | ) | 422,738 | (619,746 | ) | 18,802,104 | 1,895,373 | 367,087 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 40,422,360 | 5,367,114 | — | — | (144,602 | ) | 45,644,872 | 1,828,721 | 618,428 | |||||||||||||||||||||||
| $ | 154,114,851 | $ | 48,823,558 | $ | (48,287,974 | ) | $ | 422,738 | $ | (1,078,576 | ) | $ | 153,994,597 | $ | 2,139,234 | |||||||||||||||||
80 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $42,100,856) | $ | 44,886,206 | ||
Investments in affiliated issuers, at value (cost $154,115,256) | 153,994,597 | |||
Cash | 569,999 | |||
Segregated cash with broker | 136,500 | |||
Unrealized appreciation on OTC swap agreements | 5,052,896 | |||
Prepaid expenses | 4,641 | |||
Receivables: | ||||
Dividends | 211,199 | |||
Fund shares sold | 15,724 | |||
Interest | 54 | |||
Total assets | 204,871,816 | |||
Liabilities: | ||||
Segregated cash due to broker | 5,640,000 | |||
Payable for: | ||||
Securities purchased | 210,301 | |||
Swap settlement | 128,331 | |||
Management fees | 80,096 | |||
Fund shares redeemed | 41,885 | |||
Distribution and service fees | 41,460 | |||
Fund accounting/administration fees | 12,437 | |||
Trustees’ fees* | 5,011 | |||
Variation margin on futures contracts | 4,525 | |||
Transfer agent/maintenance fees | 2,205 | |||
Miscellaneous | 78,132 | |||
Total liabilities | 6,244,383 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 198,627,433 | ||
Net assets consist of: | ||||
Paid in capital | $ | 147,140,007 | ||
Total distributable earnings (loss) | 51,487,426 | |||
Net assets | $ | 198,627,433 | ||
Capital shares outstanding | 2,791,075 | |||
Net asset value per share | $ | 71.17 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 229,666 | ||
Dividends from securities of affiliated issuers | 2,139,234 | |||
Interest | 717 | |||
Total investment income | 2,369,617 | |||
Expenses: | ||||
Management fees | 1,489,568 | |||
Distribution and service fees | 496,522 | |||
Transfer agent/maintenance fees | 25,398 | |||
Fund accounting/administration fees | 138,083 | |||
Professional fees | 57,231 | |||
Custodian fees | 29,718 | |||
Prime broker interest expense | 21,758 | |||
Trustees’ fees* | 18,031 | |||
Line of credit fees | 8,793 | |||
Miscellaneous | 17,724 | |||
Total expenses | 2,302,826 | |||
Less: | ||||
Expenses waived by Adviser | (535,876 | ) | ||
Net expenses | 1,766,950 | |||
Net investment income | 602,667 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 7,570,813 | |||
Investments in affiliated issuers | 422,738 | |||
Swap agreements | 39,413,847 | |||
Futures contracts | 575,767 | |||
Net realized gain | 47,983,165 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (2,273,251 | ) | ||
Investments in affiliated issuers | (1,078,576 | ) | ||
Swap agreements | (20,061,120 | ) | ||
Futures contracts | 50,533 | |||
Net change in unrealized appreciation (depreciation) | (23,362,414 | ) | ||
Net realized and unrealized gain | 24,620,751 | |||
Net increase in net assets resulting from operations | $ | 25,223,418 | ||
* | 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 | 81 |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 602,667 | $ | 1,028,980 | ||||
Net realized gain on investments | 47,983,165 | 28,212,196 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (23,362,414 | ) | 17,383,447 | |||||
Net increase in net assets resulting from operations | 25,223,418 | 46,624,623 | ||||||
Distributions to shareholders | (27,830,332 | ) | (9,832,328 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 7,094,590 | 4,851,242 | ||||||
Distributions reinvested | 27,830,332 | 9,832,328 | ||||||
Cost of shares redeemed | (24,610,575 | ) | (18,230,591 | ) | ||||
Net increase (decrease) from capital share transactions | 10,314,347 | (3,547,021 | ) | |||||
Net increase in net assets | 7,707,433 | 33,245,274 | ||||||
Net assets: | ||||||||
Beginning of year | 190,920,000 | 157,674,726 | ||||||
End of year | $ | 198,627,433 | $ | 190,920,000 | ||||
Capital share activity: | ||||||||
Shares sold | 92,701 | 80,991 | ||||||
Shares issued from reinvestment of distributions | 400,552 | 169,086 | ||||||
Shares redeemed | (336,867 | ) | (311,264 | ) | ||||
Net increase (decrease) in shares | 156,386 | (61,187 | ) | |||||
82 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES J (STYLEPLUS—MID GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 72.46 | $ | 58.49 | $ | 48.75 | $ | 59.82 | $ | 48.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .22 | .39 | .79 | .97 | .67 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 9.44 | 17.43 | 14.90 | (4.08 | ) | 11.22 | ||||||||||||||
Total from investment operations | 9.66 | 17.82 | 15.69 | (3.11 | ) | 11.89 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.40 | ) | (.84 | ) | (.49 | ) | (.83 | ) | (.50 | ) | ||||||||||
Net realized gains | (10.55 | ) | (3.01 | ) | (5.46 | ) | (7.13 | ) | — | |||||||||||
Total distributions | (10.95 | ) | (3.85 | ) | (5.95 | ) | (7.96 | ) | (.50 | ) | ||||||||||
Net asset value, end of period | $ | 71.17 | $ | 72.46 | $ | 58.49 | $ | 48.75 | $ | 59.82 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 13.69 | % | 32.10 | % | 32.70 | % | (7.10 | %) | 24.67 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 198,627 | $ | 190,920 | $ | 157,675 | $ | 137,116 | $ | 187,897 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.30 | % | 0.66 | % | 1.39 | % | 1.64 | % | 1.25 | % | ||||||||||
Total expensesc | 1.16 | % | 1.22 | % | 1.30 | % | 1.28 | % | 1.14 | % | ||||||||||
Net expensesd,e | 0.89 | % | 0.89 | % | 1.00 | % | 1.01 | % | 0.94 | % | ||||||||||
Portfolio turnover rate | 60 | % | 71 | % | 57 | % | 66 | % | 49 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.87% | 0.88% | 0.92% | 0.94% | 0.92% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 83 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series N (Managed Asset Allocation Series) is managed by a team of seasoned professionals, including Michael P. Byrum, CFA, Portfolio Manager; Ryan Harder, CFA, Portfolio Manager; and Matthew Wu, Ph.D., CFA, Portfolio Manager. In the following paragraphs, the team discusses performance of the Series for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series N (Managed Asset Allocation Series) returned 12.47%, compared with its weighted benchmark that is 60% S&P 500® Index and 40% Bloomberg U.S. Aggregate Bond Index, which returned 15.86%. The S&P 500 Index returned 28.71% over the year and the Bloomberg U.S. Aggregate Bond Index returned -1.54%.
Investment Approach
The Fund seeks to provide growth of capital and, secondarily, preservation of capital. It seeks to achieve its investment objective by investing in a diversified portfolio of futures contracts and exchange-traded funds (ETFs) and other pooled investment vehicles that track major equity indexes and fixed-income indexes to obtain exposure to equity, fixed-income and money-market assets. The precise allocation to equity and fixed-income assets will depend on the outlook of Guggenheim Investments for each asset class and are expected to change (possibly suddenly and significantly) from time to time.
Performance Review and Positioning
The successful development of vaccines brought confidence to the economy and market. Therefore, U.S. stocks rose sharply in 2021 as the economy and corporate profits bounced back. International equity markets also rose, though they continued to underperform the US. With strong economy and disrupted supply chain, inflation emerged and put pressure on the central banks to reverse the QE monetary policy. The bond market wrestled with this prospect in most of the year 2021.
The total exposures to equity added value while total exposures to bonds detracted value. ETFs and futures contracts on the S&P 500 Index became the largest individual winners, followed by S&P MidCap 400 Index. The best performer of year 2020 —ETFs and futures on Russell 2000 Index —was the third-best performer. On the other hand, bonds had losses with the 10-year U.S. Treasury performing the worst. iShares of iBoxx Investment Grade Corporate Bond Index and Bloomberg U.S. Aggregate Bond Index were the other two big detractors.
The Fund utilized equity futures opportunistically to gain exposure to various global equity markets. The use of equity futures contributed to performance. The Fund further utilized interest rate futures opportunistically to speculate on the U.S. Treasury 2 Year and 10 Year Note. The use of interest rate futures detracted slightly from performance.
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.
84 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES N (MANAGED ASSET ALLOCATION SERIES)
OBJECTIVE: Seeks to provide growth of capital and, secondarily, preservation of capital.
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: June 1, 1995 |
Ten Largest Holdings (% of Total Net Assets) | |
Vanguard S&P 500 ETF | 20.9% |
SPDR S&P 500 ETF Trust | 16.2% |
Schwab U.S. Aggregate Bond ETF | 15.2% |
iShares Core S&P Mid-Cap ETF | 7.0% |
iShares iBoxx $ Investment Grade Corporate Bond ETF | 6.5% |
iShares MSCI EAFE ETF | 6.1% |
iShares 7-10 Year Treasury Bond ETF | 4.6% |
Guggenheim Strategy Fund II | 4.0% |
Guggenheim Variable Insurance Strategy Fund III | 4.0% |
iShares 1-3 Year Treasury Bond ETF | 3.9% |
Top Ten Total | 88.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 85 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series N (Managed Asset Allocation Series) | 12.47% | 10.40% | 9.38% |
Blended Index** | 15.86% | 12.61% | 11.14% |
Bloomberg U.S. Aggregate Bond Index | (1.54%) | 3.57% | 2.90% |
S&P 500 Index | 28.71% | 18.47% | 16.55% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The S&P 500 Index and the Bloomberg U.S. Aggregate Bond Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
** | Blended index is 60% S&P 500 Index and 40% Bloomberg U.S. Aggregate Bond Index. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
86 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 84.2% | ||||||||
Vanguard S&P 500 ETF | 22,530 | $ | 9,835,922 | |||||
SPDR S&P 500 ETF Trust | 16,055 | 7,625,483 | ||||||
Schwab U.S. Aggregate Bond ETF | 132,248 | 7,128,167 | ||||||
iShares Core S&P Mid-Cap ETF | 11,700 | 3,312,036 | ||||||
iShares iBoxx $ Investment Grade Corporate Bond ETF | 23,033 | 3,052,333 | ||||||
iShares MSCI EAFE ETF | 36,690 | 2,886,769 | ||||||
iShares 7-10 Year Treasury Bond ETF | 18,601 | 2,139,115 | ||||||
iShares 1-3 Year Treasury Bond ETF | 21,409 | 1,831,326 | ||||||
iShares Russell 1000 Value ETF | 4,533 | 761,227 | ||||||
iShares TIPS Bond ETF | 3,987 | 515,121 | ||||||
iShares iBoxx High Yield Corporate Bond ETF | 5,736 | 499,089 | ||||||
iShares Core S&P 500 ETF | 2 | 954 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $26,335,539) | 39,587,542 | |||||||
MUTUAL FUNDS† - 14.0% | ||||||||
Guggenheim Strategy Fund II1 | 76,037 | 1,891,803 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 74,264 | 1,853,627 | ||||||
Guggenheim Strategy Fund III1 | 71,314 | 1,784,985 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 105,191 | 1,043,498 | ||||||
Total Mutual Funds | ||||||||
(Cost $6,583,214) | 6,573,913 | |||||||
MONEY MARKET FUND† - 0.6% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 268,242 | 268,242 | ||||||
Total Money Market Fund | ||||||||
(Cost $268,242) | 268,242 | |||||||
Face | ||||||||
U.S. TREASURY BILLS†† - 0.8% | ||||||||
U.S. Treasury Bills | ||||||||
0.04% due 01/06/223,4 | $ | 394,000 | 394,000 | |||||
Total U.S. Treasury Bills | ||||||||
(Cost $393,998) | 394,000 | |||||||
Total Investments - 99.6% | ||||||||
(Cost $33,580,993) | $ | 46,823,697 | ||||||
Other Assets & Liabilities, net - 0.4% | 184,423 | |||||||
Total Net Assets - 100.0% | $ | 47,008,120 | ||||||
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration Date | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
MSCI EAFE Index Futures Contracts | 38 | Mar 2022 | $ | 4,409,330 | $ | 79,072 | ||||||||||
Russell 2000 Index Mini Futures Contracts | 18 | Mar 2022 | 2,018,250 | 26,644 | ||||||||||||
| $ | 6,427,580 | $ | 105,716 | |||||||||||||
Interest Rate Futures Contracts Purchased† | ||||||||||||||||
U.S. Treasury 10 Year Note Futures Contracts | 19 | Mar 2022 | 2,476,235 | 17,656 | ||||||||||||
U.S. Treasury 2 Year Note Futures Contracts | 4 | Mar 2022 | 872,531 | (873 | ) | |||||||||||
| $ | 3,348,766 | $ | 16,783 | |||||||||||||
Equity Futures Contracts Sold Short† | ||||||||||||||||
Nikkei 225 (CME) Index Futures Contracts | 1 | Mar 2022 | 144,325 | 372 | ||||||||||||
FTSE 100 Index Futures Contracts†† | 1 | Mar 2022 | 98,885 | (878 | ) | |||||||||||
S&P/TSX 60 IX Index Futures Contracts | 1 | Mar 2022 | 202,606 | (1,938 | ) | |||||||||||
| $ | 445,816 | $ | (2,444 | ) | ||||||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 87 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
3 | All or a portion of this security is pledged as futures collateral at December 31, 2021. |
4 | Rate indicated is the effective yield at the time of purchase. |
CME — Chicago Mercantile Exchange | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Exchange-Traded Funds | $ | 39,587,542 | $ | — | $ | — | $ | 39,587,542 | ||||||||
Mutual Funds | 6,573,913 | — | — | 6,573,913 | ||||||||||||
Money Market Fund | 268,242 | — | — | 268,242 | ||||||||||||
U.S. Treasury Bills | — | 394,000 | — | 394,000 | ||||||||||||
Equity Futures Contracts** | 106,088 | — | — | 106,088 | ||||||||||||
Interest Rate Futures Contracts** | 17,656 | — | — | 17,656 | ||||||||||||
Total Assets | $ | 46,553,441 | $ | 394,000 | $ | — | $ | 46,947,441 | ||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Futures Contracts** | $ | 1,938 | $ | 878 | $ | — | $ | 2,816 | ||||||||
Interest Rate Futures Contracts** | 873 | — | — | 873 | ||||||||||||
Total Liabilities | $ | 2,811 | $ | 878 | $ | — | $ | 3,689 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
88 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 1,871,503 | $ | 26,389 | $ | — | $ | — | $ | (6,089 | ) | $ | 1,891,803 | 76,037 | $ | 26,444 | ||||||||||||||||
Guggenheim Strategy Fund III | 2,256,685 | 32,421 | (500,000 | ) | 6,880 | (11,001 | ) | 1,784,985 | 71,314 | 32,556 | ||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 1,040,355 | 9,437 | — | — | (6,294 | ) | 1,043,498 | 105,191 | 9,441 | |||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 2,327,726 | 31,500 | (500,000 | ) | 1,556 | (7,155 | ) | 1,853,627 | 74,264 | 31,626 | ||||||||||||||||||||||
| $ | 7,496,269 | $ | 99,747 | $ | (1,000,000 | ) | $ | 8,436 | $ | (30,539 | ) | $ | 6,573,913 | $ | 100,067 | |||||||||||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 89 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $26,997,779) | $ | 40,249,784 | ||
Investments in affiliated issuers, at value (cost $6,583,214) | 6,573,913 | |||
Cash | 429 | |||
Prepaid expenses | 2,525 | |||
Receivables: | ||||
Securities sold | 349,528 | |||
Dividends | 41,373 | |||
Fund shares sold | 1,254 | |||
Interest | 2 | |||
Total assets | 47,218,808 | |||
Liabilities: | ||||
Payable for: | ||||
Securities purchased | 128,252 | |||
Professional fees | 26,985 | |||
Management fees | 15,587 | |||
Distribution and service fees | 9,880 | |||
Variation margin on futures contracts | 7,654 | |||
Trustees’ fees* | 6,335 | |||
Fund accounting/administration fees | 4,298 | |||
Fund shares redeemed | 3,953 | |||
Transfer agent/maintenance fees | 2,104 | |||
Miscellaneous | 5,640 | |||
Total liabilities | 210,688 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 47,008,120 | ||
Net assets consist of: | ||||
Paid in capital | $ | 29,725,253 | ||
Total distributable earnings (loss) | 17,282,867 | |||
Net assets | $ | 47,008,120 | ||
Capital shares outstanding | 1,349,820 | |||
Net asset value per share | $ | 34.83 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 657,748 | ||
Dividends from securities of affiliated issuers | 100,067 | |||
Interest | 231 | |||
Total investment income | 758,046 | |||
Expenses: | ||||
Management fees | 187,060 | |||
Distribution and service fees | 116,913 | |||
Transfer agent/maintenance fees | 25,181 | |||
Professional fees | 44,990 | |||
Fund accounting/administration fees | 38,647 | |||
Trustees’ fees* | 16,188 | |||
Custodian fees | 5,004 | |||
Line of credit fees | 2,220 | |||
Miscellaneous | 4,742 | |||
Total expenses | 440,945 | |||
Less: | ||||
Expenses waived by Adviser | (2,608 | ) | ||
Net expenses | 438,337 | |||
Net investment income | 319,709 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 3,323,754 | |||
Investments in affiliated issuers | 8,436 | |||
Futures contracts | 887,138 | |||
Foreign currency transactions | 204 | |||
Net realized gain | 4,219,532 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 1,040,815 | |||
Investments in affiliated issuers | (30,539 | ) | ||
Futures contracts | (75,216 | ) | ||
Foreign currency translations | (28 | ) | ||
Net change in unrealized appreciation (depreciation) | 935,032 | |||
Net realized and unrealized gain | 5,154,564 | |||
Net increase in net assets resulting from operations | $ | 5,474,273 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
90 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 319,709 | $ | 332,700 | ||||
Net realized gain on investments | 4,219,532 | 3,324,169 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 935,032 | 1,388,054 | ||||||
Net increase in net assets resulting from operations | 5,474,273 | 5,044,923 | ||||||
Distributions to shareholders | (3,475,814 | ) | (3,200,030 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 1,389,917 | 1,360,017 | ||||||
Distributions reinvested | 3,475,814 | 3,200,030 | ||||||
Cost of shares redeemed | (5,528,955 | ) | (6,950,594 | ) | ||||
Net decrease from capital share transactions | (663,224 | ) | (2,390,547 | ) | ||||
Net increase (decrease) in net assets | 1,335,235 | (545,654 | ) | |||||
Net assets: | ||||||||
Beginning of year | 45,672,885 | 46,218,539 | ||||||
End of year | $ | 47,008,120 | $ | 45,672,885 | ||||
Capital share activity: | ||||||||
Shares sold | 40,195 | 43,430 | ||||||
Shares issued from reinvestment of distributions | 103,632 | 106,597 | ||||||
Shares redeemed | (160,933 | ) | (225,315 | ) | ||||
Net decrease in shares | (17,106 | ) | (75,288 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 91 |
SERIES N (MANAGED ASSET ALLOCATION SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 33.41 | $ | 32.05 | $ | 27.34 | $ | 31.68 | $ | 28.74 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .24 | .24 | .44 | .47 | .39 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.83 | 3.52 | 5.02 | (2.08 | ) | 3.68 | ||||||||||||||
Total from investment operations | 4.07 | 3.76 | 5.46 | (1.61 | ) | 4.07 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.25 | ) | (.49 | ) | (.51 | ) | (.44 | ) | (.46 | ) | ||||||||||
Net realized gains | (2.40 | ) | (1.91 | ) | (.24 | ) | (2.29 | ) | (.67 | ) | ||||||||||
Total distributions | (2.65 | ) | (2.40 | ) | (.75 | ) | (2.73 | ) | (1.13 | ) | ||||||||||
Net asset value, end of period | $ | 34.83 | $ | 33.41 | $ | 32.05 | $ | 27.34 | $ | 31.68 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 12.47 | % | 12.59 | % | 20.11 | % | (5.73 | %) | 14.39 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 47,008 | $ | 45,673 | $ | 46,219 | $ | 42,636 | $ | 51,080 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.68 | % | 0.77 | % | 1.45 | % | 1.53 | % | 1.29 | % | ||||||||||
Total expensesc | 0.94 | % | 1.01 | % | 1.01 | % | 0.99 | % | 0.98 | % | ||||||||||
Net expensesd | 0.94 | % | 1.00 | % | 1.00 | % | 0.99 | % | 0.98 | % | ||||||||||
Portfolio turnover rate | 26 | % | 6 | % | 14 | % | 4 | % | 1 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
92 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series O (All Cap Value Series) is managed by a team of seasoned professionals led by James Schier, CFA, Senior Managing Director and Portfolio Manager; David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series O (All Cap Value Series) returned 26.95%, compared with the Russell 3000® Value Index, which returned 25.37%.
Investment Approach
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 industries in which they operate. In today’s rapidly changing environment marked by very sharp and 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 fundamentals once again become a more dominant factor in the market.
Performance Review and Positioning
Rising interest rates, the reopening of the economy following the pandemic, and a historically wide valuation gap between growth and value sectors were among the factors that, in a reversal from the last few years, saw value stocks rival or outperform growth stocks over the period, particularly in the small capitalization space. Early on, the smallest and most sensitive to an improving economy advanced the most, but larger, more growth-focused names stepped up as the market grew concerned about the Delta variant, peak profitability, rising input prices, logistical challenges, and shortages. The Fund tends to own the smaller and more value-focused companies in the benchmark, and lagged its benchmark at times throughout the period.
The Fund benefited from strong security selection, with Materials and Consumer Discretionary contributing the most at the sector level. In Materials, commodity price inflation on the back of an improving economy benefitted steel names such as Nucor Corp. as well as specialty chemical companies like Huntsman Corp. and Olin Corp. In Consumer Discretionary, the Fund was helped by holdings in sellers of autos and auto parts (LKQ Corp. and Penske Automotive Group, Inc.), and home-related holdings (D.R. Horton and Home Depot).
Selection Energy and Staples were also relative contributors to performance. Energy benefited from the rise in energy prices, and natural gas-oriented Range Resources was the leading contributor in that sector; integrated oil companies Marathon Oil and ConocoPhillips were other sector contributors.
The principal sector detractor Health Care, mostly due to Encompass Health, which guided earnings lower in the third quarter, and an underweight in Pfizer, which had a strong pipeline and COVID treatments.
Industrials was also a detractor in the period, partly due to weak airlines performance.
While this strategy is balanced relative to the benchmark, the size of companies it owns is typically smaller, given their often-better growth opportunities. The Fund’s largest sector overweights relative to the benchmark were in Energy and Utilities. The Fund’s largest sector underweight was in Industrials. Other sector underweights were Real Estate and Financials.
The market outlook continues to be murkier than usual. The expectation of a Federal Reserve that is now biased to being less accommodative and growing geopolitical risks suggest an environment that may constrain the upside for equities. However, record negative real interest rates promise to provide a solid underpinning for equity valuations.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 93 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES O (ALL CAP VALUE SERIES)
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.
Inception Date: June 1, 1995 |
Ten Largest Holdings (% of Total Net Assets) | |
Tyson Foods, Inc. — Class A | 1.9% |
Chevron Corp. | 1.9% |
Huntsman Corp. | 1.8% |
JPMorgan Chase & Co. | 1.8% |
Berkshire Hathaway, Inc. — Class B | 1.8% |
Micron Technology, Inc. | 1.8% |
Johnson & Johnson | 1.7% |
Bunge Ltd. | 1.6% |
Johnson Controls International plc | 1.5% |
Wells Fargo & Co. | 1.4% |
Top Ten Total | 17.2% |
“Ten Largest Holdings” excludes any temporary cash investments. | |
94 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series O (All Cap Value Series) | 26.95% | 10.42% | 12.26% |
Russell 3000 Value Index | 25.37% | 11.00% | 12.89% |
* | 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 3000 Value Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 95 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES O (ALL CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.1% | ||||||||
Financial - 21.3% | ||||||||
JPMorgan Chase & Co. | 11,885 | $ | 1,881,990 | |||||
Berkshire Hathaway, Inc. — Class B* | 6,100 | 1,823,900 | ||||||
Wells Fargo & Co. | 31,201 | 1,497,024 | ||||||
Bank of America Corp. | 33,505 | 1,490,637 | ||||||
STAG Industrial, Inc. REIT | 25,988 | 1,246,385 | ||||||
Medical Properties Trust, Inc. REIT | 39,458 | 932,393 | ||||||
BOK Financial Corp. | 7,672 | 809,319 | ||||||
Allstate Corp. | 6,837 | 804,373 | ||||||
Voya Financial, Inc. | 11,903 | 789,288 | ||||||
First Horizon Corp. | 44,618 | 728,612 | ||||||
Alleghany Corp.* | 1,079 | 720,330 | ||||||
KeyCorp | 30,753 | 711,317 | ||||||
Charles Schwab Corp. | 7,419 | 623,938 | ||||||
Zions Bancorp North America | 9,860 | 622,758 | ||||||
Physicians Realty Trust REIT | 29,711 | 559,458 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 2,480 | 552,941 | ||||||
Park Hotels & Resorts, Inc. REIT* | 28,247 | 533,303 | ||||||
Prosperity Bancshares, Inc. | 6,993 | 505,594 | ||||||
Regions Financial Corp. | 22,189 | 483,720 | ||||||
Sun Communities, Inc. REIT | 2,052 | 430,858 | ||||||
American Tower Corp. — Class A REIT | 1,450 | 424,125 | ||||||
VICI Properties, Inc. REIT | 13,634 | 410,520 | ||||||
Citigroup, Inc. | 5,863 | 354,066 | ||||||
Gaming and Leisure Properties, Inc. REIT | 7,190 | 349,865 | ||||||
Stifel Financial Corp. | 4,680 | 329,566 | ||||||
Axis Capital Holdings Ltd. | 5,505 | 299,857 | ||||||
Jackson Financial, Inc. — Class A | 6,521 | 272,773 | ||||||
Unum Group | 10,497 | 257,911 | ||||||
Mastercard, Inc. — Class A | 715 | 256,914 | ||||||
Apple Hospitality REIT, Inc. | 15,426 | 249,130 | ||||||
Old Republic International Corp. | 9,140 | 224,661 | ||||||
Virtu Financial, Inc. — Class A | 7,127 | 205,471 | ||||||
Heartland Financial USA, Inc. | 3,967 | 200,770 | ||||||
GoHealth, Inc. — Class A* | 51,157 | 193,885 | ||||||
eHealth, Inc.* | 4,004 | 102,102 | ||||||
Heritage Insurance Holdings, Inc. | 15,888 | 93,422 | ||||||
Total Financial | 21,973,176 | |||||||
Consumer, Non-cyclical - 17.2% | ||||||||
Tyson Foods, Inc. — Class A | 22,928 | 1,998,404 | ||||||
Johnson & Johnson | 10,119 | 1,731,057 | ||||||
Bunge Ltd. | 17,942 | 1,675,065 | ||||||
Ingredion, Inc. | 14,206 | 1,372,868 | ||||||
J M Smucker Co. | 8,301 | 1,127,442 | ||||||
Archer-Daniels-Midland Co. | 16,063 | 1,085,698 | ||||||
Henry Schein, Inc.* | 13,673 | 1,060,068 | ||||||
Quest Diagnostics, Inc. | 5,569 | 963,493 | ||||||
Humana, Inc. | 1,823 | 845,617 | ||||||
McKesson Corp. | 3,206 | 796,915 | ||||||
Merck & Company, Inc. | 9,829 | 753,295 | ||||||
Medtronic plc | 6,276 | 649,252 | ||||||
Encompass Health Corp. | 8,850 | 577,551 | ||||||
Pfizer, Inc. | 7,912 | 467,204 | ||||||
HCA Healthcare, Inc. | 1,707 | 438,562 | ||||||
Central Garden & Pet Co. — Class A* | 7,922 | 379,068 | ||||||
Amgen, Inc. | 1,636 | 368,051 | ||||||
Bristol-Myers Squibb Co. | 5,239 | 326,652 | ||||||
Procter & Gamble Co. | 1,893 | 309,657 | ||||||
US Foods Holding Corp.* | 8,453 | 294,418 | ||||||
Integer Holdings Corp.* | 3,227 | 276,199 | ||||||
Pacira BioSciences, Inc.* | 2,997 | 180,329 | ||||||
Emergent BioSolutions, Inc.* | 2,156 | 93,721 | ||||||
Total Consumer, Non-cyclical | 17,770,586 | |||||||
Consumer, Cyclical - 11.2% | ||||||||
Whirlpool Corp. | 5,238 | 1,229,149 | ||||||
Walmart, Inc. | 8,159 | 1,180,526 | ||||||
DR Horton, Inc. | 10,096 | 1,094,911 | ||||||
LKQ Corp. | 13,820 | 829,615 | ||||||
Kohl’s Corp. | 14,414 | 711,907 | ||||||
PVH Corp. | 6,578 | 701,544 | ||||||
Lear Corp. | 3,640 | 665,938 | ||||||
Ralph Lauren Corp. — Class A | 5,600 | 665,616 | ||||||
Southwest Airlines Co.* | 14,749 | 631,847 | ||||||
PACCAR, Inc. | 5,968 | 526,736 | ||||||
Avient Corp. | 8,639 | 483,352 | ||||||
Methode Electronics, Inc. | 7,815 | 384,263 | ||||||
Home Depot, Inc. | 900 | 373,509 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 4,351 | 365,745 | ||||||
Alaska Air Group, Inc.* | 5,933 | 309,110 | ||||||
Delta Air Lines, Inc.* | 7,103 | 277,585 | ||||||
Abercrombie & Fitch Co. — Class A* | 6,687 | 232,908 | ||||||
Marriott Vacations Worldwide Corp. | 1,054 | 178,105 | ||||||
H&E Equipment Services, Inc. | 3,927 | 173,848 | ||||||
Dana, Inc. | 7,474 | 170,557 | ||||||
Newell Brands, Inc. | 6,712 | 146,590 | ||||||
Lakeland Industries, Inc.* | 6,577 | 142,721 | ||||||
La-Z-Boy, Inc. | 2,400 | 87,144 | ||||||
Total Consumer, Cyclical | 11,563,226 | |||||||
Industrial - 10.8% | ||||||||
Johnson Controls International plc | 19,318 | 1,570,746 | ||||||
Knight-Swift Transportation Holdings, Inc. | 21,358 | 1,301,557 | ||||||
Valmont Industries, Inc. | 3,681 | 922,091 | ||||||
FedEx Corp. | 3,213 | 831,010 | ||||||
Littelfuse, Inc. | 1,841 | 579,326 | ||||||
L3Harris Technologies, Inc. | 2,536 | 540,777 | ||||||
Advanced Energy Industries, Inc. | 5,649 | 514,398 | ||||||
Jacobs Engineering Group, Inc. | 3,679 | 512,227 | ||||||
Kirby Corp.* | 6,945 | 412,672 | ||||||
Graphic Packaging Holding Co. | 20,768 | 404,976 | ||||||
Plexus Corp.* | 3,908 | 374,738 | ||||||
Colfax Corp.* | 7,300 | 335,581 | ||||||
Altra Industrial Motion Corp. | 5,805 | 299,364 | ||||||
Energizer Holdings, Inc. | 7,171 | 287,557 | ||||||
Curtiss-Wright Corp. | 2,055 | 284,967 | ||||||
PGT Innovations, Inc.* | 12,485 | 280,788 | ||||||
Zurn Water Solutions Corp. | 7,322 | 266,520 | ||||||
Terex Corp. | 5,590 | 245,680 | ||||||
GATX Corp. | 2,150 | 224,009 | ||||||
96 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES O (ALL CAP VALUE SERIES) |
| Shares | Value | ||||||
Daseke, Inc.* | 18,251 | $ | 183,240 | |||||
Kennametal, Inc. | 4,942 | 177,467 | ||||||
Arcosa, Inc. | 3,255 | 171,539 | ||||||
EnerSys | 2,114 | 167,133 | ||||||
Park Aerospace Corp. | 11,271 | 148,777 | ||||||
ChargePoint Holdings, Inc.* | 6,531 | 124,415 | ||||||
Total Industrial | 11,161,555 | |||||||
Technology - 9.2% | ||||||||
Micron Technology, Inc. | 19,418 | 1,808,786 | ||||||
DXC Technology Co.* | 31,741 | 1,021,743 | ||||||
Skyworks Solutions, Inc. | 6,298 | 977,072 | ||||||
Leidos Holdings, Inc. | 10,336 | 918,870 | ||||||
Apple, Inc. | 4,767 | 846,476 | ||||||
Qorvo, Inc.* | 5,310 | 830,431 | ||||||
Activision Blizzard, Inc. | 10,921 | 726,574 | ||||||
QUALCOMM, Inc. | 3,924 | 717,582 | ||||||
Evolent Health, Inc. — Class A* | 22,593 | 625,149 | ||||||
Amdocs Ltd. | 4,891 | 366,043 | ||||||
Science Applications International Corp. | 4,099 | 342,635 | ||||||
Cerner Corp. | 2,940 | 273,038 | ||||||
Total Technology | 9,454,399 | |||||||
Energy - 8.6% | ||||||||
Chevron Corp. | 16,722 | 1,962,327 | ||||||
Pioneer Natural Resources Co. | 8,092 | 1,471,773 | ||||||
ConocoPhillips | 20,031 | 1,445,837 | ||||||
Range Resources Corp.* | 70,480 | 1,256,658 | ||||||
Patterson-UTI Energy, Inc. | 108,168 | 914,020 | ||||||
Marathon Oil Corp. | 51,739 | 849,554 | ||||||
Coterra Energy, Inc. — Class A | 29,092 | 552,748 | ||||||
Kinder Morgan, Inc. | 28,094 | 445,571 | ||||||
Total Energy | 8,898,488 | |||||||
Utilities - 6.4% | ||||||||
Exelon Corp. | 23,741 | 1,371,280 | ||||||
Edison International | 18,247 | 1,245,358 | ||||||
Black Hills Corp. | 15,762 | 1,112,324 | ||||||
Duke Energy Corp. | 9,889 | 1,037,356 | ||||||
Pinnacle West Capital Corp. | 10,663 | 752,701 | ||||||
NiSource, Inc. | 18,936 | 522,823 | ||||||
PPL Corp. | 9,865 | 296,542 | ||||||
Spire, Inc. | 3,327 | 216,987 | ||||||
Total Utilities | 6,555,371 | |||||||
Basic Materials - 6.2% | ||||||||
Huntsman Corp. | 54,063 | 1,885,717 | ||||||
Westlake Chemical Corp. | 13,907 | 1,350,787 | ||||||
Reliance Steel & Aluminum Co. | 5,239 | 849,871 | ||||||
Nucor Corp. | 5,050 | 576,457 | ||||||
International Flavors & Fragrances, Inc. | 1,983 | 298,739 | ||||||
Ashland Global Holdings, Inc. | 2,721 | 292,943 | ||||||
Element Solutions, Inc. | 11,935 | 289,782 | ||||||
Kraton Corp.* | 5,854 | 271,157 | ||||||
DuPont de Nemours, Inc. | 2,496 | 201,627 | ||||||
Commercial Metals Co. | 5,375 | 195,059 | ||||||
Dow, Inc. | 3,272 | 185,588 | ||||||
Total Basic Materials | 6,397,727 | |||||||
Communications - 6.2% | ||||||||
Verizon Communications, Inc. | 27,789 | 1,443,916 | ||||||
Cisco Systems, Inc. | 14,121 | 894,848 | ||||||
Comcast Corp. — Class A | 15,643 | 787,312 | ||||||
Alphabet, Inc. — Class A* | 257 | 744,539 | ||||||
T-Mobile US, Inc.* | 4,919 | 570,506 | ||||||
Infinera Corp.* | 52,464 | 503,130 | ||||||
Juniper Networks, Inc. | 13,304 | 475,086 | ||||||
Ciena Corp.* | 4,620 | 355,601 | ||||||
TEGNA, Inc. | 18,288 | 339,426 | ||||||
ViacomCBS, Inc. — Class B | 8,646 | 260,936 | ||||||
Total Communications | 6,375,300 | |||||||
Total Common Stocks | ||||||||
(Cost $72,013,169) | 100,149,828 | |||||||
RIGHTS† - 0.0% | ||||||||
Basic Materials - 0.0% | ||||||||
Pan American Silver Corp.* | 40,146 | 31,262 | ||||||
Total Rights | ||||||||
(Cost $—) | 31,262 | |||||||
MONEY MARKET FUND† - 2.7% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%1 | 2,778,133 | 2,778,133 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,778,133) | 2,778,133 | |||||||
Total Investments - 99.8% | ||||||||
(Cost $74,791,302) | $ | 102,959,223 | ||||||
Other Assets & Liabilities, net - 0.2% | 175,204 | |||||||
Total Net Assets - 100.0% | $ | 103,134,427 | ||||||
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
1 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 97 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES O (ALL CAP VALUE SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 100,149,828 | $ | — | $ | — | $ | 100,149,828 | ||||||||
Rights | 31,262 | — | — | 31,262 | ||||||||||||
Money Market Fund | 2,778,133 | — | — | 2,778,133 | ||||||||||||
Total Assets | $ | 102,959,223 | $ | — | $ | — | $ | 102,959,223 | ||||||||
98 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES O (ALL CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments, at value (cost $74,791,302) | $ | 102,959,223 | ||
Prepaid expenses | 3,079 | |||
Receivables: | ||||
Fund shares sold | 159,376 | |||
Dividends | 146,648 | |||
Interest | 31 | |||
Total assets | 103,268,357 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 36,254 | |||
Professional fees | 31,116 | |||
Distribution and service fees | 21,530 | |||
Fund shares redeemed | 18,475 | |||
Fund accounting/administration fees | 7,290 | |||
Trustees’ fees* | 5,318 | |||
Transfer agent/maintenance fees | 2,026 | |||
Miscellaneous | 11,921 | |||
Total liabilities | 133,930 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 103,134,427 | ||
Net assets consist of: | ||||
Paid in capital | $ | 63,599,933 | ||
Total distributable earnings (loss) | 39,534,494 | |||
Net assets | $ | 103,134,427 | ||
Capital shares outstanding | 2,676,917 | |||
Net asset value per share | $ | 38.53 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends | $ | 1,969,591 | ||
Interest | 254 | |||
Total investment income | 1,969,845 | |||
Expenses: | ||||
Management fees | 714,990 | |||
Distribution and service fees | 255,353 | |||
Transfer agent/maintenance fees | 25,127 | |||
Fund accounting/administration fees | 74,904 | |||
Professional fees | 44,596 | |||
Trustees’ fees* | 19,517 | |||
Custodian fees | 9,202 | |||
Line of credit fees | 4,615 | |||
Miscellaneous | 8,499 | |||
Total expenses | 1,156,803 | |||
Less: | ||||
Expenses waived by Adviser | (268,200 | ) | ||
Net expenses | 888,603 | |||
Net investment income | 1,081,242 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 11,358,520 | |||
Net realized gain | 11,358,520 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 11,215,836 | |||
Net change in unrealized appreciation (depreciation) | 11,215,836 | |||
Net realized and unrealized gain | 22,574,356 | |||
Net increase in net assets resulting from operations | $ | 23,655,598 | ||
* | 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 | 99 |
SERIES O (ALL CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,081,242 | $ | 1,749,986 | ||||
Net realized gain on investments | 11,358,520 | 1,258,735 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 11,215,836 | (3,137,740 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 23,655,598 | (129,019 | ) | |||||
Distributions to shareholders | (2,332,442 | ) | (6,300,999 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,847,533 | 2,686,231 | ||||||
Distributions reinvested | 2,332,442 | 6,300,999 | ||||||
Cost of shares redeemed | (16,029,758 | ) | (18,530,135 | ) | ||||
Net decrease from capital share transactions | (9,849,783 | ) | (9,542,905 | ) | ||||
Net increase (decrease) in net assets | 11,473,373 | (15,972,923 | ) | |||||
Net assets: | ||||||||
Beginning of year | 91,661,054 | 107,633,977 | ||||||
End of year | $ | 103,134,427 | $ | 91,661,054 | ||||
Capital share activity: | ||||||||
Shares sold | 103,312 | 103,876 | ||||||
Shares issued from reinvestment of distributions | 65,298 | 241,418 | ||||||
Shares redeemed | (442,874 | ) | (666,704 | ) | ||||
Net decrease in shares | (274,264 | ) | (321,410 | ) | ||||
100 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES O (ALL CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 31.06 | $ | 32.89 | $ | 29.31 | $ | 35.97 | $ | 34.05 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .38 | .56 | .51 | .43 | .24 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 7.93 | (.33 | ) | 6.19 | (3.83 | ) | 4.51 | |||||||||||||
Total from investment operations | 8.31 | .23 | 6.70 | (3.40 | ) | 4.75 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.65 | ) | (.52 | ) | (.49 | ) | (.40 | ) | (.38 | ) | ||||||||||
Net realized gains | (.19 | ) | (1.54 | ) | (2.63 | ) | (2.86 | ) | (2.45 | ) | ||||||||||
Total distributions | (.84 | ) | (2.06 | ) | (3.12 | ) | (3.26 | ) | (2.83 | ) | ||||||||||
Net asset value, end of period | $ | 38.53 | $ | 31.06 | $ | 32.89 | $ | 29.31 | $ | 35.97 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 26.95 | % | 1.88 | % | 23.74 | % | (10.62 | %) | 14.77 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 103,134 | $ | 91,661 | $ | 107,634 | $ | 100,916 | $ | 132,771 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.06 | % | 2.03 | % | 1.62 | % | 1.23 | % | 0.69 | % | ||||||||||
Total expensesc | 1.13 | % | 1.21 | % | 1.18 | % | 1.17 | % | 1.11 | % | ||||||||||
Net expensesd,e,f | 0.87 | % | 0.87 | % | 0.88 | % | 0.88 | % | 0.89 | % | ||||||||||
Portfolio turnover rate | 26 | % | 22 | % | 33 | % | 36 | % | 33 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | — | 0.00%* |
* | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.87% | 0.87% | 0.88% | 0.88% | 0.88% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 101 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders
The Series P (High Yield Series) is managed by a team of seasoned professionals, including B. Scott Minerd, Chairman of Investments and Global Chief Investment Officer; Thomas J. Hauser, Senior Managing Director and Portfolio Manager; and Richard de Wet, 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 December 31, 2021.
For the one-year period ended December 31, 2021, Series P (High Yield Series) returned 5.41%, compared to 5.28% return of its benchmark, the Bloomberg U.S. Corporate High Yield Index.
Investment Approach
The Fund seeks to deliver high current income. Capital appreciation is a secondary objective. The Fund’s strategy offers the flexibility to invest across a broad array of high yield securities including corporate bonds, syndicated bank loans, mortgage-backed and asset-backed securities and convertible securities and access to Guggenheim’s unique fixed income process and philosophy founded on the principles of behavioral finance. An allocation to high yield securities may provide additional diversification (though, diversification neither assures a profit nor eliminates the risk of experiencing investment losses) along with higher income and return potential. Investors should note, high yield, below investment grade, and unrated high-risk debt securities may present additional risk because these securities may be less liquid and present more credit risk than investment grade bonds
Performance Review and Positioning
The high yield market rallied over the year with seven consecutive quarters of positive returns. The unprecedented and ongoing policy response to COVID-19 has accelerated the progression of the credit cycle characterized by strong earnings growth, low default volumes, upward ratings migration, and tight spreads. However, near-term downside risks emerged towards the end of the period due to the continued spread of Covid-19, increasing concerns about inflation, and a hawkish shift in monetary policy by the Federal Reserve.
U.S. high yield new issuance volume totaled a record $480 billion for the year, up 7% annually driven by the strong first quarter. About 60% of the year’s new issuance was for refinancing existing debt. Fund flow estimates indicate $13 billion of outflows from high yield mutual funds and ETFs, which did not have a material impact on the market. The high-yield default rate ended the year at 0.4%, down dramatically from the recent high of 7% and well below its longer-term average. Easy lending and improving fundamentals continue to support expectations of low default activity, aided by fewer distressed issuers.
Annual performance in high yield was positive across industries with Energy continuing to be the top performer amid rising commodity prices. CCCs outperformed, nearly doubling the returns of BBs and Bs with most of outperformance occurring in the first half of the year. At the end of the year, the average high yield corporate bond yield (Bloomberg U.S. Corporate High Yield Index) was 4.21% which compares favorably to considerably lower global yields.
The Fund utilized credit swaps and forward foreign currency contracts during the period. Credit swaps were used to obtain credit market index exposure and contributed modestly to performance. The Fund invests in non-U.S. dollar denominated assets when the risk-return profile is favorable. Forward foreign currency contracts were used to hedge foreign currency exposure in the portfolio and operated effectively, though on a standalone basis, had a negligible impact on performance. Non-U.S. dollar denominated assets comprise less than 2% of the Fund.
Fund performance over the period was driven by strong credit selection in Consumer Non-Cyclicals, Communications, and CCC-rated credit. The allocation to bank loans and a small exposure to reorg equities contributed to performance as well. The Fund was negatively impacted by the ~490bps underweight in Energy which was the top performing sector and weaker performance by the Fund’s Energy exposures which were concentrated in midstream companies who are less exposed to underlying commodity prices.
Even as high yield market fundamentals are strong and improving, we have become more cautious amidst the market rally. As spreads to Treasuries have narrowed to near historical tights, there is a greater concern in fixed income markets (including in high yield) around interest rate risk rather than credit risk. With rates set to rise, we expect incremental new issuance could pressure secondary pricing in the near-term. Non-corporate fundamental factors like interest rates, net new issuance, and market flows will likely dictate near term performance though none of these factors appear to be of imminent concern.
102 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
The hunt for yield is likely to continue amid low prevailing global yields. While the level of distressed assets in the market remains low, we still believe avoiding defaults will be important in achieving performance over the medium to longer term. As such, we continue to avoid highly levered industries and companies with heavy capital expenditure needs that can impair cash flow. Companies with recurring revenue streams, strong cash flows, and high-quality margins remain the focus in the current environment.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 103 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES)
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.
Inception Date: August 5, 1996 |
Ten Largest Holdings (% of Total Net Assets) | |
Terraform Global Operating LLC, 6.13% | 1.6% |
Hunt Companies, Inc., 5.25% | 1.2% |
NFP Corp., 6.88% | 1.1% |
Cleaver-Brooks, Inc., 7.88% | 1.0% |
GrafTech Finance, Inc., 4.63% | 1.0% |
Jefferies Finance LLC / JFIN Company-Issuer Corp., 5.00% | 1.0% |
Cheplapharm Arzneimittel GmbH, 5.50% | 1.0% |
Carpenter Technology Corp., 6.38% | 1.0% |
Artera Services LLC, 9.03% | 0.9% |
CPI CG, Inc., 8.63% | 0.9% |
Top Ten Total | 10.7% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
104 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series P (High Yield Series) | 5.41% | 4.65% | 6.00% |
Bloomberg U.S. Corporate High Yield Index | 5.28% | 6.30% | 6.83% |
Portfolio Composition by Quality Rating1 | |
Rating | % of Total |
Fixed Income Instruments | |
A | 0.3% |
BBB | 5.4% |
BB | 49.6% |
B | 30.5% |
CCC | 4.5% |
NR2 | 0.8% |
Other Instruments | 8.9% |
Total Investments | 100.0% |
* | 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 Bloomberg 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
1 | Source: BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). All securities except for those labeled “NR” have been rated by Moody’s, Standard & Poor’s (“S&P”), or Fitch, each of which is 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 ratings to the equivalent S&P rating. Security ratings are determined at the time of purchase and may change thereafter. |
2 | NR (not rated) securities do not necessarily indicate low credit quality. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 105 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Shares | Value | |||||||
COMMON STOCKS† - 1.4% | ||||||||
| Financial - 0.6% | ||||||||
KKR Acquisition Holdings I Corp. — Class A*,1 | 16,531 | $ | 161,041 | |||||
TPG Pace Beneficial II Corp.*,1 | 5,510 | 53,998 | ||||||
Acropolis Infrastructure Acquisition Corp. — Class A*,1 | 4,900 | 47,481 | ||||||
| Jefferies Financial Group, Inc. | 247 | 9,584 | ||||||
RXR Acquisition Corp. — Class A*,1 | 207 | 2,018 | ||||||
Colicity, Inc. — Class A*,1 | 163 | 1,589 | ||||||
MSD Acquisition Corp. — Class A*,1 | 84 | 832 | ||||||
| Total Financial | 276,543 | |||||||
| Utilities - 0.4% | ||||||||
TexGen Power LLC*,††† | 7,929 | 184,349 | ||||||
| Communications - 0.3% | ||||||||
| Vacasa, Inc. — Class A* | 14,083 | 117,171 | ||||||
| Consumer, Non-cyclical - 0.1% | ||||||||
Cengage Learning Holdings II, Inc.*,†† | 2,107 | 37,926 | ||||||
| Spectrum Brands Holdings, Inc. | 6 | 610 | ||||||
| Crimson Wine Group Ltd.* | 24 | 198 | ||||||
MEDIQ, Inc.*,††† | 92 | — | ||||||
| Total Consumer, Non-cyclical | 38,734 | |||||||
| Energy - 0.0% | ||||||||
Legacy Reserves, Inc.*,††† | 1,969 | 12,799 | ||||||
Permian Production Partners LLC††† | 9,124 | 11,587 | ||||||
Bruin E&P Partnership Units††† | 6,071 | 316 | ||||||
| Total Energy | 24,702 | |||||||
| Industrial - 0.0% | ||||||||
BP Holdco LLC*,†††,2 | 523 | 368 | ||||||
Vector Phoenix Holdings, LP*,††† | 523 | 144 | ||||||
| Total Industrial | 512 | |||||||
| Consumer, Cyclical - 0.0% | ||||||||
| Chorus Aviation, Inc.* | 3 | 8 | ||||||
| Total Common Stocks | ||||||||
| (Cost $610,821) | 642,019 | |||||||
| PREFERRED STOCKS†† - 2.3% | ||||||||
| Financial - 2.3% | ||||||||
| Wells Fargo & Co., 4.38% | 9,000 | 227,700 | ||||||
| American Equity Investment Life Holding Co., 5.95% | 6,000 | 165,000 | ||||||
| Arch Capital Group Ltd., 4.55% | 6,000 | 155,160 | ||||||
| Bank of America Corp., 4.38% | 6,000 | 153,480 | ||||||
| First Republic Bank, 4.13% | 6,000 | 151,860 | ||||||
| Charles Schwab Corp., 4.00% | 150,000 | 151,500 | ||||||
| Total Financial | 1,004,700 | |||||||
| Industrial - 0.0% | ||||||||
U.S. Shipping Corp.*,††† | 24,529 | 2 | ||||||
| Total Preferred Stocks | ||||||||
| (Cost $1,600,000) | 1,004,702 | |||||||
| WARRANTS† - 0.0% | ||||||||
| KKR Acquisition Holdings I Corp. - Class A | ||||||||
Expiring 12/31/27*,1 | 4,132 | 4,126 | ||||||
| Acropolis Infrastructure Acquisition Corp. | ||||||||
Expiring 03/31/26*,1 | 1,632 | 1,308 | ||||||
| RXR Acquisition Corp. | ||||||||
Expiring 03/08/26*,1 | 38 | 27 | ||||||
| Colicity, Inc. - Class A | ||||||||
Expiring 12/31/27*,1 | 30 | 23 | ||||||
| MSD Acquisition Corp. | ||||||||
Expiring 05/13/23*,1 | 16 | 18 | ||||||
| Total Warrants | ||||||||
| (Cost $5,740) | 5,502 | |||||||
| MONEY MARKET FUND† - 5.2% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%4 | 2,321,396 | 2,321,396 | ||||||
| Total Money Market Fund | ||||||||
| (Cost $2,321,396) | 2,321,396 | |||||||
Face | ||||||||
| CORPORATE BONDS†† - 80.0% | ||||||||
| Consumer, Non-cyclical - 17.2% | ||||||||
| Nielsen Finance LLC / Nielsen Finance Co. | ||||||||
5.88% due 10/01/305 | 275,000 | 290,356 | ||||||
4.75% due 07/15/315 | 250,000 | 246,875 | ||||||
| Kraft Heinz Foods Co. | ||||||||
| 4.88% due 10/01/49 | 200,000 | 251,188 | ||||||
| 5.00% due 06/04/42 | 150,000 | 186,594 | ||||||
| 4.38% due 06/01/46 | 50,000 | 58,550 | ||||||
| 5.20% due 07/15/45 | 25,000 | 31,787 | ||||||
| Cheplapharm Arzneimittel GmbH | ||||||||
5.50% due 01/15/285 | 425,000 | 430,313 | ||||||
| CPI CG, Inc. | ||||||||
8.63% due 03/15/265 | 375,000 | 396,589 | ||||||
| FAGE International S.A. / FAGE USA Dairy Industry, Inc. | ||||||||
5.63% due 08/15/265 | 385,000 | 394,625 | ||||||
| Rent-A-Center, Inc. | ||||||||
6.38% due 02/15/295 | 375,000 | 390,937 | ||||||
| US Foods, Inc. | ||||||||
6.25% due 04/15/255 | 275,000 | 286,344 | ||||||
4.63% due 06/01/305 | 100,000 | 101,115 | ||||||
| Sabre GLBL, Inc. | ||||||||
9.25% due 04/15/255 | 200,000 | 226,000 | ||||||
7.38% due 09/01/255 | 150,000 | 156,750 | ||||||
| Bausch Health Companies, Inc. | ||||||||
4.88% due 06/01/285 | 375,000 | 382,500 | ||||||
| Post Holdings, Inc. | ||||||||
4.50% due 09/15/315 | 300,000 | 297,750 | ||||||
5.50% due 12/15/295 | 50,000 | 52,531 | ||||||
| BCP V Modular Services Finance II plc | ||||||||
4.75% due 10/30/285 | EUR 225,000 | 258,069 | ||||||
106 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Face | Value | ||||||
Lamb Weston Holdings, Inc. | ||||||||
4.13% due 01/31/305 | 225,000 | $ | 230,893 | |||||
Par Pharmaceutical, Inc. | ||||||||
7.50% due 04/01/275 | 225,000 | 229,934 | ||||||
ADT Security Corp. | ||||||||
4.13% due 08/01/295 | 225,000 | 221,625 | ||||||
Prime Security Services Borrower LLC / Prime Finance, Inc. | ||||||||
3.38% due 08/31/275 | 225,000 | 217,213 | ||||||
Tenet Healthcare Corp. | ||||||||
7.50% due 04/01/255 | 200,000 | 210,490 | ||||||
Sotheby’s/Bidfair Holdings, Inc. | ||||||||
5.88% due 06/01/295 | 200,000 | 204,000 | ||||||
Mozart Debt Merger Sub, Inc. | ||||||||
5.25% due 10/01/295 | 200,000 | 202,728 | ||||||
Molina Healthcare, Inc. | ||||||||
3.88% due 05/15/325 | 200,000 | 201,250 | ||||||
KeHE Distributors LLC / KeHE Finance Corp. | ||||||||
8.63% due 10/15/265 | 179,000 | 191,530 | ||||||
Sotheby’s | ||||||||
7.38% due 10/15/275 | 175,000 | 186,375 | ||||||
Nathan’s Famous, Inc. | ||||||||
6.63% due 11/01/255 | 175,000 | 178,500 | ||||||
Service Corporation International | ||||||||
4.00% due 05/15/31 | 150,000 | 151,875 | ||||||
Kronos Acquisition Holdings, Inc. / KIK Custom Products, Inc. | ||||||||
7.00% due 12/31/275 | 107,000 | 100,848 | ||||||
5.00% due 12/31/265 | 50,000 | 49,391 | ||||||
WW International, Inc. | ||||||||
4.50% due 04/15/295 | 150,000 | 143,587 | ||||||
Centene Corp. | ||||||||
4.25% due 12/15/27 | 125,000 | 130,312 | ||||||
Endo Luxembourg Finance Company I SARL / Endo US, Inc. | ||||||||
6.13% due 04/01/295 | 125,000 | 122,500 | ||||||
Legends Hospitality Holding Company LLC / Legends Hospitality Co-Issuer, Inc. | ||||||||
5.00% due 02/01/265 | 100,000 | 100,500 | ||||||
Gartner, Inc. | ||||||||
3.63% due 06/15/295 | 75,000 | 75,829 | ||||||
Central Garden & Pet Co. | ||||||||
4.13% due 04/30/315 | 75,000 | 75,375 | ||||||
Total Consumer, Non-cyclical | 7,663,628 | |||||||
Communications - 14.3% | ||||||||
CSC Holdings LLC | ||||||||
4.13% due 12/01/305 | 225,000 | 219,656 | ||||||
4.63% due 12/01/305 | 200,000 | 189,250 | ||||||
3.38% due 02/15/315 | 200,000 | 187,250 | ||||||
6.50% due 02/01/295 | 150,000 | 160,500 | ||||||
Altice France S.A. | ||||||||
5.50% due 10/15/295 | 325,000 | 320,125 | ||||||
5.13% due 07/15/295 | 225,000 | 219,476 | ||||||
8.13% due 02/01/275 | 200,000 | 213,750 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
4.50% due 05/01/32 | 275,000 | 282,906 | ||||||
4.50% due 06/01/335 | 250,000 | 255,057 | ||||||
4.25% due 01/15/345 | 100,000 | 98,383 | ||||||
Level 3 Financing, Inc. | ||||||||
4.25% due 07/01/285 | 300,000 | 297,000 | ||||||
3.63% due 01/15/295 | 300,000 | 285,000 | ||||||
McGraw-Hill Education, Inc. | ||||||||
5.75% due 08/01/285 | 375,000 | 371,250 | ||||||
8.00% due 08/01/295 | 175,000 | 173,661 | ||||||
UPC Broadband Finco BV | ||||||||
4.88% due 07/15/315 | 375,000 | 382,500 | ||||||
Sirius XM Radio, Inc. | ||||||||
5.50% due 07/01/295 | 125,000 | 134,688 | ||||||
3.88% due 09/01/315 | 125,000 | 122,556 | ||||||
4.13% due 07/01/305 | 100,000 | 100,000 | ||||||
Cengage Learning, Inc. | ||||||||
9.50% due 06/15/245 | 290,000 | 291,813 | ||||||
LCPR Senior Secured Financing DAC | ||||||||
6.75% due 10/15/275 | 270,000 | 283,500 | ||||||
Virgin Media Finance plc | ||||||||
5.00% due 07/15/305 | 275,000 | 273,625 | ||||||
Match Group Holdings II LLC | ||||||||
3.63% due 10/01/315 | 150,000 | 145,688 | ||||||
4.63% due 06/01/285 | 100,000 | 104,040 | ||||||
Houghton Mifflin Harcourt Publishers, Inc. | ||||||||
9.00% due 02/15/255 | 200,000 | 209,000 | ||||||
Telenet Finance Luxembourg Notes SARL | ||||||||
5.50% due 03/01/28 | 200,000 | 206,000 | ||||||
Virgin Media Secured Finance plc | ||||||||
4.50% due 08/15/305 | 200,000 | 201,262 | ||||||
AMC Networks, Inc. | ||||||||
4.25% due 02/15/29 | 200,000 | 198,750 | ||||||
Go Daddy Operating Company LLC / GD Finance Co., Inc. | ||||||||
3.50% due 03/01/295 | 200,000 | 198,469 | ||||||
Vmed O2 UK Financing I plc | ||||||||
4.25% due 01/31/315 | 200,000 | 196,000 | ||||||
TripAdvisor, Inc. | ||||||||
7.00% due 07/15/255 | 50,000 | 52,750 | ||||||
Total Communications | 6,373,905 | |||||||
Financial - 12.3% | ||||||||
Hunt Companies, Inc. | ||||||||
5.25% due 04/15/295 | 550,000 | 541,750 | ||||||
NFP Corp. | ||||||||
6.88% due 08/15/285 | 500,000 | 501,290 | ||||||
Iron Mountain, Inc. | ||||||||
5.63% due 07/15/325 | 275,000 | 294,300 | ||||||
4.88% due 09/15/295 | 120,000 | 124,198 | ||||||
5.25% due 07/15/305 | 75,000 | 79,037 | ||||||
Jefferies Finance LLC / JFIN Company-Issuer Corp. | ||||||||
5.00% due 08/15/285 | 425,000 | 435,625 | ||||||
United Wholesale Mortgage LLC | ||||||||
5.50% due 04/15/295 | 225,000 | 220,781 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 107 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Face | Value | ||||||
5.75% due 06/15/275 | 200,000 | $ | 200,500 | |||||
OneMain Finance Corp. | ||||||||
3.88% due 09/15/28 | 175,000 | 171,500 | ||||||
4.00% due 09/15/30 | 75,000 | 73,754 | ||||||
6.63% due 01/15/28 | 50,000 | 56,000 | ||||||
8.88% due 06/01/25 | 50,000 | 53,500 | ||||||
Cushman & Wakefield US Borrower LLC | ||||||||
6.75% due 05/15/285 | 300,000 | 321,000 | ||||||
HUB International Ltd. | ||||||||
5.63% due 12/01/295 | 200,000 | 206,044 | ||||||
7.00% due 05/01/265 | 100,000 | 102,750 | ||||||
Assurant, Inc. | ||||||||
7.00% due 03/27/483 | 200,000 | 227,750 | ||||||
Iron Mountain Information Management Services, Inc. | ||||||||
5.00% due 07/15/325 | 200,000 | 204,694 | ||||||
AmWINS Group, Inc. | ||||||||
4.88% due 06/30/295 | 175,000 | 176,750 | ||||||
USI, Inc. | ||||||||
6.88% due 05/01/255 | 175,000 | 176,313 | ||||||
Home Point Capital, Inc. | ||||||||
5.00% due 02/01/265 | 175,000 | 162,313 | ||||||
Kennedy-Wilson, Inc. | ||||||||
5.00% due 03/01/31 | 150,000 | 154,500 | ||||||
Wilton Re Finance LLC | ||||||||
5.88% due 03/30/333,5 | 150,000 | 154,263 | ||||||
Jane Street Group / JSG Finance, Inc. | ||||||||
4.50% due 11/15/295 | 140,000 | 141,400 | ||||||
Greystar Real Estate Partners LLC | ||||||||
5.75% due 12/01/255 | 125,000 | 127,215 | ||||||
Rocket Mortgage LLC / Rocket Mortgage Company-Issuer, Inc. | ||||||||
3.88% due 03/01/315 | 125,000 | 126,875 | ||||||
PHM Group Holding Oy | ||||||||
4.75% due 06/18/265 | EUR | 100,000 | 116,218 | |||||
LPL Holdings, Inc. | ||||||||
4.38% due 05/15/315 | 100,000 | 102,288 | ||||||
Liberty Mutual Group, Inc. | ||||||||
4.30% due 02/01/615 | 100,000 | 94,000 | ||||||
Alliant Holdings Intermediate LLC / Alliant Holdings Company-Issuer | ||||||||
4.25% due 10/15/275 | 75,000 | 75,000 | ||||||
Starwood Property Trust, Inc. | ||||||||
3.75% due 12/31/245 | 50,000 | 50,538 | ||||||
Total Financial | 5,472,146 | |||||||
Industrial - 11.1% | ||||||||
New Enterprise Stone & Lime Company, Inc. | ||||||||
9.75% due 07/15/285 | 350,000 | 374,500 | ||||||
5.25% due 07/15/285 | 150,000 | 152,100 | ||||||
Cleaver-Brooks, Inc. | ||||||||
7.88% due 03/01/235 | 450,000 | 439,875 | ||||||
GrafTech Finance, Inc. | ||||||||
4.63% due 12/15/285 | 430,000 | 436,450 | ||||||
Artera Services LLC | ||||||||
9.03% due 12/04/255 | 400,000 | 423,174 | ||||||
TransDigm, Inc. | ||||||||
6.25% due 03/15/265 | 275,000 | 285,828 | ||||||
8.00% due 12/15/255 | 100,000 | 105,497 | ||||||
Harsco Corp. | ||||||||
5.75% due 07/31/275 | 377,000 | 384,069 | ||||||
Howmet Aerospace, Inc. | ||||||||
5.95% due 02/01/37 | 275,000 | 325,187 | ||||||
Brundage-Bone Concrete Pumping Holdings, Inc. | ||||||||
6.00% due 02/01/265 | 275,000 | 286,000 | ||||||
EnerSys | ||||||||
4.38% due 12/15/275 | 250,000 | 259,375 | ||||||
Amsted Industries, Inc. | ||||||||
4.63% due 05/15/305 | 250,000 | 256,250 | ||||||
Great Lakes Dredge & Dock Corp. | ||||||||
5.25% due 06/01/295 | 225,000 | 231,750 | ||||||
Standard Industries, Inc. | ||||||||
4.38% due 07/15/305 | 150,000 | 153,076 | ||||||
5.00% due 02/15/275 | 50,000 | 51,470 | ||||||
Masonite International Corp. | ||||||||
5.38% due 02/01/285 | 175,000 | 183,531 | ||||||
Ball Corp. | ||||||||
3.13% due 09/15/31 | 150,000 | 148,125 | ||||||
Mauser Packaging Solutions Holding Co. | ||||||||
5.50% due 04/15/245 | 125,000 | 126,146 | ||||||
TopBuild Corp. | ||||||||
4.13% due 02/15/325 | 75,000 | 76,969 | ||||||
Arcosa, Inc. | ||||||||
4.38% due 04/15/295 | 75,000 | 76,031 | ||||||
Pactiv Evergreen Group Issuer Incorporated/Pactiv Evergreen Group Issuer LLC/Reynolds Gro | ||||||||
4.00% due 10/15/275 | 75,000 | 72,938 | ||||||
Builders FirstSource, Inc. | ||||||||
4.25% due 02/01/325 | 50,000 | 51,760 | ||||||
Hillenbrand, Inc. | ||||||||
3.75% due 03/01/31 | 50,000 | 50,125 | ||||||
Total Industrial | 4,950,226 | |||||||
Consumer, Cyclical - 8.1% | ||||||||
Suburban Propane Partners Limited Partnership/Suburban Energy Finance Corp. | ||||||||
5.88% due 03/01/27 | 275,000 | 283,938 | ||||||
5.00% due 06/01/315 | 150,000 | 151,688 | ||||||
JB Poindexter & Company, Inc. | ||||||||
7.13% due 04/15/265 | 350,000 | 366,212 | ||||||
1011778 BC ULC / New Red Finance, Inc. | ||||||||
3.88% due 01/15/285 | 150,000 | 151,914 | ||||||
3.50% due 02/15/295 | 125,000 | 123,712 | ||||||
Clarios Global, LP | ||||||||
6.75% due 05/15/255 | 201,000 | 210,548 | ||||||
Hawaiian Brand Intellectual Property Ltd. / HawaiianMiles Loyalty Ltd. | ||||||||
5.75% due 01/20/265 | 190,000 | 198,787 | ||||||
Allison Transmission, Inc. | ||||||||
3.75% due 01/30/315 | 200,000 | 195,000 | ||||||
108 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Face | Value | ||||||
Superior Plus Limited Partnership / Superior General Partner, Inc. | ||||||||
4.50% due 03/15/295 | 175,000 | $ | 179,872 | |||||
Wolverine World Wide, Inc. | ||||||||
4.00% due 08/15/295 | 175,000 | 170,147 | ||||||
Wabash National Corp. | ||||||||
4.50% due 10/15/285 | 150,000 | 151,500 | ||||||
Murphy Oil USA, Inc. | ||||||||
3.75% due 02/15/315 | 150,000 | 149,063 | ||||||
Boyd Gaming Corp. | ||||||||
8.63% due 06/01/255 | 124,000 | 132,868 | ||||||
CD&R Smokey Buyer, Inc. | ||||||||
6.75% due 07/15/255 | 125,000 | 131,250 | ||||||
Cedar Fair, LP / Canada’s Wonderland Co. / Magnum Management Corp. / Millennium Operations LLC | ||||||||
5.50% due 05/01/255 | 125,000 | 129,375 | ||||||
Air Canada | ||||||||
3.88% due 08/15/265 | 125,000 | 127,500 | ||||||
Station Casinos LLC | ||||||||
4.63% due 12/01/315 | 125,000 | 126,025 | ||||||
Mileage Plus Holdings LLC / Mileage Plus Intellectual Property Assets Ltd. | ||||||||
6.50% due 06/20/275 | 100,000 | 106,750 | ||||||
Hilton Domestic Operating Company, Inc. | ||||||||
5.75% due 05/01/285 | 50,000 | 53,421 | ||||||
4.00% due 05/01/315 | 50,000 | 51,127 | ||||||
Tempur Sealy International, Inc. | ||||||||
3.88% due 10/15/315 | 100,000 | 100,189 | ||||||
Penn National Gaming, Inc. | ||||||||
4.13% due 07/01/295 | 100,000 | 97,000 | ||||||
Six Flags Theme Parks, Inc. | ||||||||
7.00% due 07/01/255 | 75,000 | 80,096 | ||||||
Asbury Automotive Group, Inc. | ||||||||
5.00% due 02/15/325 | 75,000 | 77,827 | ||||||
Superior Plus, LP | ||||||||
4.25% due 05/18/285 | CAD | 75,000 | 59,589 | |||||
Ritchie Bros Holdings Ltd. | ||||||||
4.95% due 12/15/295 | CAD | 25,000 | 20,098 | |||||
Total Consumer, Cyclical | 3,625,496 | |||||||
Energy - 7.4% | ||||||||
Parkland Corp. | ||||||||
4.50% due 10/01/295 | 250,000 | 250,197 | ||||||
4.63% due 05/01/305 | 250,000 | 248,438 | ||||||
NuStar Logistics, LP | ||||||||
5.63% due 04/28/27 | 200,000 | 211,500 | ||||||
6.38% due 10/01/30 | 100,000 | 111,000 | ||||||
6.00% due 06/01/26 | 75,000 | 81,375 | ||||||
CVR Energy, Inc. | ||||||||
5.75% due 02/15/285,6 | 325,000 | 312,000 | ||||||
5.25% due 02/15/255 | 25,000 | 24,125 | ||||||
ITT Holdings LLC | ||||||||
6.50% due 08/01/295 | 325,000 | 321,750 | ||||||
Southwestern Energy Co. | ||||||||
5.38% due 02/01/29 | 250,000 | 264,375 | ||||||
4.75% due 02/01/32 | 25,000 | 26,328 | ||||||
Global Partners Limited Partnership / GLP Finance Corp. | ||||||||
7.00% due 08/01/27 | 225,000 | 233,438 | ||||||
6.88% due 01/15/29 | 50,000 | 52,358 | ||||||
Rattler Midstream, LP | ||||||||
5.63% due 07/15/255 | 250,000 | 260,000 | ||||||
Exterran Energy Solutions Limited Partnership / EES Finance Corp. | ||||||||
8.13% due 05/01/25 | 241,000 | 224,130 | ||||||
Occidental Petroleum Corp. | ||||||||
4.63% due 06/15/45 | 125,000 | 129,687 | ||||||
4.10% due 02/15/47 | 50,000 | 49,000 | ||||||
Crestwood Midstream Partners Limited Partnership / Crestwood Midstream Finance Corp. | ||||||||
5.63% due 05/01/275 | 150,000 | 152,812 | ||||||
TransMontaigne Partners Limited Partnership / TLP Finance Corp. | ||||||||
6.13% due 02/15/26 | 150,000 | 148,312 | ||||||
PDC Energy, Inc. | ||||||||
6.13% due 09/15/24 | 126,000 | 127,575 | ||||||
DT Midstream, Inc. | ||||||||
4.13% due 06/15/295 | 75,000 | 76,781 | ||||||
Basic Energy Services, Inc. | ||||||||
due 10/15/237,8 | 175,000 | 12,250 | ||||||
Total Energy | 3,317,431 | |||||||
Basic Materials - 5.9% | ||||||||
Carpenter Technology Corp. | ||||||||
6.38% due 07/15/28 | 400,000 | 425,238 | ||||||
Minerals Technologies, Inc. | ||||||||
5.00% due 07/01/285 | 375,000 | 388,706 | ||||||
SCIL IV LLC / SCIL USA Holdings LLC | ||||||||
5.38% due 11/01/265 | 225,000 | 230,906 | ||||||
EverArc Escrow SARL | ||||||||
5.00% due 10/30/295 | 225,000 | 225,167 | ||||||
Arconic Corp. | ||||||||
6.00% due 05/15/255 | 200,000 | 209,000 | ||||||
Ingevity Corp. | ||||||||
4.50% due 02/01/265 | 100,000 | 100,250 | ||||||
3.88% due 11/01/285 | 100,000 | 97,375 | ||||||
Kaiser Aluminum Corp. | ||||||||
4.63% due 03/01/285 | 110,000 | 111,100 | ||||||
4.50% due 06/01/315 | 75,000 | 73,781 | ||||||
Clearwater Paper Corp. | ||||||||
4.75% due 08/15/285 | 175,000 | 178,063 | ||||||
Diamond BC BV | ||||||||
4.63% due 10/01/295 | 150,000 | 148,795 | ||||||
Valvoline, Inc. | ||||||||
3.63% due 06/15/315 | 125,000 | 121,038 | ||||||
4.25% due 02/15/305 | 25,000 | 25,506 | ||||||
Compass Minerals International, Inc. | ||||||||
6.75% due 12/01/275 | 125,000 | 132,354 | ||||||
WR Grace Holdings LLC | ||||||||
4.88% due 06/15/275 | 125,000 | 128,391 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 109 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Face | Value | ||||||
Mirabela Nickel Ltd. | ||||||||
due 06/24/197,8 | 390,085 | $ | 19,504 | |||||
Total Basic Materials | 2,615,174 | |||||||
Technology - 2.1% | ||||||||
NCR Corp. | ||||||||
6.13% due 09/01/295 | 200,000 | 213,728 | ||||||
Open Text Holdings, Inc. | ||||||||
4.13% due 12/01/315 | 175,000 | 176,750 | ||||||
Fair Isaac Corp. | ||||||||
4.00% due 06/15/285 | 125,000 | 128,491 | ||||||
Boxer Parent Company, Inc. | ||||||||
7.13% due 10/02/255 | 100,000 | 104,875 | ||||||
MSCI, Inc. | ||||||||
3.88% due 02/15/315 | 100,000 | 104,125 | ||||||
CDK Global, Inc. | ||||||||
5.25% due 05/15/295 | 50,000 | 53,000 | ||||||
Dun & Bradstreet Corp. | ||||||||
5.00% due 12/15/295 | 50,000 | 51,152 | ||||||
PTC, Inc. | ||||||||
4.00% due 02/15/285 | 50,000 | 50,875 | ||||||
Playtika Holding Corp. | ||||||||
4.25% due 03/15/295 | 50,000 | 49,000 | ||||||
Total Technology | 931,996 | |||||||
Utilities - 1.6% | ||||||||
Terraform Global Operating LLC | ||||||||
6.13% due 03/01/265 | 695,000 | 708,031 | ||||||
Total Corporate Bonds | ||||||||
(Cost $35,653,364) | 35,658,033 | |||||||
SENIOR FLOATING RATE INTERESTS††,10 - 11.5% | ||||||||
Consumer, Cyclical - 2.8% | ||||||||
PetSmart LLC | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 02/11/28 | 299,250 | 299,439 | ||||||
ScribeAmerica Intermediate Holdco LLC (Healthchannels) | ||||||||
4.60% (1 Month USD LIBOR + 4.50%, Rate Floor: 4.50%) due 04/03/25 | 190,279 | 173,154 | ||||||
Blue Nile, Inc. | ||||||||
7.50% (3 Month USD LIBOR + 6.50%, Rate Floor: 7.50%) due 02/17/23 | 174,375 | 169,144 | ||||||
First Brands Group LLC | ||||||||
6.00% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 03/30/27 | 114,500 | 114,843 | ||||||
Apro LLC | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 11/14/26 | 99,250 | 99,126 | ||||||
Mavis Tire Express Services TopCo Corp. | ||||||||
4.75% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 05/04/28 | 74,813 | 74,812 | ||||||
Holding SOCOTEC | ||||||||
5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 06/30/28 | 75,000 | 74,719 | ||||||
CCRR Parent, Inc. | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 03/06/28 | 74,625 | 74,485 | ||||||
FR Refuel LLC | ||||||||
5.50% (1 Month USD LIBOR + 4.75%, Rate Floor: 5.50%) due 11/08/28††† | 66,250 | 65,753 | ||||||
Sotheby’s | ||||||||
5.00% (3 Month USD LIBOR + 4.50%, Rate Floor: 5.00%) due 01/15/27 | 52,143 | 52,143 | ||||||
Rent-A-Center, Inc. | ||||||||
3.75% (1 Month USD LIBOR + 3.25%, Rate Floor: 3.75%) due 02/17/28 | 49,625 | 49,470 | ||||||
Total Consumer, Cyclical | 1,247,088 | |||||||
Consumer, Non-cyclical - 2.2% | ||||||||
HAH Group Holding Co. LLC | ||||||||
6.00% (3 Month USD LIBOR + 5.00%, Rate Floor: 6.00%) due 10/29/27 | 149,342 | 148,968 | ||||||
SCP Eye Care Services LLC | ||||||||
5.25% (3 Month USD LIBOR + 4.50%, Rate Floor: 5.25%) due 03/16/28 | 127,521 | 127,602 | ||||||
Quirch Foods Holdings LLC | ||||||||
5.50% (1 Month USD LIBOR + 4.50%, Rate Floor: 5.50%) due 10/27/27††† | 99,000 | 99,247 | ||||||
Women’s Care Holdings, Inc. | ||||||||
5.25% (3 Month USD LIBOR + 4.50%, Rate Floor: 5.25%) due 01/15/28 | 99,500 | 99,152 | ||||||
Blue Ribbon LLC | ||||||||
6.75% (3 Month USD LIBOR + 6.00%, Rate Floor: 6.75%) due 05/08/28 | 98,750 | 98,503 | ||||||
Kronos Acquisition Holdings, Inc. | ||||||||
4.25% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.25%) due 12/22/26 | 74,438 | 72,088 | ||||||
due 12/22/26 | 25,000 | 24,766 | ||||||
Gibson Brands, Inc. | ||||||||
5.75% (3 Month USD LIBOR + 5.00%, Rate Floor: 5.75%) due 08/11/28 | 97,500 | 96,281 | ||||||
National Mentor Holdings, Inc. | ||||||||
4.50% ((1 Month USD LIBOR + 3.75%) and (3 Month USD LIBOR + 3.75%), Rate Floor: 4.50%)due 03/02/28 | 95,083 | 93,948 | ||||||
Balrog Acquisition, Inc. | ||||||||
4.50% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 09/05/28 | 75,000 | 74,719 | ||||||
Confluent Health LLC | ||||||||
4.10% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.00%) due 11/30/28 | 61,726 | 61,623 | ||||||
Total Consumer, Non-cyclical | 996,897 | |||||||
Industrial - 2.2% | ||||||||
Arcline FM Holdings LLC | ||||||||
5.50% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.50%) due 06/23/28 | 174,563 | 174,126 | ||||||
Dispatch Terra Acquisition LLC | ||||||||
5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 03/27/28 | 149,750 | 149,376 | ||||||
110 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
| Face | Value | ||||||
Pelican Products, Inc. | ||||||||
4.75% (1 Month USD LIBOR + 4.25%, Rate Floor: 4.75%) due 11/16/28 | 125,000 | $ | 124,375 | |||||
YAK MAT (YAK ACCESS LLC) | ||||||||
10.21% (3 Month USD LIBOR + 10.00%, Rate Floor: 10.00%) due 07/10/26 | 150,000 | 97,500 | ||||||
Michael Baker International LLC | ||||||||
5.75% (1 Month USD LIBOR + 5.00%, Rate Floor: 5.75%) due 12/01/28††† | 75,000 | 75,375 | ||||||
Aegion Corp. | ||||||||
5.50% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.50%) due 05/17/28 | 74,813 | 75,062 | ||||||
Pro Mach Group, Inc. | ||||||||
5.00% (3 Month USD LIBOR + 4.00%, Rate Floor: 5.00%) due 08/31/28 | 66,620 | 66,787 | ||||||
PECF USS Intermediate Holding III Corp. | ||||||||
due 11/04/28 | 50,000 | 50,018 | ||||||
LTI Holdings, Inc. | ||||||||
4.85% (1 Month USD LIBOR + 4.75%, Rate Floor: 4.75%) due 07/24/26††† | 50,000 | 49,937 | ||||||
United Airlines, Inc. | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 04/21/28 | 49,750 | 49,818 | ||||||
Air Canada | ||||||||
4.25% (3 Month USD LIBOR + 3.50%, Rate Floor: 4.25%) due 08/11/28 | 50,000 | 49,794 | ||||||
Total Industrial | 962,168 | |||||||
Technology - 2.1% | ||||||||
Datix Bidco Ltd. | ||||||||
4.96% (6 Month GBP LIBOR + 4.50%, Rate Floor: 4.50%) due 04/28/25††† | GBP | 150,000 | 201,894 | |||||
8.21% (6 Month GBP LIBOR + 7.75%, Rate Floor: 7.75%) due 04/27/26††† | GBP | 75,000 | 100,849 | |||||
Peraton Corp. | ||||||||
4.50% (1 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 02/01/28 | 248,374 | 248,284 | ||||||
Polaris Newco LLC | ||||||||
4.50% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 06/02/28 | 130,000 | 129,878 | ||||||
Apttus Corp. | ||||||||
5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 05/08/28 | 74,813 | 74,875 | ||||||
Atlas CC Acquisition Corp. | ||||||||
5.00% (3 Month USD LIBOR + 4.25%, Rate Floor: 5.00%) due 05/25/28 | 74,625 | 74,695 | ||||||
Taxware Holdings (Sovos Compliance LLC) | ||||||||
5.00% (1 Month USD LIBOR + 4.50%, Rate Floor: 5.00%) due 08/11/28 | 63,955 | 64,076 | ||||||
Planview Parent, Inc. | ||||||||
4.75% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.75%) due 12/17/27 | 49,500 | 49,479 | ||||||
Total Technology | 944,030 | |||||||
Communications - 1.2% | ||||||||
McGraw Hill LLC | ||||||||
5.25% (1 Month USD LIBOR + 4.75%, Rate Floor: 5.25%) due 07/28/28 | 149,625 | 148,784 | ||||||
Xplornet Communications, Inc. | ||||||||
4.50% (1 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 10/02/28 | 125,000 | 124,740 | ||||||
Playtika Holding Corp. | ||||||||
2.85% (1 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 03/13/28 | 99,250 | 98,712 | ||||||
Cengage Learning Acquisitions, Inc. | ||||||||
5.75% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.75%) due 07/14/26 | 74,813 | 74,945 | ||||||
Titan AcquisitionCo New Zealand Ltd. | ||||||||
4.50% (3 Month USD LIBOR + 4.00%, Rate Floor: 4.50%) due 10/18/28 | 75,000 | 74,687 | ||||||
GTT Communications, Inc. | ||||||||
2.87% (3 Month USD LIBOR + 2.75%, Rate Floor: 2.75%) due 05/30/25††† | 3,594 | — | ||||||
Total Communications | 521,868 | |||||||
Financial - 0.6% | ||||||||
Franchise Group, Inc. | ||||||||
5.50% (3 Month USD LIBOR + 4.75%, Rate Floor: 5.50%) due 03/10/26 | 101,931 | 101,626 | ||||||
Claros Mortgage Trust, Inc. | ||||||||
5.00% (1 Month USD SOFR + 4.50%, Rate Floor: 5.00%) due 08/10/26 | 92,000 | 92,230 | ||||||
Eisner Advisory Group | ||||||||
6.00% (3 Month USD LIBOR + 5.25%, Rate Floor: 6.00%) due 07/28/28††† | 45,455 | 45,455 | ||||||
7.50% (1 Month USD LIBOR + 5.25%, Rate Floor: 6.00%) due 07/28/28††† | 4,545 | 4,545 | ||||||
Total Financial | 243,856 | |||||||
Energy - 0.2% | ||||||||
TransMontaigne Operating Company LP | ||||||||
4.00% (1 Month USD LIBOR + 3.50%, Rate Floor: 4.00%) due 11/17/28 | 75,000 | 75,281 | ||||||
Permian Production Partners LLC | ||||||||
9.00% (1 Month USD LIBOR + 6.00%, Rate Floor: 7.00%) (in-kind rate was 2.00%) due 11/24/25†††,9 | 33,686 | 30,318 | ||||||
Total Energy | 105,599 | |||||||
Basic Materials - 0.2% | ||||||||
NIC Acquisition Corp. | ||||||||
4.50% (3 Month USD LIBOR + 3.75%, Rate Floor: 4.50%) due 12/29/27 | 99,499 | 98,007 | ||||||
Total Senior Floating Rate Interests | ||||||||
(Cost $5,153,546) | 5,119,513 | |||||||
Total Investments - 100.4% | ||||||||
(Cost $45,344,867) | $ | 44,751,165 | ||||||
Other Assets & Liabilities, net - (0.4)% | (159,235 | ) | ||||||
Total Net Assets - 100.0% | $ | 44,591,930 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 111 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
Forward Foreign Currency Exchange Contracts†† | ||||||||||||||||||||||||
Counterparty | Currency | Type | Quantity | Contract | Settlement | Unrealized | ||||||||||||||||||
Barclays Bank plc | CAD | Sell | 101,000 | 78,550 USD | 01/14/22 | $ | (1,347 | ) | ||||||||||||||||
Morgan Stanley Capital Services LLC | EUR | Sell | 332,000 | 374,172 USD | 01/14/22 | (3,868 | ) | |||||||||||||||||
JPMorgan Chase Bank, N.A. | GBP | Sell | 225,000 | 297,607 USD | 01/14/22 | (6,668 | ) | |||||||||||||||||
| $ | (11,883 | ) | ||||||||||||||||||||||
~ | The face amount is denominated in U.S. dollars unless otherwise indicated. |
* | 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 | Special Purpose Acquisition Company (SPAC). |
2 | Affiliated issuer. |
3 | Security has a fixed rate coupon which will convert to a floating or variable rate coupon on a future date. |
4 | Rate indicated is the 7-day yield as of December 31, 2021. |
5 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) securities is $30,499,622 (cost $30,216,490), or 68.4% of total net assets. |
6 | All or a portion of this security has been physically segregated or earmarked in connection with reverse repurchase agreements. At December 31, 2021, the total market value of segregated or earmarked security was $312,000 — See Note 11. |
7 | Security is in default of interest and/or principal obligations. |
8 | Security is a 144A or Section 4(a)(2) security. These securities have been determined to be illiquid and restricted under guidelines established by the Board of Trustees. The total market value of 144A or Section 4(a)(2) illiquid and restricted securities is $31,754 (cost $528,103), or 0.1% of total net assets — See Note 9. |
9 | Payment-in-kind security. |
10 | Variable rate security. Rate indicated is the rate effective at December 31, 2021. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
CAD — Canadian Dollar | |
EUR — Euro | |
GBP — British Pound | |
LIBOR — London Interbank Offered Rate | |
plc — Public Limited Company | |
SARL — Société à Responsabilité Limitée | |
SOFR — Secured Overnight Financing Rate | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 394,530 | $ | 37,926 | $ | 209,563 | $ | 642,019 | ||||||||
Preferred Stocks | — | 1,004,700 | 2 | 1,004,702 | ||||||||||||
Warrants | 5,502 | — | — | 5,502 | ||||||||||||
Money Market Fund | 2,321,396 | — | — | 2,321,396 | ||||||||||||
Corporate Bonds | — | 35,658,033 | — | 35,658,033 | ||||||||||||
Senior Floating Rate Interests | — | 4,446,140 | 673,373 | 5,119,513 | ||||||||||||
Total Assets | $ | 2,721,428 | $ | 41,146,799 | $ | 882,938 | $ | 44,751,165 | ||||||||
112 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Forward Foreign Currency Exchange Contracts** | $ | — | $ | 11,883 | $ | — | $ | 11,883 | ||||||||
Unfunded Loan Commitments (Note 8) | — | — | 169 | 169 | ||||||||||||
Total Liabilities | $ | — | $ | 11,883 | $ | 169 | $ | 12,052 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of the period end, reverse repurchase agreements of $271,094 are categorized as Level 2 within the disclosure hierarchy — See Note 11.
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:
Category | Ending Balance at | Valuation Technique | Unobservable Inputs | Input Range | Weighted Average* | |||||||||||||||
Assets: | ||||||||||||||||||||
Common Stocks | $ | 184,349 | Third Party Pricing | Broker Quote | — | — | ||||||||||||||
Common Stocks | 24,898 | Enterprise Value | Valuation Multiple | 2.8x-12.8x | 3.1x | |||||||||||||||
Common Stocks | 316 | Model Price | Liquidation Value | — | — | |||||||||||||||
Preferred Stocks | 2 | Model Price | Purchase Price | — | — | |||||||||||||||
Senior Floating Rate Interests | 370,630 | Third Party Pricing | Broker Quote | — | — | |||||||||||||||
Senior Floating Rate Interests | 302,743 | Yield Analysis | Yield | 4.9%-8.1% | 6.0% | |||||||||||||||
Total Assets | $ | 882,938 |
|
|
|
| ||||||||||||||
Liabilities: | ||||||||||||||||||||
Unfunded Loan Commitments | $ | 169 | Model Price | Purchase Price | — | — | ||||||||||||||
* | Inputs are weighted by the fair value of the instruments. |
Significant changes in a quote, yield, liquidation value or valuation multiples would generally result in significant changes in the fair value of the security.
The Fund’s fair valuation leveling guidelines classify a single daily broker quote, or a vendor price based on a single daily or monthly broker quote, as Level 3, if such a quote or price cannot be supported with other available market information.
Transfer between Level 2 and Level 3 may occur as markets fluctuate and/or the availability of data used in an investment’s valuation changes. For the year ended December 31, 2021, the Fund had securities with a total value of $283,596 transfer into Level 3 from Level 2 due to a lack of observable inputs.
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 113 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES P (HIGH YIELD SERIES) |
Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value for the year ended December 31, 2021:
Assets | Liabilities | |||||||||||||||||||||||
| Corporate | Senior Floating | Common | Preferred | Total Assets | Unfunded Loan | ||||||||||||||||||
Beginning Balance | $ | 70 | $ | 466,283 | $ | 108,858 | $ | — | $ | 575,211 | $ | (408 | ) | |||||||||||
Purchases/(Receipts) | — | 547,476 | 3,475 | — | 550,951 | (589 | ) | |||||||||||||||||
(Sales, maturities and paydowns)/Fundings | (3,475 | ) | (511,201 | ) | (398,592 | ) | — | (913,268 | ) | 138 | ||||||||||||||
Amortization of premiums/discounts | (1,594 | ) | 20,171 | — | — | 18,577 | 305 | |||||||||||||||||
Total realized gains (losses) included in earnings | (130,304 | ) | (8,440 | ) | 291,483 | — | 152,739 | 330 | ||||||||||||||||
Total change in unrealized appreciation (depreciation) included in earnings | 135,303 | 59,837 | 19,990 | 2 | 215,132 | 55 | ||||||||||||||||||
Transfers into Level 3 | — | 99,247 | 184,349 | — | 283,596 | — | ||||||||||||||||||
Ending Balance | $ | — | $ | 673,373 | $ | 209,563 | $ | 2 | $ | 882,938 | $ | (169 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) for investments in Level 3 securities still held at December 31, 2021 | $ | — | $ | 27,598 | $ | 19,535 | $ | 2 | $ | 47,135 | $ | 77 | ||||||||||||
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | |||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||
BP Holdco LLC* | $ | 184 | $ | — | $ | — | $ | — | $ | 184 | $ | 368 | 523 | |||||||||||||||
* | Non-income producing security. |
114 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES P (HIGH YIELD SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $45,344,682) | $ | 44,750,797 | ||
Investments in affiliated issuers, at value (cost $185) | 368 | |||
Cash | 5,587 | |||
Prepaid expenses | 2,889 | |||
Receivables: | ||||
Interest | 560,402 | |||
Securities sold | 86,080 | |||
Fund shares sold | 1,696 | |||
Total assets | 45,407,819 | |||
Liabilities: | ||||
Unfunded loan commitments, at value (Note 8) (commitment fees received $246) | 169 | |||
Reverse repurchase agreements (Note 11) | 271,094 | |||
Unrealized depreciation on forward foreign currency exchange contracts | 11,883 | |||
Payable for: | ||||
Securities purchased | 394,881 | |||
Fund shares redeemed | 37,771 | |||
Management fees | 16,099 | |||
Distribution and service fees | 9,118 | |||
Trustees’ fees* | 4,258 | |||
Fund accounting/administration fees | 4,101 | |||
Transfer agent/maintenance fees | 2,084 | |||
Miscellaneous | 64,431 | |||
Total liabilities | 815,889 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 44,591,930 | ||
Net assets consist of: | ||||
Paid in capital | $ | 50,824,277 | ||
Total distributable earnings (loss) | (6,232,347 | ) | ||
Net assets | $ | 44,591,930 | ||
Capital shares outstanding | 1,618,356 | |||
Net asset value per share | $ | 27.55 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from unaffiliated issuers | $ | 182,399 | ||
Interest from unaffiliated issuers | 2,464,379 | |||
Total investment income | 2,646,778 | |||
Expenses: | ||||
Management fees | 274,738 | |||
Distribution and service fees | 114,473 | |||
Transfer agent/maintenance fees | 25,270 | |||
Professional fees | 54,199 | |||
Fund accounting/administration fees | 38,013 | |||
Custodian fees | 21,427 | |||
Trustees’ fees* | 18,316 | |||
Interest expense | 6,606 | |||
Line of credit fees | 3,959 | |||
Miscellaneous | 27,544 | |||
Total expenses | 584,545 | |||
Less: | ||||
Expenses reimbursed by Adviser | (294 | ) | ||
Expenses waived by Adviser | (89,952 | ) | ||
Total waived/reimbursed expenses | (90,246 | ) | ||
Net expenses | 494,299 | |||
Net investment income | 2,152,479 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,034,601 | |||
Investments sold short | 3,961 | |||
Swap agreements | 230,367 | |||
Forward foreign currency exchange contracts | 37,491 | |||
Foreign currency transactions | (3,672 | ) | ||
Net realized gain | 1,302,748 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (810,984 | ) | ||
Investments in affiliated issuers | 184 | |||
Swap agreements | (155,839 | ) | ||
Forward foreign currency exchange contracts | (11,883 | ) | ||
Foreign currency translations | 33 | |||
Net change in unrealized appreciation (depreciation) | (978,489 | ) | ||
Net realized and unrealized gain | 324,259 | |||
Net increase in net assets resulting from operations | $ | 2,476,738 | ||
* | 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 | 115 |
SERIES P (HIGH YIELD SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 2,152,479 | $ | 2,212,603 | ||||
Net realized gain (loss) on investments | 1,302,748 | (3,370,145 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (978,489 | ) | 2,805,377 | |||||
Net increase in net assets resulting from operations | 2,476,738 | 1,647,835 | ||||||
Distributions to shareholders | (2,204,042 | ) | (3,157,421 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 90,239,472 | 17,515,926 | ||||||
Distributions reinvested | 2,204,042 | 3,157,421 | ||||||
Cost of shares redeemed | (93,277,254 | ) | (28,298,902 | ) | ||||
Net decrease from capital share transactions | (833,740 | ) | (7,625,555 | ) | ||||
Net decrease in net assets | (561,044 | ) | (9,135,141 | ) | ||||
Net assets: | ||||||||
Beginning of year | 45,152,974 | 54,288,115 | ||||||
End of year | $ | 44,591,930 | $ | 45,152,974 | ||||
Capital share activity: | ||||||||
Shares sold | 3,257,017 | 669,412 | ||||||
Shares issued from reinvestment of distributions | 81,180 | 123,918 | ||||||
Shares redeemed | (3,362,102 | ) | (1,063,235 | ) | ||||
Net decrease in shares | (23,905 | ) | (269,905 | ) | ||||
116 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES P (HIGH YIELD SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 27.49 | $ | 28.39 | $ | 27.51 | $ | 31.13 | $ | 30.82 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | 1.30 | 1.37 | 1.68 | 1.79 | 1.81 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | .18 | (.21 | ) | 1.45 | (2.99 | ) | .09 | |||||||||||||
Total from investment operations | 1.48 | 1.16 | 3.13 | (1.20 | ) | 1.90 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.42 | ) | (2.06 | ) | (2.25 | ) | (2.42 | ) | (1.59 | ) | ||||||||||
Total distributions | (1.42 | ) | (2.06 | ) | (2.25 | ) | (2.42 | ) | (1.59 | ) | ||||||||||
Net asset value, end of period | $ | 27.55 | $ | 27.49 | $ | 28.39 | $ | 27.51 | $ | 31.13 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 5.41 | % | 4.64 | % | 11.59 | % | (4.16 | %) | 6.23 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 44,592 | $ | 45,153 | $ | 54,288 | $ | 52,504 | $ | 79,272 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 4.70 | % | 5.13 | % | 5.89 | % | 5.98 | % | 5.79 | % | ||||||||||
Total expensesc | 1.28 | % | 1.38 | % | 1.31 | % | 1.42 | % | 1.40 | % | ||||||||||
Net expensesd,e,f | 1.08 | % | 1.12 | % | 1.10 | % | 1.26 | % | 1.33 | % | ||||||||||
Portfolio turnover rate | 76 | % | 84 | % | 58 | % | 51 | % | 76 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests, if any. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.00%* | 0.02% |
* | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
1.06% | 1.07% | 1.07% | 1.07% | 1.07% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 117 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series Q (Small Cap Value Series) is managed by a team of seasoned professionals led by David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; James Schier, CFA, Senior Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series Q (Small Cap Value Series) returned 26.18%, compared with the Russell 2000® Value Index, which returned 28.27%.
Investment Approach
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 industries in which they operate. In today’s rapidly changing environment marked by very sharp and 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 fundamentals once again become a more dominant factor in the market.
Performance Review and Positioning
Rising interest rates, the reopening of the economy following the pandemic, and a historically wide valuation gap between growth and value sectors were among the factors that, in a reversal from the last few years, saw value stocks rival or outperform growth stocks over the period, particularly in the small capitalization space. Early on, the smallest and most sensitive to an improving economy advanced the most, but larger, more growth-focused names stepped up as the market grew concerned about the Delta variant, peak profitability, rising input prices, logistical challenges, and shortages. The Fund, which tends to own the larger but more value-focused companies in the benchmark, lagged its benchmark at times throughout the period. While small cap value stocks outperformed large cap value stocks for the period, the more volatile, lower-quality companies in the small cap space outperformed those of higher quality, which are those the Fund tends to own.
The largest headwind to the Fund was stock selection in the Industrials and Technology sectors, as earnings reports of companies indicated supply chain issues, cost input inflation, or impairments related to Hurricane Ida. Equities in the Industrials sector returned about half of those in the benchmark. Equities in the Industrials sector rose less than half those in the benchmark. Large detractors were Parsons Corp., which had poor earnings, and Enersys, which fell on raw material cost inflation and availability issues. In Technology, communication equipment names as well as the hand-set chip suppliers were weak, as component availability either impaired the ability to get sufficient product out the door or delayed customer orders. Stocks that fell from highs in the period included Infinera Corp. and travel-software company Sabre Corp.
A positive contribution from underweighting the Health Care sector was offset by poor selection, led by Emergent BioSolutions, which fell as the company in a manufacturing contract for Johnson and Johnson’s vaccine had to dispose of millions of contaminated doses. The company’s facility has subsequently corrected the outstanding issues at the facility and is once again manufacturing. Not owning hospitals or life science tools companies also detracted from performance. Evolent Health was a large individual contributor in the sector, rising on speculation that the company could become a takeover target after involvement by activist investors.
Also detracting from performance was the fact that the Fund did not own Gamestop (Consumer Discretionary) and AMC (Communication Services), volatile meme stocks that soared earlier in 2021, based on the view that the companies’ earnings fundamentals did not justify their valuations.
Selection in REITs was poor against the benchmark, worsened by an underweighting to the sector. A lack of exposure to cyclical office retail REITs and an overweighting to healthcare REITs was entirely the cause, as opposed to any issues with individual companies. A large position in volatile Physicians REIT was the main individual detractor.
Selection in Energy was the greatest relative contributor to performance, as the sector benefitted from the rise in energy prices. An emphasis on exploration and production companies was helpful, especially for natural gas-oriented Range Resources. Another significant contributor was Parsley Energy, an oil and gas company which was acquired by Pioneer Natural Resources during the period.
118 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
Another leading contributor to relative performance for the year was stock selection in Consumer Discretionary, where the Fund was helped by holdings in retailers selling apparel (Abercrombie & Fitch), autos and auto parts (Penske Automotive, LKQ Corp.), and sporting equipment (Dick’s Sporting Goods).
Selection in Financials had a positive influence in the period, led by regional banks, but an over-exposure to insurance and reinsurance names, such as Heritage Insurance Holdings, Inc., was detrimental as the market feared the impact of Hurricane Ida and other storms. Insurance brokers such as eHealth and GoHealth also detracted.
In Materials, commodity price inflation on the back of an improving economy benefitted steel names such as Nucor Corp. as well as specialty chemical companies like Huntsman Corp. and Olin Corp.
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics in virtue of emphasizing relatively larger companies found in the benchmark as well as an overweight in Utilities. At the end of the period, the Fund’s largest sector overweights relative to the benchmark were Industrials and Information Technology, and Materials. The Fund’s largest sector underweights were in Financials, Health Care, and REITs.
The market outlook is continues to be murkier than usual. The expectation of a Federal Reserve that is now biased to being less accommodative and growing geopolitical risks suggest an environment that may constrain the upside for equities. However, record negative real interest rates promise to provide a solid underpinning for equity valuations.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 119 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES Q (SMALL CAP VALUE SERIES)
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.
Inception Date: May 1, 2000 |
Ten Largest Holdings (% of Total Net Assets) | |
Pioneer Natural Resources Co. | 2.9% |
iShares Russell 2000 Value ETF | 2.6% |
First Horizon Corp. | 2.0% |
Range Resources Corp. | 1.9% |
LXP Industrial Trust | 1.7% |
Littelfuse, Inc. | 1.7% |
Huntsman Corp. | 1.7% |
Black Hills Corp. | 1.6% |
Physicians Realty Trust | 1.6% |
MDU Resources Group, Inc. | 1.6% |
Top Ten Total | 19.3% |
“Ten Largest Holdings” excludes any temporary cash investments. | |
120 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series Q (Small Cap Value Series) | 26.18% | 6.76% | 10.21% |
Russell 2000 Value Index | 28.27% | 9.07% | 12.03% |
* | 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. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 121 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES Q (SMALL CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 94.5% | ||||||||
Financial - 29.2% | ||||||||
First Horizon Corp. | 89,171 | $ | 1,456,162 | |||||
LXP Industrial Trust REIT | 81,504 | 1,273,093 | ||||||
Physicians Realty Trust REIT | 62,421 | 1,175,387 | ||||||
Prosperity Bancshares, Inc. | 14,976 | 1,082,765 | ||||||
CNO Financial Group, Inc. | 40,859 | 974,079 | ||||||
Cathay General Bancorp | 21,370 | 918,696 | ||||||
BOK Financial Corp. | 8,584 | 905,526 | ||||||
STAG Industrial, Inc. REIT | 18,573 | 890,761 | ||||||
Hanmi Financial Corp. | 35,569 | 842,274 | ||||||
Investors Bancorp, Inc. | 52,455 | 794,693 | ||||||
Stifel Financial Corp. | 10,984 | 773,493 | ||||||
Simmons First National Corp. — Class A | 25,348 | 749,794 | ||||||
MGIC Investment Corp. | 47,910 | 690,862 | ||||||
Hancock Whitney Corp. | 13,170 | 658,763 | ||||||
Axis Capital Holdings Ltd. | 11,496 | 626,187 | ||||||
Berkshire Hills Bancorp, Inc. | 21,325 | 606,270 | ||||||
Flagstar Bancorp, Inc. | 12,439 | 596,326 | ||||||
Jackson Financial, Inc. — Class A | 13,625 | 569,934 | ||||||
Unum Group | 21,730 | 533,906 | ||||||
Kennedy-Wilson Holdings, Inc. | 20,793 | 496,537 | ||||||
Independent Bank Group, Inc. | 6,785 | 489,538 | ||||||
Apple Hospitality REIT, Inc. | 30,185 | 487,488 | ||||||
Zions Bancorp North America | 7,193 | 454,310 | ||||||
Old Republic International Corp. | 17,213 | 423,096 | ||||||
Piedmont Office Realty Trust, Inc. — Class A REIT | 22,755 | 418,237 | ||||||
Sunstone Hotel Investors, Inc. REIT* | 35,434 | 415,641 | ||||||
GoHealth, Inc. — Class A* | 108,346 | 410,631 | ||||||
Virtu Financial, Inc. — Class A | 14,127 | 407,282 | ||||||
Heartland Financial USA, Inc. | 7,689 | 389,140 | ||||||
Park Hotels & Resorts, Inc. REIT* | 19,249 | 363,421 | ||||||
RMR Group, Inc. — Class A | 7,220 | 250,389 | ||||||
eHealth, Inc.* | 8,387 | 213,868 | ||||||
Heritage Insurance Holdings, Inc. | 34,651 | 203,748 | ||||||
Total Financial | 21,542,297 | |||||||
Industrial - 21.8% | ||||||||
Littelfuse, Inc. | 4,001 | 1,259,035 | ||||||
MDU Resources Group, Inc. | 38,023 | 1,172,629 | ||||||
Knight-Swift Transportation Holdings, Inc. | 16,678 | 1,016,357 | ||||||
GATX Corp. | 9,649 | 1,005,329 | ||||||
Kirby Corp.* | 15,172 | 901,520 | ||||||
Plexus Corp.* | 8,628 | 827,339 | ||||||
Sanmina Corp.* | 19,739 | 818,379 | ||||||
Valmont Industries, Inc. | 3,161 | 791,831 | ||||||
Graphic Packaging Holding Co. | 39,961 | 779,240 | ||||||
Colfax Corp.* | 15,643 | 719,109 | ||||||
Altra Industrial Motion Corp. | 12,814 | 660,818 | ||||||
Energizer Holdings, Inc. | 16,081 | 644,848 | ||||||
Zurn Water Solutions Corp. | 17,141 | 623,933 | ||||||
PGT Innovations, Inc.* | 27,397 | 616,159 | ||||||
Curtiss-Wright Corp. | 4,017 | 557,037 | ||||||
Terex Corp. | 12,374 | 543,837 | ||||||
Kennametal, Inc. | 11,020 | 395,728 | ||||||
Belden, Inc. | 5,787 | 380,379 | ||||||
Owens Corning | 4,194 | 379,557 | ||||||
Daseke, Inc.* | 37,222 | 373,709 | ||||||
Advanced Energy Industries, Inc. | 3,990 | 363,329 | ||||||
EnerSys | 4,571 | 361,383 | ||||||
Arcosa, Inc. | 6,648 | 350,350 | ||||||
Park Aerospace Corp. | 22,473 | 296,644 | ||||||
ChargePoint Holdings, Inc.* | 13,978 | 266,281 | ||||||
Total Industrial | 16,104,760 | |||||||
Consumer, Cyclical - 12.1% | ||||||||
Methode Electronics, Inc. | 21,640 | 1,064,039 | ||||||
Avient Corp. | 18,079 | 1,011,520 | ||||||
Whirlpool Corp. | 3,814 | 894,993 | ||||||
Meritage Homes Corp.* | 5,862 | 715,516 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 8,379 | 704,339 | ||||||
Abercrombie & Fitch Co. — Class A* | 19,162 | 667,412 | ||||||
Alaska Air Group, Inc.* | 12,258 | 638,642 | ||||||
Hawaiian Holdings, Inc.* | 31,086 | 571,050 | ||||||
Lakeland Industries, Inc.* | 23,699 | 514,268 | ||||||
Tenneco, Inc. — Class A* | 36,566 | 413,196 | ||||||
Marriott Vacations Worldwide Corp. | 2,255 | 381,050 | ||||||
H&E Equipment Services, Inc. | 8,010 | 354,603 | ||||||
Dana, Inc. | 15,507 | 353,869 | ||||||
Macy’s, Inc. | 13,170 | 344,791 | ||||||
Newell Brands, Inc. | 13,715 | 299,535 | ||||||
Total Consumer, Cyclical | 8,928,823 | |||||||
Energy - 6.8% | ||||||||
Pioneer Natural Resources Co. | 11,717 | 2,131,088 | ||||||
Range Resources Corp.* | 78,336 | 1,396,731 | ||||||
Patterson-UTI Energy, Inc. | 111,109 | 938,871 | ||||||
CNX Resources Corp.* | 40,226 | 553,108 | ||||||
Total Energy | 5,019,798 | |||||||
Consumer, Non-cyclical - 6.3% | ||||||||
Ingredion, Inc. | 10,034 | 969,685 | ||||||
Encompass Health Corp. | 14,281 | 931,978 | ||||||
Central Garden & Pet Co. — Class A* | 16,553 | 792,061 | ||||||
US Foods Holding Corp.* | 16,542 | 576,158 | ||||||
Integer Holdings Corp.* | 6,366 | 544,866 | ||||||
Pacira BioSciences, Inc.* | 6,247 | 375,882 | ||||||
Perdoceo Education Corp.* | 20,801 | 244,620 | ||||||
Emergent BioSolutions, Inc.* | 4,706 | 204,570 | ||||||
Total Consumer, Non-cyclical | 4,639,820 | |||||||
Basic Materials - 5.5% | ||||||||
Huntsman Corp. | 34,999 | 1,220,765 | ||||||
Ashland Global Holdings, Inc. | 6,799 | 731,980 | ||||||
Reliance Steel & Aluminum Co. | 3,874 | 628,441 | ||||||
Element Solutions, Inc. | 24,781 | 601,683 | ||||||
Kraton Corp.* | 11,022 | 510,539 | ||||||
Commercial Metals Co. | 10,787 | 391,460 | ||||||
Total Basic Materials | 4,084,868 | |||||||
122 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES Q (SMALL CAP VALUE SERIES) |
| Shares | Value | ||||||
Technology - 5.0% | ||||||||
Evolent Health, Inc. — Class A* | 33,899 | $ | 937,985 | |||||
DXC Technology Co.* | 24,545 | 790,104 | ||||||
Science Applications International Corp. | 9,254 | 773,542 | ||||||
Amkor Technology, Inc. | 24,185 | 599,546 | ||||||
Conduent, Inc.* | 109,019 | 582,161 | ||||||
Total Technology | 3,683,338 | |||||||
Communications - 4.3% | ||||||||
Infinera Corp.* | 102,982 | 987,598 | ||||||
Ciena Corp.* | 10,256 | 789,404 | ||||||
TEGNA, Inc. | 40,898 | 759,067 | ||||||
Gray Television, Inc. | 25,944 | 523,031 | ||||||
Audacy, Inc.* | 57,603 | 148,039 | ||||||
Total Communications | 3,207,139 | |||||||
Utilities - 3.5% | ||||||||
Black Hills Corp. | 17,277 | 1,219,238 | ||||||
Spire, Inc. | 7,249 | 472,780 | ||||||
ALLETE, Inc. | 6,868 | 455,691 | ||||||
Avista Corp. | 9,559 | 406,162 | ||||||
Total Utilities | 2,553,871 | |||||||
Total Common Stocks | ||||||||
(Cost $56,130,211) | 69,764,714 | |||||||
CONVERTIBLE PREFERRED STOCKS††† - 0.0% | ||||||||
Industrial - 0.0% | ||||||||
Thermoenergy Corp.*,1 | 116,667 | — | ||||||
Total Convertible Preferred Stocks | ||||||||
(Cost $111,410) | — | |||||||
RIGHTS† - 0.1% | ||||||||
Basic Materials - 0.1% | ||||||||
Pan American Silver Corp.* | 81,258 | 63,276 | ||||||
Total Rights | ||||||||
(Cost $—) | 63,276 | |||||||
EXCHANGE-TRADED FUNDS† - 2.6% | ||||||||
iShares Russell 2000 Value ETF | 11,483 | 1,906,752 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $1,301,506) | 1,906,752 | |||||||
MONEY MARKET FUND† - 2.8% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 2,066,257 | 2,066,257 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,066,257) | 2,066,257 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $59,609,384) | $ | 73,800,999 | ||||||
Other Assets & Liabilities, net - 0.0% | 35,638 | |||||||
Total Net Assets - 100.0% | $ | 73,836,637 | ||||||
* | 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. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 69,764,714 | $ | — | $ | — | $ | 69,764,714 | ||||||||
Convertible Preferred Stocks | — | — | — | * | — | |||||||||||
Rights | 63,276 | — | — | 63,276 | ||||||||||||
Exchange-Traded Funds | 1,906,752 | — | — | 1,906,752 | ||||||||||||
Money Market Fund | 2,066,257 | — | — | 2,066,257 | ||||||||||||
Total Assets | $ | 73,800,999 | $ | — | $ | — | $ | 73,800,999 | ||||||||
* | Security has a market value of $0. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 123 |
SERIES Q (SMALL CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments, at value (cost $59,609,384) | $ | 73,800,999 | ||
Prepaid expenses | 2,802 | |||
Receivables: | ||||
Dividends | 103,129 | |||
Fund shares sold | 43,547 | |||
Interest | 21 | |||
Total assets | 73,950,498 | |||
Liabilities: | ||||
Payable for: | ||||
Management fees | 40,851 | |||
Professional fees | 18,817 | |||
Distribution and service fees | 15,346 | |||
Fund shares redeemed | 13,941 | |||
Fund accounting/administration fees | 5,705 | |||
Trustees’ fees* | 5,305 | |||
Transfer agent/maintenance fees | 2,207 | |||
Miscellaneous | 11,689 | |||
Total liabilities | 113,861 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 73,836,637 | ||
Net assets consist of: | ||||
Paid in capital | $ | 55,835,303 | ||
Total distributable earnings (loss) | 18,001,334 | |||
Net assets | $ | 73,836,637 | ||
Capital shares outstanding | 1,581,173 | |||
Net asset value per share | $ | 46.70 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends | $ | 1,289,613 | ||
Interest | 195 | |||
Total investment income | 1,289,808 | |||
Expenses: | ||||
Management fees | 554,726 | |||
Distribution and service fees | 184,909 | |||
Transfer agent/maintenance fees | 25,505 | |||
Fund accounting/administration fees | 56,462 | |||
Professional fees | 37,470 | |||
Trustees’ fees* | 15,305 | |||
Custodian fees | 7,885 | |||
Line of credit fees | 3,264 | |||
Miscellaneous | 8,455 | |||
Total expenses | 893,981 | |||
Less: | ||||
Expenses waived by Adviser | (58,292 | ) | ||
Net expenses | 835,689 | |||
Net investment income | 454,119 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 7,938,808 | |||
Net realized gain | 7,938,808 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 8,020,621 | |||
Net change in unrealized appreciation (depreciation) | 8,020,621 | |||
Net realized and unrealized gain | 15,959,429 | |||
Net increase in net assets resulting from operations | $ | 16,413,548 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
124 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Q (SMALL CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 454,119 | $ | 552,276 | ||||
Net realized gain (loss) on investments | 7,938,808 | (4,256,850 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 8,020,621 | 1,558,527 | ||||||
Net increase (decrease) in net assets resulting from operations | 16,413,548 | (2,146,047 | ) | |||||
Distributions to shareholders | (557,150 | ) | (4,948,061 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 8,061,437 | 3,971,913 | ||||||
Distributions reinvested | 557,150 | 4,948,061 | ||||||
Cost of shares redeemed | (15,056,587 | ) | (11,422,980 | ) | ||||
Net decrease from capital share transactions | (6,438,000 | ) | (2,503,006 | ) | ||||
Net increase (decrease) in net assets | 9,418,398 | (9,597,114 | ) | |||||
Net assets: | ||||||||
Beginning of year | 64,418,239 | 74,015,353 | ||||||
End of year | $ | 73,836,637 | $ | 64,418,239 | ||||
Capital share activity: | ||||||||
Shares sold | 179,207 | 120,097 | ||||||
Shares issued from reinvestment of distributions | 12,764 | 161,070 | ||||||
Shares redeemed | (338,001 | ) | (342,024 | ) | ||||
Net decrease in shares | (146,030 | ) | (60,857 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 125 |
SERIES Q (SMALL CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 37.30 | $ | 41.39 | $ | 36.18 | $ | 45.89 | $ | 46.02 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .27 | .32 | .32 | .30 | .05 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 9.47 | (1.36 | ) | 7.62 | (5.28 | ) | 1.58 | |||||||||||||
Total from investment operations | 9.74 | (1.04 | ) | 7.94 | (4.98 | ) | 1.63 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.34 | ) | (.37 | ) | (.33 | ) | (.16 | ) | (.17 | ) | ||||||||||
Net realized gains | — | (2.68 | ) | (2.40 | ) | (4.57 | ) | (1.59 | ) | |||||||||||
Total distributions | (.34 | ) | (3.05 | ) | (2.73 | ) | (4.73 | ) | (1.76 | ) | ||||||||||
Net asset value, end of period | $ | 46.70 | $ | 37.30 | $ | 41.39 | $ | 36.18 | $ | 45.89 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 26.18 | % | (0.97 | %) | 22.58 | % | (12.66 | %) | 3.70 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 73,837 | $ | 64,418 | $ | 74,015 | $ | 68,349 | $ | 98,726 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.61 | % | 0.97 | % | 0.80 | % | 0.68 | % | 0.11 | % | ||||||||||
Total expensesc | 1.21 | % | 1.29 | % | 1.29 | % | 1.26 | % | 1.23 | % | ||||||||||
Net expensesd,e,f | 1.13 | % | 1.14 | % | 1.14 | % | 1.14 | % | 1.14 | % | ||||||||||
Portfolio turnover rate | 32 | % | 32 | % | 54 | % | 37 | % | 32 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | — | 0.00%* |
* | Less than 0.01%. |
f | Net expense may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the periods would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
1.13% | 1.13% | 1.14% | 1.14% | 1.12% |
126 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series V (SMid Cap Value Series) is managed by a team of seasoned professionals led by James Schier, CFA, Senior Managing Director and Portfolio Manager; David Toussaint, CFA, CPA, Managing Director and Portfolio Manager; Farhan Sharaff, Senior Managing Director, Assistant Chief Investment Officer, Equities, and Portfolio Manager; Gregg Strohkorb, CFA, Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the following paragraphs, the team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series V (SMid Cap Value Series) returned 23.75%, compared with the Russell 2500® Value Index, which returned 27.78%.
Investment Approach
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 industries in which they operate. In today’s rapidly changing environment marked by very sharp and 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 fundamentals once again become a more dominant factor in the market.
Performance Review and Positioning
Rising interest rates, the reopening of the economy following the pandemic, and a historically wide valuation gap between growth and value sectors were among the factors that, in a reversal from the last few years, saw value stocks rival or outperform growth stocks over the period, particularly in the small capitalization space. Early on, the smallest and most sensitive to an improving economy advanced the most, but larger, more growth-focused names stepped up as the market grew concerned about the Delta variant, peak profitability, rising input prices, logistical challenges, and shortages. The Fund, which tends to own the larger, higher quality, and more growthy companies in the benchmark, lagged its benchmark at times throughout the period.
The largest headwind to the Fund was stock selection in the Industrials and Information Technology sectors, as earnings reports of companies indicated supply chain issues, cost input inflation, or impairments related to Hurricane Ida. Equities in the Industrials sector rose less than half those in the benchmark. Large detractors were Parsons Corp., which had poor earnings, and Enersys, which fell on raw material cost inflation and availability issues. In Technology, communication equipment names as well as the hand-set chip suppliers were weak, as component availability either impaired the ability to get sufficient product out the door or delayed customer orders. Stocks that fell from highs in the period included Infinera Corp., Qorvo, Inc. and travel-software company Sabre Corp.
Selection in Financials was also a negative influence in the period. An over-exposure to insurance and reinsurance names, such as Alleghany Corp. and Heritage Insurance Holdings, Inc., was detrimental as the market feared the impact of Hurricane Ida and other storms. Insurance brokers such as eHealth and GoHealth also detracted. A bright spot was Synovus Financial, whose earnings grew during the year.
A positive contribution from underweighting the Health Care sector was offset by poor selection, led by Emergent BioSolutions, which fell as the company in a manufacturing contract for Johnson and Johnson’s vaccine had to dispose of millions of contaminated doses. The company’s facility has subsequently corrected the outstanding issues at the facility and is once again manufacturing. Not owning hospitals or life science tools companies also detracted from performance. Evolent Health was a large individual contributor in the sector, rising on speculation that the company could become a takeover target after involvement by activist investors.
Also detracting from performance was the fact that the Fund did not own Gamestop (Consumer Discretionary) and AMC (Communication Services), volatile meme stocks that soared earlier in 2021, based on the view that the companies’ earnings fundamentals did not justify their valuations.
The leading contributor to relative performance for the year was stock selection in Consumer Discretionary and Consumer Staples. In Consumer Discretionary, the Fund was helped by holdings in retailers selling autos and auto parts (LKQ Corp. and Penske Automotive Group, Inc.), and sporting equipment (Dick’s Sporting Goods). Consumer Staples names in the Fund also outgained those in the benchmark, led by Bunge, one of the Fund’s largest holdings.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 127 |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
The Energy sector benefitted from the rise in price of both oil and natural gas. The Fund’s holdings in exploration and production companies were helpful, especially for natural gas-oriented Range Resources, although a warm start to the winter resulted in some profit taking after a very strong run.
While this strategy is balanced relative to the benchmark, it does possess defensive characteristics in virtue of emphasizing relatively larger, higher quality companies found in the benchmark as well as an overweight in Utilities. Over the period, the Fund’s largest sector overweights on average relative to the benchmark were in Staples, Materials, and Industrials. The Fund’s largest sector underweights were in Financials, REITs, and Health Care.
The market outlook is continues to be murkier than usual. The expectation of a Federal Reserve that is now biased to being less accommodative and growing geopolitical risks suggest an environment that may constrain the upside for equities. However, record negative real interest rates promise to provide a solid underpinning for equity valuations.
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.
128 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES V (SMID CAP VALUE SERIES)
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.
Inception Date: May 1, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Pioneer Natural Resources Co. | 3.0% |
Bunge Ltd. | 2.7% |
LKQ Corp. | 2.3% |
First Horizon Corp. | 2.1% |
Alleghany Corp. | 2.1% |
Evolent Health, Inc. — Class A | 1.9% |
Huntsman Corp. | 1.8% |
Range Resources Corp. | 1.8% |
Alexandria Real Estate Equities, Inc. | 1.7% |
Littelfuse, Inc. | 1.7% |
Top Ten Total | 21.1% |
“Ten Largest Holdings” excludes any temporary cash investments. | |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 129 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series V (SMid Cap Value Series) | 23.75% | 10.11% | 11.66% |
Russell 2500 Value Index | 27.78% | 9.88% | 12.43% |
* | 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. |
��� | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
130 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES V (SMID CAP VALUE SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.0% | ||||||||
Financial - 24.1% | ||||||||
First Horizon Corp. | 245,918 | $ | 4,015,841 | |||||
Alleghany Corp.* | 5,855 | 3,908,739 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 14,205 | 3,167,147 | ||||||
Physicians Realty Trust REIT | 164,446 | 3,096,518 | ||||||
Prosperity Bancshares, Inc. | 37,832 | 2,735,253 | ||||||
BOK Financial Corp. | 21,837 | 2,303,585 | ||||||
STAG Industrial, Inc. REIT | 47,835 | 2,294,167 | ||||||
Sun Communities, Inc. REIT | 10,576 | 2,220,643 | ||||||
VICI Properties, Inc. REIT | 70,712 | 2,129,138 | ||||||
Stifel Financial Corp. | 26,146 | 1,841,202 | ||||||
KeyCorp | 72,582 | 1,678,822 | ||||||
Axis Capital Holdings Ltd. | 29,809 | 1,623,696 | ||||||
Voya Financial, Inc. | 21,525 | 1,427,323 | ||||||
Jackson Financial, Inc. — Class A | 33,953 | 1,420,254 | ||||||
Unum Group | 56,247 | 1,381,989 | ||||||
Apple Hospitality REIT, Inc. | 82,613 | 1,334,200 | ||||||
Medical Properties Trust, Inc. REIT | 53,620 | 1,267,040 | ||||||
Zions Bancorp North America | 18,375 | 1,160,565 | ||||||
Old Republic International Corp. | 46,321 | 1,138,570 | ||||||
Heartland Financial USA, Inc. | 21,485 | 1,087,356 | ||||||
GoHealth, Inc. — Class A* | 278,809 | 1,056,686 | ||||||
Park Hotels & Resorts, Inc. REIT* | 50,975 | 962,408 | ||||||
Gaming and Leisure Properties, Inc. REIT | 19,571 | 952,325 | ||||||
eHealth, Inc.* | 20,936 | 533,868 | ||||||
Heritage Insurance Holdings, Inc. | 86,937 | 511,190 | ||||||
Total Financial | 45,248,525 | |||||||
Industrial - 20.4% | ||||||||
Littelfuse, Inc. | 9,995 | 3,145,227 | ||||||
Jacobs Engineering Group, Inc. | 19,651 | 2,736,009 | ||||||
Johnson Controls International plc | 32,961 | 2,680,059 | ||||||
Knight-Swift Transportation Holdings, Inc. | 42,599 | 2,595,983 | ||||||
Graphic Packaging Holding Co. | 119,885 | 2,337,757 | ||||||
Kirby Corp.* | 38,649 | 2,296,524 | ||||||
Plexus Corp.* | 21,533 | 2,064,799 | ||||||
Valmont Industries, Inc. | 7,997 | 2,003,248 | ||||||
Colfax Corp.* | 39,965 | 1,837,191 | ||||||
Altra Industrial Motion Corp. | 32,424 | 1,672,106 | ||||||
Energizer Holdings, Inc. | 40,672 | 1,630,947 | ||||||
Zurn Water Solutions Corp. | 42,569 | 1,549,511 | ||||||
PGT Innovations, Inc.* | 68,573 | 1,542,207 | ||||||
Curtiss-Wright Corp. | 10,964 | 1,520,378 | ||||||
Terex Corp. | 31,725 | 1,394,314 | ||||||
GATX Corp. | 10,780 | 1,123,168 | ||||||
Kennametal, Inc. | 28,392 | 1,019,557 | ||||||
Daseke, Inc.* | 94,028 | 944,041 | ||||||
Advanced Energy Industries, Inc. | 10,258 | 934,094 | ||||||
EnerSys | 11,333 | 895,987 | ||||||
Arcosa, Inc. | 16,791 | 884,885 | ||||||
Park Aerospace Corp. | 63,025 | 831,930 | ||||||
ChargePoint Holdings, Inc.* | 35,037 | 667,455 | ||||||
Total Industrial | 38,307,377 | |||||||
Consumer, Cyclical - 14.2% | ||||||||
LKQ Corp. | 72,822 | 4,371,505 | ||||||
Avient Corp. | 46,496 | 2,601,451 | ||||||
Whirlpool Corp. | 9,535 | 2,237,483 | ||||||
Methode Electronics, Inc. | 43,015 | 2,115,048 | ||||||
MSC Industrial Direct Company, Inc. — Class A | 22,407 | 1,883,532 | ||||||
Alaska Air Group, Inc.* | 32,117 | 1,673,296 | ||||||
Ralph Lauren Corp. — Class A | 13,536 | 1,608,889 | ||||||
DR Horton, Inc. | 12,860 | 1,394,667 | ||||||
Abercrombie & Fitch Co. — Class A* | 37,831 | 1,317,654 | ||||||
Kohl’s Corp. | 26,014 | 1,284,831 | ||||||
PVH Corp. | 11,908 | 1,269,988 | ||||||
Marriott Vacations Worldwide Corp. | 5,658 | 956,089 | ||||||
H&E Equipment Services, Inc. | 20,234 | 895,759 | ||||||
Dana, Inc. | 38,966 | 889,204 | ||||||
Lakeland Industries, Inc.* | 35,963 | 780,397 | ||||||
Newell Brands, Inc. | 35,094 | 766,453 | ||||||
La-Z-Boy, Inc. | 13,202 | 479,365 | ||||||
Total Consumer, Cyclical | 26,525,611 | |||||||
Consumer, Non-cyclical - 11.7% | ||||||||
Bunge Ltd. | 54,912 | 5,126,584 | ||||||
Ingredion, Inc. | 25,798 | 2,493,119 | ||||||
Central Garden & Pet Co. — Class A* | 43,114 | 2,063,005 | ||||||
J M Smucker Co. | 15,120 | 2,053,598 | ||||||
Encompass Health Corp. | 31,114 | 2,030,500 | ||||||
Henry Schein, Inc.* | 25,168 | 1,951,275 | ||||||
Tyson Foods, Inc. — Class A | 18,994 | 1,655,517 | ||||||
US Foods Holding Corp.* | 45,191 | 1,574,003 | ||||||
Integer Holdings Corp.* | 17,381 | 1,487,640 | ||||||
Pacira BioSciences, Inc.* | 15,959 | 960,253 | ||||||
Emergent BioSolutions, Inc.* | 11,690 | 508,164 | ||||||
Total Consumer, Non-cyclical | 21,903,658 | |||||||
Basic Materials - 7.6% | ||||||||
Huntsman Corp. | 95,151 | 3,318,867 | ||||||
Westlake Chemical Corp. | 23,085 | 2,242,246 | ||||||
Ashland Global Holdings, Inc. | 17,628 | 1,897,831 | ||||||
Element Solutions, Inc. | 67,298 | 1,633,995 | ||||||
Reliance Steel & Aluminum Co. | 9,765 | 1,584,078 | ||||||
Kraton Corp.* | 29,931 | 1,386,404 | ||||||
Nucor Corp. | 9,527 | 1,087,507 | ||||||
Commercial Metals Co. | 27,772 | 1,007,846 | ||||||
Total Basic Materials | 14,158,774 | |||||||
Technology - 6.4% | ||||||||
Evolent Health, Inc. — Class A* | 129,629 | 3,586,834 | ||||||
DXC Technology Co.* | 61,893 | 1,992,336 | ||||||
Science Applications International Corp. | 23,262 | 1,944,470 | ||||||
Leidos Holdings, Inc. | 19,309 | 1,716,570 | ||||||
Skyworks Solutions, Inc. | 8,720 | 1,352,821 | ||||||
Qorvo, Inc.* | 8,592 | 1,343,703 | ||||||
Total Technology | 11,936,734 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 131 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES V (SMID CAP VALUE SERIES) |
| Shares | Value | ||||||
Energy - 6.0% | ||||||||
Pioneer Natural Resources Co. | 30,929 | $ | 5,625,366 | |||||
Range Resources Corp.* | 184,618 | 3,291,739 | ||||||
Patterson-UTI Energy, Inc. | 284,964 | 2,407,946 | ||||||
HydroGen Corp.*,†††,1 | 672,346 | 1 | ||||||
Total Energy | 11,325,052 | |||||||
Communications - 3.7% | ||||||||
Infinera Corp.* | 285,587 | 2,738,779 | ||||||
Ciena Corp.* | 25,828 | 1,987,981 | ||||||
TEGNA, Inc. | 104,531 | 1,940,095 | ||||||
ViacomCBS, Inc. — Class B | 11,265 | 339,978 | ||||||
Total Communications | 7,006,833 | |||||||
Utilities - 2.9% | ||||||||
Black Hills Corp. | 43,060 | 3,038,744 | ||||||
Pinnacle West Capital Corp. | 18,086 | 1,276,691 | ||||||
Spire, Inc. | 17,968 | 1,171,873 | ||||||
Total Utilities | 5,487,308 | |||||||
Total Common Stocks | ||||||||
(Cost $142,771,078) | 181,899,872 | |||||||
CONVERTIBLE PREFERRED STOCKS††† - 0.0% | ||||||||
Industrial - 0.0% | ||||||||
Thermoenergy Corp.*,2 | 308,333 | 1 | ||||||
Total Convertible Preferred Stocks | ||||||||
(Cost $294,438) | 1 | |||||||
RIGHTS† - 0.1% | ||||||||
Basic Materials - 0.1% | ||||||||
Pan American Silver Corp.* | 220,317 | 171,561 | ||||||
Total Rights | ||||||||
(Cost $—) | 171,561 | |||||||
MONEY MARKET FUND† - 2.9% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%3 | 5,349,983 | 5,349,983 | ||||||
Total Money Market Fund | ||||||||
(Cost $5,349,983) | 5,349,983 | |||||||
Total Investments - 100.0% | ||||||||
(Cost $148,415,499) | $ | 187,421,417 | ||||||
Other Assets & Liabilities, net - 0.0% | (48,446 | ) | ||||||
Total Net Assets - 100.0% | $ | 187,372,971 | ||||||
* | Non-income producing security. |
† | Value determined based on Level 1 inputs, unless otherwise noted — See Note 4. |
††† | Value determined based on Level 3 inputs — See Note 4. |
1 | Affiliated issuer. |
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 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 181,899,871 | $ | — | $ | 1 | $ | 181,899,872 | ||||||||
Convertible Preferred Stocks | — | — | 1 | 1 | ||||||||||||
Rights | 171,561 | — | — | 171,561 | ||||||||||||
Money Market Fund | 5,349,983 | — | — | 5,349,983 | ||||||||||||
Total Assets | $ | 187,421,415 | $ | — | $ | 2 | $ | 187,421,417 | ||||||||
132 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES V (SMID CAP VALUE SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments, result in that company being considered an affiliated issuer, as defined in the 1940 Act.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||||||||
HydroGen Corp.* | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | 672,346 | $ | — | |||||||||||||||||
* | Non-income producing security. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 133 |
SERIES V (SMID CAP VALUE SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $145,843,924) | $ | 187,421,416 | ||
Investments in affiliated issuers, at value (cost $2,571,575) | 1 | |||
Prepaid expenses | 4,514 | |||
Receivables: | ||||
Dividends | 276,038 | |||
Fund shares sold | 26,177 | |||
Interest | 44 | |||
Total assets | 187,728,190 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 170,885 | |||
Management fees | 78,522 | |||
Distribution and service fees | 38,829 | |||
Professional fees | 21,867 | |||
Fund accounting/administration fees | 11,753 | |||
Trustees’ fees* | 7,226 | |||
Transfer agent/maintenance fees | 2,917 | |||
Miscellaneous | 23,220 | |||
Total liabilities | 355,219 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 187,372,971 | ||
Net assets consist of: | ||||
Paid in capital | $ | 128,384,047 | ||
Total distributable earnings (loss) | 58,988,924 | |||
Net assets | $ | 187,372,971 | ||
Capital shares outstanding | 2,254,448 | |||
Net asset value per share | $ | 83.11 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 3,149,397 | ||
Interest | 260 | |||
Total investment income | 3,149,657 | |||
Expenses: | ||||
Management fees | 1,423,683 | |||
Distribution and service fees | 474,561 | |||
Transfer agent/maintenance fees | 25,068 | |||
Fund accounting/administration fees | 132,375 | |||
Professional fees | 55,922 | |||
Trustees’ fees* | 19,035 | |||
Custodian fees | 10,134 | |||
Line of credit fees | 8,757 | |||
Miscellaneous | 11,550 | |||
Total expenses | 2,161,085 | |||
Less: | ||||
Expenses waived by Adviser | (452,499 | ) | ||
Net expenses | 1,708,586 | |||
Net investment income | 1,441,071 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 23,340,393 | |||
Net realized gain | 23,340,393 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 14,828,004 | |||
Net change in unrealized appreciation (depreciation) | 14,828,004 | |||
Net realized and unrealized gain | 38,168,397 | |||
Net increase in net assets resulting from operations | $ | 39,609,468 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
134 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES V (SMID CAP VALUE SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 1,441,071 | $ | 3,240,442 | ||||
Net realized gain (loss) on investments | 23,340,393 | (3,032,217 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 14,828,004 | 2,945,264 | ||||||
Net increase in net assets resulting from operations | 39,609,468 | 3,153,489 | ||||||
Distributions to shareholders | (3,140,125 | ) | (8,192,481 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 5,172,278 | 3,673,402 | ||||||
Distributions reinvested | 3,140,125 | 8,192,481 | ||||||
Cost of shares redeemed | (29,848,950 | ) | (29,593,956 | ) | ||||
Net decrease from capital share transactions | (21,536,547 | ) | (17,728,073 | ) | ||||
Net increase (decrease) in net assets | 14,932,796 | (22,767,065 | ) | |||||
Net assets: | ||||||||
Beginning of year | 172,440,175 | 195,207,240 | ||||||
End of year | $ | 187,372,971 | $ | 172,440,175 | ||||
Capital share activity: | ||||||||
Shares sold | 64,686 | 65,752 | ||||||
Shares issued from reinvestment of distributions | 40,140 | 145,257 | ||||||
Shares redeemed | (374,637 | ) | (508,289 | ) | ||||
Net decrease in shares | (269,811 | ) | (297,280 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 135 |
SERIES V (SMID CAP VALUE SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 68.31 | $ | 69.18 | $ | 61.70 | $ | 82.36 | $ | 74.35 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .61 | 1.21 | .68 | .53 | (.16 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 15.53 | 1.10 | e | 15.01 | (9.07 | ) | 10.16 | |||||||||||||
Total from investment operations | 16.14 | 2.31 | 15.69 | (8.54 | ) | 10.00 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (1.34 | ) | (.77 | ) | (.64 | ) | (.49 | ) | (.52 | ) | ||||||||||
Net realized gains | — | (2.41 | ) | (7.57 | ) | (11.63 | ) | (1.47 | ) | |||||||||||
Total distributions | (1.34 | ) | (3.18 | ) | (8.21 | ) | (12.12 | ) | (1.99 | ) | ||||||||||
Net asset value, end of period | $ | 83.11 | $ | 68.31 | $ | 69.18 | $ | 61.70 | $ | 82.36 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 23.75 | % | 4.30 | % | 26.70 | % | (12.97 | %) | 13.71 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 187,373 | $ | 172,440 | $ | 195,207 | $ | 176,113 | $ | 242,217 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.76 | % | 2.05 | % | 1.01 | % | 0.68 | % | (0.21 | %) | ||||||||||
Total expenses | 1.14 | % | 1.22 | % | 1.19 | % | 1.19 | % | 1.10 | % | ||||||||||
Net expensesc,d | 0.90 | % | 0.90 | % | 0.91 | % | 0.91 | % | 0.91 | % | ||||||||||
Portfolio turnover rate | 34 | % | 38 | % | 41 | % | 65 | % | 54 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
d | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.90% | 0.90% | 0.91% | 0.91% | 0.89% |
e | The amount shown for a share outstanding throughout the period does not agree with the aggregate net loss on investments for the period because of the sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
136 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series X (StylePlusTM—Small Growth Series) is managed by a team of seasoned professionals, , including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series X (StylePlus—Small Growth Series) returned 6.54%, compared with the 2.83% return of its benchmark, the Russell 2000® Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell 2000 Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review and Positioning
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund outperformed the Russell 2000 Growth Index for the fiscal year ended December 31, 2021 by almost four percentage points net of fees. The fixed income sleeve contributed to total return, as positions in the Guggenheim Ultra Short Duration Fund and the Guggenheim Strategy Funds, net of the investment income earned by these positions, were positive for the period. The actively managed equity sleeve contributed to performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, also contributed to performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 137 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES)
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: October 15, 1997 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund III | 25.0% |
Guggenheim Variable Insurance Strategy Fund III | 24.2% |
Guggenheim Strategy Fund II | 18.0% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 9.0% |
UFP Industries, Inc. | 0.3% |
Mueller Industries, Inc. | 0.3% |
ServisFirst Bancshares, Inc. | 0.3% |
Diodes, Inc. | 0.3% |
Viavi Solutions, Inc. | 0.3% |
MaxLinear, Inc. — Class A | 0.3% |
Top Ten Total | 78.0% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
138 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series X (StylePlus—Small Growth Series) | 6.54% | 14.14% | 14.05% |
Russell 2000 Growth Index | 2.83% | 14.53% | 14.14% |
* | 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 Russell 2000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 139 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 19.6% | ||||||||
Financial - 4.1% | ||||||||
ServisFirst Bancshares, Inc. | 1,259 | $ | 106,939 | |||||
First BanCorp | 6,900 | 95,082 | ||||||
Piper Sandler Cos. | 448 | 79,973 | ||||||
Preferred Bank/Los Angeles CA | 1,093 | 78,466 | ||||||
Meta Financial Group, Inc. | 1,242 | 74,098 | ||||||
United Community Banks, Inc. | 2,061 | 74,072 | ||||||
HomeStreet, Inc. | 1,416 | 73,632 | ||||||
National Bank Holdings Corp. — Class A | 1,656 | 72,765 | ||||||
Banner Corp. | 1,194 | 72,440 | ||||||
Innovative Industrial Properties, Inc. REIT | 247 | 64,939 | ||||||
Walker & Dunlop, Inc. | 415 | 62,615 | ||||||
Central Pacific Financial Corp. | 2,158 | 60,791 | ||||||
Virtus Investment Partners, Inc. | 197 | 58,529 | ||||||
Veritex Holdings, Inc. | 1,315 | 52,311 | ||||||
Dime Community Bancshares, Inc. | 1,351 | 47,501 | ||||||
Customers Bancorp, Inc.* | 701 | 45,824 | ||||||
Hilltop Holdings, Inc. | 1,243 | 43,679 | ||||||
Stewart Information Services Corp. | 486 | 38,749 | ||||||
Triumph Bancorp, Inc.* | 312 | 37,153 | ||||||
Independence Realty Trust, Inc. REIT | 1,424 | 36,782 | ||||||
Lakeland Financial Corp. | 440 | 35,262 | ||||||
Brightsphere Investment Group, Inc. | 1,269 | 32,486 | ||||||
Interactive Brokers Group, Inc. — Class A | 373 | 29,624 | ||||||
Enova International, Inc.* | 717 | 29,368 | ||||||
Southside Bancshares, Inc. | 674 | 28,187 | ||||||
Evercore, Inc. — Class A | 199 | 27,034 | ||||||
UMB Financial Corp. | 251 | 26,634 | ||||||
Independent Bank Corp. | 265 | 21,605 | ||||||
World Acceptance Corp.* | 84 | 20,616 | ||||||
Total Financial | 1,527,156 | |||||||
Technology - 3.6% | ||||||||
Diodes, Inc.* | 950 | 104,319 | ||||||
MaxLinear, Inc. — Class A* | 1,315 | 99,138 | ||||||
Rambus, Inc.* | 3,153 | 92,667 | ||||||
Onto Innovation, Inc.* | 855 | 86,552 | ||||||
CSG Systems International, Inc. | 1,483 | 85,451 | ||||||
SPS Commerce, Inc.* | 574 | 81,709 | ||||||
Progress Software Corp. | 1,675 | 80,852 | ||||||
ExlService Holdings, Inc.* | 554 | 80,202 | ||||||
Kulicke & Soffa Industries, Inc. | 1,153 | 69,803 | ||||||
Axcelis Technologies, Inc.* | 779 | 58,082 | ||||||
Veeco Instruments, Inc.* | 1,987 | 56,570 | ||||||
Xperi Holding Corp. | 2,823 | 53,383 | ||||||
3D Systems Corp.* | 2,323 | 50,037 | ||||||
Ultra Clean Holdings, Inc.* | 787 | 45,142 | ||||||
Maximus, Inc. | 534 | 42,544 | ||||||
Apollo Medical Holdings, Inc.* | 563 | 41,369 | ||||||
Power Integrations, Inc. | 408 | 37,899 | ||||||
TTEC Holdings, Inc. | 412 | 37,307 | ||||||
CEVA, Inc.* | 795 | 34,376 | ||||||
Cohu, Inc.* | 875 | 33,329 | ||||||
SMART Global Holdings, Inc.* | 463 | 32,868 | ||||||
Cirrus Logic, Inc.* | 346 | 31,839 | ||||||
Total Technology | 1,335,438 | |||||||
Industrial - 3.6% | ||||||||
UFP Industries, Inc. | 1,321 | 121,545 | ||||||
Mueller Industries, Inc. | 1,929 | 114,505 | ||||||
Hillenbrand, Inc. | 1,763 | 91,658 | ||||||
Encore Wire Corp. | 609 | 87,148 | ||||||
Knowles Corp.* | 3,632 | 84,807 | ||||||
OSI Systems, Inc.* | 851 | 79,313 | ||||||
Chart Industries, Inc.* | 424 | 67,624 | ||||||
Advanced Energy Industries, Inc. | 697 | 63,469 | ||||||
Comfort Systems USA, Inc. | 626 | 61,936 | ||||||
Albany International Corp. — Class A | 649 | 57,404 | ||||||
Fabrinet* | 483 | 57,221 | ||||||
Boise Cascade Co. | 790 | 56,248 | ||||||
Badger Meter, Inc. | 484 | 51,575 | ||||||
Sturm Ruger & Company, Inc. | 728 | 49,519 | ||||||
Insteel Industries, Inc. | 1,131 | 45,025 | ||||||
AAON, Inc. | 504 | 40,033 | ||||||
Patrick Industries, Inc. | 478 | 38,570 | ||||||
Matson, Inc. | 372 | 33,491 | ||||||
Dorian LPG Ltd. | 2,332 | 29,593 | ||||||
Lincoln Electric Holdings, Inc. | 197 | 27,476 | ||||||
Louisiana-Pacific Corp. | 333 | 26,091 | ||||||
Eagle Materials, Inc. | 155 | 25,801 | ||||||
Exponent, Inc. | 176 | 20,545 | ||||||
Total Industrial | 1,330,597 | |||||||
Consumer, Non-cyclical - 3.0% | ||||||||
Omnicell, Inc.* | 525 | 94,731 | ||||||
Prestige Consumer Healthcare, Inc.* | 1,478 | 89,641 | ||||||
Alarm.com Holdings, Inc.* | 1,005 | 85,234 | ||||||
Innoviva, Inc.* | 4,859 | 83,818 | ||||||
AMN Healthcare Services, Inc.* | 593 | 72,542 | ||||||
EVERTEC, Inc. | 1,388 | 69,372 | ||||||
Amphastar Pharmaceuticals, Inc.* | 2,890 | 67,308 | ||||||
Cytokinetics, Inc.* | 1,117 | 50,913 | ||||||
LeMaitre Vascular, Inc. | 925 | 46,463 | ||||||
Corcept Therapeutics, Inc.* | 2,248 | 44,510 | ||||||
Supernus Pharmaceuticals, Inc.* | 1,466 | 42,749 | ||||||
Tivity Health, Inc.* | 1,596 | 42,198 | ||||||
Surmodics, Inc.* | 864 | 41,601 | ||||||
Fulgent Genetics, Inc.* | 386 | 38,828 | ||||||
Eagle Pharmaceuticals, Inc.* | 740 | 37,681 | ||||||
United Therapeutics Corp.* | 167 | 36,085 | ||||||
uniQure N.V.* | 1,729 | 35,859 | ||||||
Vanda Pharmaceuticals, Inc.* | 2,121 | 33,278 | ||||||
Community Health Systems, Inc.* | 2,244 | 29,868 | ||||||
Owens & Minor, Inc. | 666 | 28,971 | ||||||
CorVel Corp.* | 132 | 27,456 | ||||||
Total Consumer, Non-cyclical | 1,099,106 | |||||||
Consumer, Cyclical - 2.8% | ||||||||
LGI Homes, Inc.* | 411 | 63,491 | ||||||
Boot Barn Holdings, Inc.* | 497 | 61,156 | ||||||
Vista Outdoor, Inc.* | 1,242 | 57,219 | ||||||
140 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
| Shares | Value | ||||||
Century Communities, Inc. | 644 | $ | 52,673 | |||||
Methode Electronics, Inc. | 1,039 | 51,088 | ||||||
Gentherm, Inc.* | 555 | 48,229 | ||||||
Choice Hotels International, Inc. | 307 | 47,889 | ||||||
Oxford Industries, Inc. | 457 | 46,395 | ||||||
Cavco Industries, Inc.* | 143 | 45,424 | ||||||
Sleep Number Corp.* | 586 | 44,887 | ||||||
Buckle, Inc. | 1,011 | 42,776 | ||||||
MarineMax, Inc.* | 720 | 42,509 | ||||||
Installed Building Products, Inc. | 303 | 42,335 | ||||||
Shoe Carnival, Inc. | 1,037 | 40,526 | ||||||
Dine Brands Global, Inc. | 509 | 38,587 | ||||||
Winnebago Industries, Inc. | 506 | 37,910 | ||||||
Kontoor Brands, Inc. | 712 | 36,490 | ||||||
Jack in the Box, Inc. | 406 | 35,517 | ||||||
Hibbett, Inc. | 472 | 33,951 | ||||||
Boyd Gaming Corp.* | 481 | 31,539 | ||||||
Movado Group, Inc. | 728 | 30,452 | ||||||
Sally Beauty Holdings, Inc.* | 1,563 | 28,853 | ||||||
Asbury Automotive Group, Inc.* | 137 | 23,664 | ||||||
Brunswick Corp. | 230 | 23,168 | ||||||
AutoNation, Inc.* | 185 | 21,617 | ||||||
Total Consumer, Cyclical | 1,028,345 | |||||||
Communications - 1.0% | ||||||||
Viavi Solutions, Inc.* | 5,839 | 102,883 | ||||||
Perficient, Inc.* | 544 | 70,334 | ||||||
Extreme Networks, Inc.* | 3,706 | 58,184 | ||||||
Shutterstock, Inc. | 420 | 46,570 | ||||||
InterDigital, Inc. | 622 | 44,554 | ||||||
Harmonic, Inc.* | 3,108 | 36,550 | ||||||
HealthStream, Inc.* | 996 | 26,254 | ||||||
Total Communications | 385,329 | |||||||
Energy - 0.9% | ||||||||
PDC Energy, Inc. | 1,269 | 61,902 | ||||||
Civitas Resources, Inc. | 1,043 | 51,076 | ||||||
Matador Resources Co. | 1,382 | 51,023 | ||||||
SM Energy Co. | 1,669 | 49,202 | ||||||
Southwestern Energy Co.* | 9,415 | 43,874 | ||||||
Callon Petroleum Co.* | 650 | 30,712 | ||||||
Antero Midstream Corp. | 2,839 | 27,482 | ||||||
Total Energy | 315,271 | |||||||
Basic Materials - 0.6% | ||||||||
Livent Corp.* | 2,020 | 49,248 | ||||||
Ingevity Corp.* | 649 | 46,533 | ||||||
AdvanSix, Inc. | 876 | 41,391 | ||||||
Balchem Corp. | 199 | 33,551 | ||||||
Valvoline, Inc. | 833 | 31,063 | ||||||
Olin Corp. | 439 | 25,251 | ||||||
Total Basic Materials | 227,037 | |||||||
Total Common Stocks | ||||||||
(Cost $6,306,820) | 7,248,279 | |||||||
MUTUAL FUNDS† - 76.2% | ||||||||
Guggenheim Strategy Fund III1 | 368,891 | 9,233,350 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 359,106 | 8,963,296 | ||||||
Guggenheim Strategy Fund II1 | 268,295 | 6,675,169 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 336,057 | 3,333,685 | ||||||
Total Mutual Funds | ||||||||
(Cost $28,208,664) | 28,205,500 | |||||||
MONEY MARKET FUND† - 4.4% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 1,643,450 | 1,643,450 | ||||||
Total Money Market Fund | ||||||||
(Cost $1,643,450) | 1,643,450 | |||||||
Total Investments - 100.2% | ||||||||
(Cost $36,158,934) | $ | 37,097,229 | ||||||
Other Assets & Liabilities, net - (0.2)% | (86,703 | ) | ||||||
Total Net Assets - 100.0% | $ | 37,010,526 | ||||||
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
Russell 2000 Index Mini Futures Contracts | 5 | Mar 2022 | $ | 560,625 | $ | 16,406 | ||||||||||
S&P MidCap 400 Index Mini Futures Contracts | 1 | Mar 2022 | 283,850 | 9,458 | ||||||||||||
| $ | 844,475 | $ | 25,864 | |||||||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 141 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
Total Return Swap Agreements | |||||||||||||||||||||||
Counterparty | Index | Type | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||||||
Wells Fargo Bank, N.A. | Russell 2000 Growth Index | Pay | 0.29% (Federal Funds Rate + 0.21%) | At Maturity | 04/07/22 | 19,388 | $ | 28,899,966 | $ | (99,596 | ) | ||||||||||||
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 7,248,279 | $ | — | $ | — | $ | 7,248,279 | ||||||||
Mutual Funds | 28,205,500 | — | — | 28,205,500 | ||||||||||||
Money Market Fund | 1,643,450 | — | — | 1,643,450 | ||||||||||||
Equity Futures Contracts** | 25,864 | — | — | 25,864 | ||||||||||||
Total Assets | $ | 37,123,093 | $ | — | $ | — | $ | 37,123,093 | ||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Index Swap Agreements** | $ | — | $ | 99,596 | $ | — | $ | 99,596 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
142 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 4,236,714 | $ | 2,463,878 | $ | — | $ | — | $ | (25,423 | ) | $ | 6,675,169 | 268,295 | $ | 90,846 | ||||||||||||||||
Guggenheim Strategy Fund III | 7,881,769 | 1,377,540 | — | — | (25,959 | ) | 9,233,350 | 368,891 | 127,803 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 10,787,486 | 6,833,708 | (14,240,942 | ) | 37,591 | (84,158 | ) | 3,333,685 | 336,057 | 75,150 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 7,870,976 | 1,120,288 | — | — | (27,968 | ) | 8,963,296 | 359,106 | 120,538 | |||||||||||||||||||||||
| $ | 30,776,945 | $ | 11,795,414 | $ | (14,240,942 | ) | $ | 37,591 | $ | (163,508 | ) | $ | 28,205,500 | $ | 414,337 | |||||||||||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 143 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $7,950,270) | $ | 8,891,729 | ||
Investments in affiliated issuers, at value (cost $28,208,664) | 28,205,500 | |||
Cash | 70 | |||
Segregated cash with broker | 72,500 | |||
Prepaid expenses | 2,461 | |||
Receivables: | ||||
Dividends | 38,474 | |||
Swap settlement | 10,488 | |||
Fund shares sold | 3,416 | |||
Interest | 7 | |||
Total assets | 37,224,645 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 99,596 | |||
Payable for: | ||||
Securities purchased | 38,047 | |||
Professional fees | 22,745 | |||
Management fees | 12,494 | |||
Distribution and service fees | 7,743 | |||
Trustees’ fees* | 4,561 | |||
Fund accounting/administration fees | 3,883 | |||
Transfer agent/maintenance fees | 2,115 | |||
Variation margin on futures contracts | 910 | |||
Fund shares redeemed | 274 | |||
Miscellaneous | 21,751 | |||
Total liabilities | 214,119 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 37,010,526 | ||
Net assets consist of: | ||||
Paid in capital | $ | 27,238,658 | ||
Total distributable earnings (loss) | 9,771,868 | |||
Net assets | $ | 37,010,526 | ||
Capital shares outstanding | 804,449 | |||
Net asset value per share | $ | 46.01 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 66,051 | ||
Dividends from securities of affiliated issuers | 414,337 | |||
Interest | 140 | |||
Total investment income | 480,528 | |||
Expenses: | ||||
Management fees | 293,339 | |||
Distribution and service fees | 97,779 | |||
Transfer agent/maintenance fees | 25,164 | |||
Professional fees | 37,890 | |||
Fund accounting/administration fees | 33,886 | |||
Custodian fees | 27,345 | |||
Trustees�� fees* | 17,790 | |||
Interest expense | 4,723 | |||
Line of credit fees | 1,775 | |||
Miscellaneous | 7,814 | |||
Total expenses | 547,505 | |||
Less: | ||||
Expenses reimbursed by Adviser | (405 | ) | ||
Expenses waived by Adviser | (151,034 | ) | ||
Total waived expenses | (151,439 | ) | ||
Net expenses | 396,066 | |||
Net investment income | 84,462 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,534,129 | |||
Investments in affiliated issuers | 37,591 | |||
Swap agreements | 7,976,409 | |||
Futures contracts | 127,994 | |||
Net realized gain | 9,676,123 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | (7,610 | ) | ||
Investments in affiliated issuers | (163,508 | ) | ||
Swap agreements | (7,083,134 | ) | ||
Futures contracts | 21,857 | |||
Net change in unrealized appreciation (depreciation) | (7,232,395 | ) | ||
Net realized and unrealized gain | 2,443,728 | |||
Net increase in net assets resulting from operations | $ | 2,528,190 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
144 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 84,462 | $ | 149,056 | ||||
Net realized gain on investments | 9,676,123 | 4,165,403 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (7,232,395 | ) | 4,700,737 | |||||
Net increase in net assets resulting from operations | 2,528,190 | 9,015,196 | ||||||
Distributions to shareholders | (1,474,151 | ) | (390,463 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 971,520 | 951,691 | ||||||
Distributions reinvested | 1,474,151 | 390,463 | ||||||
Cost of shares redeemed | (4,478,015 | ) | (5,013,878 | ) | ||||
Net decrease from capital share transactions | (2,032,344 | ) | (3,671,724 | ) | ||||
Net increase (decrease) in net assets | (978,305 | ) | 4,953,009 | |||||
Net assets: | ||||||||
Beginning of year | 37,988,831 | 33,035,822 | ||||||
End of year | $ | 37,010,526 | $ | 37,988,831 | ||||
Capital share activity: | ||||||||
Shares sold | 20,250 | 29,544 | ||||||
Shares issued from reinvestment of distributions | 32,292 | 11,666 | ||||||
Shares redeemed | (93,977 | ) | (152,191 | ) | ||||
Net decrease in shares | (41,435 | ) | (110,981 | ) | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 145 |
SERIES X (STYLEPLUS—SMALL GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 44.91 | $ | 34.53 | $ | 30.87 | $ | 40.19 | $ | 33.08 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .10 | .17 | .42 | .56 | .36 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.82 | 10.65 | 7.28 | (3.33 | ) | 7.02 | ||||||||||||||
Total from investment operations | 2.92 | 10.82 | 7.70 | (2.77 | ) | 7.38 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.19 | ) | (.44 | ) | (.22 | ) | (.43 | ) | (.27 | ) | ||||||||||
Net realized gains | (1.63 | ) | — | (3.82 | ) | (6.12 | ) | — | ||||||||||||
Total distributions | (1.82 | ) | (.44 | ) | (4.04 | ) | (6.55 | ) | (.27 | ) | ||||||||||
Net asset value, end of period | $ | 46.01 | $ | 44.91 | $ | 34.53 | $ | 30.87 | $ | 40.19 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 6.54 | % | 31.82 | % | 25.68 | % | (10.30 | %) | 22.38 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 37,011 | $ | 37,989 | $ | 33,036 | $ | 28,644 | $ | 39,560 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.22 | % | 0.49 | % | 1.24 | % | 1.42 | % | 0.99 | % | ||||||||||
Total expensesc | 1.39 | % | 1.50 | % | 1.62 | % | 1.47 | % | 1.37 | % | ||||||||||
Net expensesd,e,f | 1.00 | % | 1.02 | % | 1.11 | % | 1.12 | % | 1.10 | % | ||||||||||
Portfolio turnover rate | 64 | % | 86 | % | 59 | % | 65 | % | 50 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.00%* | — |
* | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
1.00% | 1.01% | 1.03% | 1.06% | 1.09% |
146 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
To Our Shareholders:
The Series Y (StylePlus TM—Large Growth Series) is managed by a team of seasoned professionals, , including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Qi Yan, Managing Director and Portfolio Manager; and Adam J. Bloch, Managing Director and Portfolio Manager. In the following paragraphs, the investment team discusses performance of the Fund for the fiscal year ended December 31, 2021.
For the year ended December 31, 2021, Series Y (StylePlus—Large Growth Series) returned 27.77%, compared with the 27.60% return of its benchmark, the Russell 1000 Growth Index.
Investment Approach
Through a combination of actively managed individual equity, passive equity, and actively managed fixed income, the Fund seeks to exceed the total return of the Russell 1000 Growth Index. The actively managed equity and fixed income components seek to provide multiple sources of outperformance and take advantage of Guggenheim’s competencies in both fixed income and systematic stock selection.
The active and passive decisions seek to add value by tactically allocating to actively managed equity through quantitative selection models when stock picking opportunities are high. During periods when Guggenheim views these opportunities to be less attractive, the Fund seeks to increase its passive exposure to equities and the allocation to fixed income securities. The prospective return during such periods is the equity index plus an “alpha” component coming from the yield of the fixed income overlay.
Performance Review and Positioning
Over the period, from 15-25% of the total equity position was allocated to actively managed equity and 75-85% to passive equity. Remaining Fund assets were invested in the Guggenheim Strategy Funds, short-term fixed income investment companies advised by Guggenheim Investments, and the Guggenheim Ultra Short Duration Fund, whose objective is to seek a high level of income consistent with the preservation of capital.
The Fund outperformed the Russell 1000 Growth Index for the fiscal year ended December 31, 2021 by 17 basis points net of fees. The fixed income sleeve contributed to total return, as positions in the Guggenheim Ultra Short Duration Fund and the Guggenheim Strategy Funds, net of the investment income earned by these positions, were positive for the period. The actively managed equity sleeve contributed to performance on a relative basis. The passive equity position, maintained through swap agreements and futures contracts, also contributed to performance.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 147 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES)
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, investments in Guggenheim Strategy Funds Trust mutual funds, or investments in Guggenheim Ultra Short Duration Fund.
Inception Date: May 3, 1999 |
Ten Largest Holdings (% of Total Net Assets) | |
Guggenheim Strategy Fund III | 24.5% |
Guggenheim Variable Insurance Strategy Fund III | 22.2% |
Guggenheim Ultra Short Duration Fund — Institutional Class | 15.9% |
Guggenheim Strategy Fund II | 15.0% |
Microsoft Corp. | 2.3% |
Apple, Inc. | 2.2% |
Alphabet, Inc. — Class C | 1.3% |
Amazon.com, Inc. | 1.1% |
Meta Platforms, Inc. — Class A | 0.5% |
Tesla, Inc. | 0.5% |
Top Ten Total | 85.5% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
148 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series Y (StylePlus—Large Growth Series) | 27.77% | 24.22% | 18.70% |
Russell 1000 Growth Index | 27.60% | 25.32% | 19.79% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Russell 1000 Growth Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce its reported return. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 149 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 18.0% | ||||||||
Technology - 7.4% | ||||||||
Microsoft Corp. | 4,031 | $ | 1,355,706 | |||||
Apple, Inc. | 7,247 | 1,286,850 | ||||||
NVIDIA Corp. | 839 | 246,758 | ||||||
QUALCOMM, Inc. | 1,123 | 205,363 | ||||||
Broadcom, Inc. | 243 | 161,695 | ||||||
Texas Instruments, Inc. | 761 | 143,426 | ||||||
KLA Corp. | 277 | 119,140 | ||||||
NetApp, Inc. | 1,222 | 112,412 | ||||||
Akamai Technologies, Inc.* | 898 | 105,102 | ||||||
Seagate Technology Holdings plc | 843 | 95,242 | ||||||
HP, Inc. | 2,471 | 93,082 | ||||||
Skyworks Solutions, Inc. | 593 | 91,998 | ||||||
Qorvo, Inc.* | 575 | 89,924 | ||||||
Advanced Micro Devices, Inc.* | 562 | 80,872 | ||||||
Adobe, Inc.* | 141 | 79,955 | ||||||
Oracle Corp. | 293 | 25,553 | ||||||
Intuit, Inc. | 31 | 19,940 | ||||||
Total Technology | 4,313,018 | |||||||
Communications - 3.9% | ||||||||
Alphabet, Inc. — Class C* | 263 | 761,014 | ||||||
Amazon.com, Inc.* | 190 | 633,525 | ||||||
Meta Platforms, Inc. — Class A* | 928 | 312,133 | ||||||
Cisco Systems, Inc. | 2,566 | 162,607 | ||||||
eBay, Inc. | 1,821 | 121,097 | ||||||
Motorola Solutions, Inc. | 434 | 117,918 | ||||||
F5, Inc.* | 447 | 109,385 | ||||||
Netflix, Inc.* | 85 | 51,207 | ||||||
Total Communications | 2,268,886 | |||||||
Consumer, Non-cyclical - 2.5% | ||||||||
AbbVie, Inc. | 1,209 | 163,699 | ||||||
Pfizer, Inc. | 2,472 | 145,971 | ||||||
Amgen, Inc. | 560 | 125,983 | ||||||
PerkinElmer, Inc. | 599 | 120,435 | ||||||
Gartner, Inc.* | 348 | 116,343 | ||||||
Laboratory Corporation of America Holdings* | 349 | 109,660 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 143 | 108,047 | ||||||
United Rentals, Inc.* | 320 | 106,333 | ||||||
Quest Diagnostics, Inc. | 614 | 106,228 | ||||||
Hologic, Inc.* | 1,385 | 106,035 | ||||||
Regeneron Pharmaceuticals, Inc.* | 165 | 104,201 | ||||||
Moderna, Inc.* | 343 | 87,115 | ||||||
S&P Global, Inc. | 71 | 33,507 | ||||||
Thermo Fisher Scientific, Inc. | 45 | 30,026 | ||||||
Total Consumer, Non-cyclical | 1,463,583 | |||||||
Consumer, Cyclical - 1.7% | ||||||||
Tesla, Inc.* | 294 | 310,693 | ||||||
AutoZone, Inc.* | 60 | 125,784 | ||||||
O’Reilly Automotive, Inc.* | 178 | 125,709 | ||||||
LKQ Corp. | 1,839 | 110,395 | ||||||
NVR, Inc.* | 18 | 106,360 | ||||||
Home Depot, Inc. | 215 | 89,227 | ||||||
Lowe’s Companies, Inc. | 119 | 30,759 | ||||||
Starbucks Corp. | 178 | 20,821 | ||||||
NIKE, Inc. — Class B | 124 | 20,667 | ||||||
McDonald’s Corp. | 76 | 20,373 | ||||||
Total Consumer, Cyclical | 960,788 | |||||||
Financial - 1.3% | ||||||||
JPMorgan Chase & Co. | 1,275 | 201,896 | ||||||
Capital One Financial Corp. | 780 | 113,170 | ||||||
Raymond James Financial, Inc. | 1,073 | 107,729 | ||||||
Discover Financial Services | 836 | 96,608 | ||||||
Synchrony Financial | 1,845 | 85,590 | ||||||
Zions Bancorp North America | 1,309 | 82,677 | ||||||
Visa, Inc. — Class A | 141 | 30,556 | ||||||
Mastercard, Inc. — Class A | 57 | 20,481 | ||||||
Total Financial | 738,707 | |||||||
Basic Materials - 0.6% | ||||||||
CF Industries Holdings, Inc. | 1,631 | 115,442 | ||||||
Nucor Corp. | 963 | 109,926 | ||||||
Celanese Corp. — Class A | 641 | 107,727 | ||||||
Total Basic Materials | 333,095 | |||||||
Industrial - 0.2% | ||||||||
Keysight Technologies, Inc.* | 577 | 119,156 | ||||||
Utilities - 0.2% | ||||||||
NRG Energy, Inc. | 2,655 | 114,377 | ||||||
Energy - 0.2% | ||||||||
Occidental Petroleum Corp. | 3,743 | 108,510 | ||||||
Total Common Stocks | ||||||||
(Cost $7,764,359) | 10,420,120 | |||||||
MUTUAL FUNDS† - 77.6% | ||||||||
Guggenheim Strategy Fund III1 | 566,681 | 14,184,016 | ||||||
Guggenheim Variable Insurance Strategy Fund III1 | 516,341 | 12,887,874 | ||||||
Guggenheim Ultra Short Duration Fund — Institutional Class1 | 929,731 | 9,222,929 | ||||||
Guggenheim Strategy Fund II1 | 350,074 | 8,709,839 | ||||||
Total Mutual Funds | ||||||||
(Cost $45,051,524) | 45,004,658 | |||||||
MONEY MARKET FUND† - 4.9% | ||||||||
Dreyfus Treasury Securities Cash Management Fund — Institutional Shares, 0.01%2 | 2,831,474 | 2,831,474 | ||||||
Total Money Market Fund | ||||||||
(Cost $2,831,474) | 2,831,474 | |||||||
Total Investments - 100.5% | ||||||||
(Cost $55,647,357) | $ | 58,256,252 | ||||||
Other Assets & Liabilities, net - (0.5)% | (279,316 | ) | ||||||
Total Net Assets - 100.0% | $ | 57,976,936 | ||||||
150 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
Futures Contracts | ||||||||||||||||
Description | Number of | Expiration | Notional | Value and | ||||||||||||
Equity Futures Contracts Purchased† | ||||||||||||||||
S&P 500 Index Mini Futures Contracts | 4 | Mar 2022 | $ | 951,900 | $ | 20,055 | ||||||||||
NASDAQ-100 Index Mini Futures Contracts | 1 | Mar 2022 | 326,505 | 4,944 | ||||||||||||
| $ | 1,278,405 | $ | 24,999 | |||||||||||||
Total Return Swap Agreements | |||||||||||||||||||||||
Counterparty | Index | Type | Financing | Payment | Maturity | Units | Notional | Value and | |||||||||||||||
OTC Equity Index Swap Agreements†† | |||||||||||||||||||||||
Wells Fargo Bank, N.A. | Russell 1000 Growth Index | Pay | 0.57% (Federal Funds Rate + 0.49%) | At Maturity | 04/07/22 | 15,201 | $ | 46,742,923 | $ | 4,743,001 | |||||||||||||
* | Non-income producing security. |
** | Includes cumulative appreciation (depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | Affiliated issuer. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 10,420,120 | $ | — | $ | — | $ | 10,420,120 | ||||||||
Mutual Funds | 45,004,658 | — | — | 45,004,658 | ||||||||||||
Money Market Fund | 2,831,474 | — | — | 2,831,474 | ||||||||||||
Equity Futures Contracts** | 24,999 | — | — | 24,999 | ||||||||||||
Equity Index Swap Agreements** | — | 4,743,001 | — | 4,743,001 | ||||||||||||
Total Assets | $ | 58,281,251 | $ | 4,743,001 | $ | — | $ | 63,024,252 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 151 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
Affiliated Transactions
Investments representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments (“GI”), result in that company being considered an affiliated issuer, as defined in the 1940 Act.
The Fund may invest in certain of the underlying series of Guggenheim Strategy Funds Trust, including Guggenheim Strategy Fund II, Guggenheim Strategy Fund III, and Guggenheim Variable Insurance Strategy Fund III, (collectively, the “Short Term Investment Vehicles”), each of which are open-end management investment companies managed by GI. The Short Term Investment Vehicles, which launched on March 11, 2014, are offered as short term investment options only to mutual funds, trusts, and other accounts managed by GI and/or its affiliates, and are not available to the public. The Short Term Investment Vehicles pay no investment management fees. The Short Term Investment Vehicles’ annual report on Form N-CSR dated September 30, 2021, is available publicly or upon request. This information is available from the EDGAR database on the SEC’s website at https://www.sec.gov/Archives/edgar/data/1601445/000182126821000490/gugg83048-ncsr.htm. The Fund may invest in certain of the underlying series of Guggenheim Fund Trust, which are open-end management investment companies managed by GI, are available to the public and whose most recent annual report on Form N-CSR is available publicly or upon request.
Transactions during the year ended December 31, 2021, in which the company is an affiliated issuer, were as follows:
Security Name | Value | Additions | Reductions | Realized | Change in | Value | Shares | Investment | ||||||||||||||||||||||||
Mutual Funds | ||||||||||||||||||||||||||||||||
Guggenheim Strategy Fund II | $ | 7,132,904 | $ | 1,605,549 | $ | — | $ | — | $ | (28,614 | ) | $ | 8,709,839 | 350,074 | $ | 105,662 | ||||||||||||||||
Guggenheim Strategy Fund III | 10,533,474 | 3,698,067 | — | — | (47,525 | ) | 14,184,016 | 566,681 | 190,309 | |||||||||||||||||||||||
Guggenheim Ultra Short Duration Fund — Institutional Class | 9,026,315 | 6,473,824 | (6,218,961 | ) | 72,369 | (130,618 | ) | 9,222,929 | 929,731 | 92,869 | ||||||||||||||||||||||
Guggenheim Variable Insurance Strategy Fund III | 11,601,522 | 1,326,799 | — | — | (40,447 | ) | 12,887,874 | 516,341 | 177,188 | |||||||||||||||||||||||
| $ | 38,294,215 | $ | 13,104,239 | $ | (6,218,961 | ) | $ | 72,369 | $ | (247,204 | ) | $ | 45,004,658 | $ | 566,028 | |||||||||||||||||
152 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $10,595,833) | $ | 13,251,594 | ||
Investments in affiliated issuers, at value (cost $45,051,524) | 45,004,658 | |||
Segregated cash with broker | 69,000 | |||
Unrealized appreciation on OTC swap agreements | 4,743,001 | |||
Prepaid expenses | 2,602 | |||
Receivables: | ||||
Dividends | 58,916 | |||
Swap settlement | 21,079 | |||
Fund shares sold | 5,548 | |||
Interest | 16 | |||
Total assets | 63,156,414 | |||
Liabilities: | ||||
Segregated cash due to broker | 5,020,000 | |||
Payable for: | ||||
Securities purchased | 58,562 | |||
Management fees | 15,699 | |||
Distribution and service fees | 12,142 | |||
Fund shares redeemed | 10,268 | |||
Trustees’ fees* | 9,758 | |||
Fund accounting/administration fees | 4,882 | |||
Variation margin on futures contracts | 4,650 | |||
Transfer agent/maintenance fees | 2,036 | |||
Miscellaneous | 41,481 | |||
Total liabilities | 5,179,478 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 57,976,936 | ||
Net assets consist of: | ||||
Paid in capital | $ | 40,205,946 | ||
Total distributable earnings (loss) | 17,770,990 | |||
Net assets | $ | 57,976,936 | ||
Capital shares outstanding | 2,198,120 | |||
Net asset value per share | $ | 26.38 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends from securities of unaffiliated issuers | $ | 84,271 | ||
Dividends from securities of affiliated issuers | 566,028 | |||
Interest | 213 | |||
Total investment income | 650,512 | |||
Expenses: | ||||
Management fees | 345,894 | |||
Distribution and service fees | 133,036 | |||
Transfer agent/maintenance fees | 25,049 | |||
Fund accounting/administration fees | 42,851 | |||
Professional fees | 37,681 | |||
Trustees’ fees* | 23,852 | |||
Custodian fees | 13,829 | |||
Interest expense | 4,952 | |||
Line of credit fees | 2,328 | |||
Miscellaneous | 6,527 | |||
Total expenses | 635,999 | |||
Less: | ||||
Expenses reimbursed by Adviser | (212 | ) | ||
Expenses waived by Adviser | (167,030 | ) | ||
Total waived expenses | (167,242 | ) | ||
Net expenses | 468,757 | |||
Net investment income | 181,755 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments in unaffiliated issuers | 1,579,713 | |||
Investments in affiliated issuers | 72,369 | |||
Swap agreements | 9,966,431 | |||
Futures contracts | 305,195 | |||
Net realized gain | 11,923,708 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments in unaffiliated issuers | 910,072 | |||
Investments in affiliated issuers | (247,204 | ) | ||
Swap agreements | 344,865 | |||
Futures contracts | 16,943 | |||
Net change in unrealized appreciation (depreciation) | 1,024,676 | |||
Net realized and unrealized gain | 12,948,384 | |||
Net increase in net assets resulting from operations | $ | 13,130,139 | ||
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 153 |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 181,755 | $ | 310,704 | ||||
Net realized gain on investments | 11,923,708 | 12,023,032 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 1,024,676 | 1,790,062 | ||||||
Net increase in net assets resulting from operations | 13,130,139 | 14,123,798 | ||||||
Distributions to shareholders | (11,035,296 | ) | (2,463,223 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 3,689,459 | 5,759,960 | ||||||
Distributions reinvested | 11,035,296 | 2,463,223 | ||||||
Cost of shares redeemed | (8,320,164 | ) | (10,593,308 | ) | ||||
Net increase (decrease) from capital share transactions | 6,404,591 | (2,370,125 | ) | |||||
Net increase in net assets | 8,499,434 | 9,290,450 | ||||||
Net assets: | ||||||||
Beginning of year | 49,477,502 | 40,187,052 | ||||||
End of year | $ | 57,976,936 | $ | 49,477,502 | ||||
Capital share activity: | ||||||||
Shares sold | 141,529 | 280,129 | ||||||
Shares issued from reinvestment of distributions | 457,516 | 116,354 | ||||||
Shares redeemed | (319,534 | ) | (504,964 | ) | ||||
Net increase (decrease) in shares | 279,511 | (108,481 | ) | |||||
154 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Y (STYLEPLUS—LARGE GROWTH SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 25.79 | $ | 19.82 | $ | 16.47 | $ | 20.30 | $ | 15.75 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .09 | .16 | .28 | .34 | .25 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 6.51 | 7.07 | 5.13 | (.63 | ) | 4.48 | ||||||||||||||
Total from investment operations | 6.60 | 7.23 | 5.41 | (.29 | ) | 4.73 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.17 | ) | (.28 | ) | (.38 | ) | (.34 | ) | (.18 | ) | ||||||||||
Net realized gains | (5.84 | ) | (.98 | ) | (1.68 | ) | (3.20 | ) | — | |||||||||||
Total distributions | (6.01 | ) | (1.26 | ) | (2.06 | ) | (3.54 | ) | (.18 | ) | ||||||||||
Net asset value, end of period | $ | 26.38 | $ | 25.79 | $ | 19.82 | $ | 16.47 | $ | 20.30 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 27.77 | % | 37.87 | % | 33.92 | % | (3.68 | %) | 30.11 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 57,977 | $ | 49,478 | $ | 40,187 | $ | 31,737 | $ | 48,173 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.34 | % | 0.73 | % | 1.51 | % | 1.70 | % | 1.36 | % | ||||||||||
Total expensesc | 1.20 | % | 1.29 | % | 1.44 | % | 1.38 | % | 1.20 | % | ||||||||||
Net expensesd,e,f | 0.88 | % | 0.88 | % | 0.97 | % | 1.02 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 40 | % | 66 | % | 47 | % | 59 | % | 43 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | 0.00%* | — |
* | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
0.87% | 0.88% | 0.90% | 0.93% | 0.97% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 155 |
MANAGERS’ COMMENTARY (Unaudited) | December 31, 2021 |
Dear Shareholder:
Guggenheim Series Z (Alpha Opportunity Series) is managed by a team of seasoned professionals, including Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities, and Portfolio Manager; Samir Sanghani, CFA, Managing Director and Portfolio Manager; and Burak Hurmeydan, Ph.D., Director and Portfolio Manager. In the paragraphs below, the team discusses the performance of the Fund for the fiscal year period ended December 31, 2021.
For the year ended December 31, 2021, Series Z (Alpha Opportunity Series) returned 13.81%, compared with the 0.05% return of its benchmark, the ICE BofA 3-Month U.S. Treasury Bill Index.
Investment Approach
The Fund is managed as an opportunistic long/short strategy, looking to invest in areas of the market where stock prices look priced at a discount vis-à-vis their company fundamentals and risks, while shorting areas of the market that look overpriced or are not compensating for risks appropriately. The strategy philosophy is founded in part on the academic view that markets are primarily efficient—investors require higher compensation for characteristics that increase the riskiness of future cash flows (such as being very small, or having lots of economic sensitivity in the business). Academics have noted that companies exhibiting certain risk factors have on average outperformed safer firms as the ‘risk premium’ leads to better performance. However, unlike most academic research in this field, the Fund’s strategy does not assume historic risk premia are constant. Investors’ perceptions of what is risky can change dramatically over time. Investors can harbor new fears about avoiding the companies that were vulnerable in the most recent economic crisis, or alternatively become over-excited about some new hot technology and completely forget about the risks involved.
The Fund’s strategy is to compute what forward-looking compensation level is embedded across a large universe of U.S. stocks—and ascertain what broad risk factors are being overvalued or undervalued. The Fund’s portfolio is adaptive to changing market dynamics and aims to buy a highly diversified set of names with undervalued risk factors, and short a highly diversified set of stocks with overvalued characteristics.
The Fund will ordinarily hold simultaneous long and short positions in equity securities or securities markets that provide exposure up to a level equal to 150% of the Fund’s net assets for both the long and short positions. The Fund intends to maintain a low overall net exposure (the difference between the notional value of long positions and the notional value of short positions), typically varying between 50% net long and 30% net short, in order to maintain low correlation to traditional equity markets and lower-than-market volatility, and seek to provide consistent absolute return. The overall net exposure will change as market opportunities change, and may, based on the Fund’s view of current market conditions, be outside this range.
Derivatives in the Fund are used to take short positions as well as long exposure above 100% of NAV (that is, to take leverage). The performance discussion below referencing short position performance would be entirely due to custom basket swap derivatives, and performance of long positions would be partially due to custom basket swap derivatives.
Performance Review and Positioning
At the high level, the year 2021 played out as an economic recovery year. The broad market (S&P 500 Index) gained 28.71%. Small caps lagged that return by over 10%, and in particular Small Cap Growth benchmarks ended with barely positive returns while Small Cap Value benchmarks kept pace.
The pandemic-related shutdowns from 2020 began to clear at the same time that several rounds of government stimulus were injected into the economy. The predictable effect was a strong rebound in consumption. Any hard consumer goods—whether cars, homes, clothes, computers—were in strong demand. But companies supplying the goods were still struggling with restrictive in-person health policies, low inventories, and shortages across their supply chains.
The result was inflation—the highest in 30 years, if using official government metrics. Some firms benefited from the supply-demand imbalance through strong pricing power and higher margins. Other firms raised prices just to keep in line with surging input costs. Interest rates started the year rallying off their generational lows as the lingering inflation proved to be less than transitory. By year-end, the Fed itself finally acknowledged that inflation was a bit out of control—and vowed to cut quantitative easing and raise rates. The market got the message and priced in significant rises in the Fed funds for next year.
156 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited)(concluded) | December 31, 2021 |
The rate move led to strong ‘under-the-surface’ rotations within the stock market. For the first time in years, high growth but currently less profitable names began to underperform as the discount rates on far distant cash flows began to rise. Cyclical companies in industries with fixed costs and marginal pricing power were huge beneficiaries. Financials also benefitted as the rate rise is expected to finally reverse a slow and steady decline in their net interest margins. The largest impact was a strong return for the ‘Value Factor’—our measure of the gap in returns between cheap vs. expensive stocks within each industry. That return for 2021 was positive after an unusually long four years of negative returns, and the largest in ten years.
The other major under-the-surface factor driving market rotation is the pandemic reopening play. Some of the most impacted industries and companies (travel, offices, energy etc.) heaved and jerked through the year as both the Delta and Omicron variants came and went, wreaking havoc on those business plans. On the flip side, many stay-at-home beneficiaries that saw a surge of business in 2020 saw their year-over-year growth trajectories inflect lower (some examples being Zoom, Peloton, Netflix, although there are countless other beneficiaries big and small). While the Covid-driven health cycles have been difficult to predict, investors have started to somewhat look past the smaller outbreaks and began to price in a longer-term recovery.
Outside of the economically explainable impacts of inflation and Covid shutdowns, 2021 also saw a shift in the more inexplicable market sentiment surrounding the most speculative corners of the market. A few groups that seemed to shine with individual investors early in the year included high growth but wildly unprofitable companies, ‘meme stocks’ that were popular on chat groups despite not great businesses, and special purpose acquisition companies (SPACS) that didn’t even have a business but promised to buy one. Those were darlings of the day traders and hedge funds in early 2021, but endured a sharp retrenchment by year-end.
At period end, the Fund held about 147% of assets in long securities, and 80% short, for a net-dollar exposure of 67%. The net exposure averaged 50% during the year. The current higher dollar exposure is the result of a focus on low beta and low volatility stocks in the long side, offset by higher risk names on the short side. The realized net beta (sensitivity of daily Fund returns to the S&P 500 index) averaged around 0.24 during the year. The realized market beta is significantly lower than the net dollar exposure due the aforementioned risk imbalance across sides.
Fund long positions (on a standalone unlevered basis) averaged a return of 28.3% for the year compared to 22.2% for short positions. With long names returning more than shorts, the Fund earned good alpha from its investment approach as well as gains from the net long bias.
Digging deeper into the attribution for the year, the Fund’s net market bias added about +4.5% of attributable return. Fundamental style tilts added +20.1% attributable return, mostly as a result of the strong Value tilt and bias towards higher profitability. Industry positioning had a drag of about -4.0%, with the largest negative contributors being the net shorts in Energy and Real Estate—both of which had strong recoveries. Stock selection–after controlling for the style and sector tilts described above—resulted in about -2.9% of return offset.
The Fund maintains its style bias towards less expensive valuation names within each sector. Despite the big recovery in the Value factor in 2021, our forward-looking measure shows still wide risk premia gaps between expensive and cheaper cohorts. The Fund also maintains its higher quality bias and an increasing bias towards lower volatility names which look much more attractive on a fundamental basis than some of the most volatile cohorts in each industry.
From an industry perspective, the Fund remains net long the IT, Financials, Healthcare, and Consumer Discretionary. After being net short the Financials sector for a few years, the investment process has flipped towards a pro-Financial stance as the valuations in the sector are still attractive and fundamentals have gained positive momentum. The largest net short exposures currently are Real Estate and Transportation names.
Performance displayed represents past performance which is no guarantee of future results.
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 157 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES)
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.
Inception Date: July 7, 2003 |
Ten Largest Holdings (% of Total Net Assets) | |
Viavi Solutions, Inc. | 1.1% |
Knowles Corp. | 1.1% |
LKQ Corp. | 1.1% |
Cisco Systems, Inc. | 1.1% |
Preferred Bank/Los Angeles CA | 1.0% |
Chesapeake Utilities Corp. | 1.0% |
AutoZone, Inc. | 1.0% |
National Fuel Gas Co. | 1.0% |
Gentex Corp. | 1.0% |
CSG Systems International, Inc. | 1.0% |
Top Ten Total | 10.4% |
“Ten Largest Holdings” excludes any temporary cash or derivative investments. | |
158 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | December 31, 2021 |
Cumulative Fund Performance*,†
Average Annual Returns*,†
Periods Ended December 31, 2021
| 1 Year | 5 Year | 10 Year |
Series Z (Alpha Opportunity Series) | 13.81% | 1.09% | 6.05% |
Morningstar Long/Short Equity Category Average | 12.75% | 5.88% | 5.37% |
ICE BofA 3-Month U.S. Treasury Bill Index | 0.05% | 1.14% | 0.63% |
* | 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 ICE BofA 3-Month U.S. Treasury Bill Index and Morningstar Long/Short Equity Category Average are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. |
† | Performance figures do not reflect fees and expenses associated with an investment in variable insurance products. If returns had taken into account these fees and expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 159 |
SCHEDULE OF INVESTMENTS | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Value | ||||||
COMMON STOCKS† - 97.5% | ||||||||
Financial - 20.2% | ||||||||
Preferred Bank/Los Angeles CA | 647 | $ | 46,448 | |||||
Raymond James Financial, Inc.1 | 453 | 45,431 | ||||||
Citigroup, Inc. | 732 | 44,205 | ||||||
Safety Insurance Group, Inc. | 517 | 43,961 | ||||||
Stewart Information Services Corp. | 551 | 43,931 | ||||||
Enstar Group Ltd.*,1 | 175 | 43,328 | ||||||
Arch Capital Group Ltd.* | 940 | 41,783 | ||||||
Mercury General Corp.1 | 775 | 41,122 | ||||||
Old Republic International Corp.1 | 1,666 | 40,950 | ||||||
National Bank Holdings Corp. — Class A | 820 | 36,031 | ||||||
Evercore, Inc. — Class A1 | 253 | 34,370 | ||||||
AMERISAFE, Inc. | 609 | 32,782 | ||||||
Piper Sandler Cos.1 | 172 | 30,704 | ||||||
United Bankshares, Inc. | 828 | 30,040 | ||||||
MGIC Investment Corp. | 2,009 | 28,970 | ||||||
Radian Group, Inc. | 1,339 | 28,293 | ||||||
HomeStreet, Inc. | 507 | 26,364 | ||||||
BankUnited, Inc. | 590 | 24,963 | ||||||
Interactive Brokers Group, Inc. — Class A | 313 | 24,858 | ||||||
Everest Re Group Ltd. | 88 | 24,105 | ||||||
First American Financial Corp. | 303 | 23,704 | ||||||
Hilltop Holdings, Inc. | 583 | 20,487 | ||||||
Meta Financial Group, Inc. | 341 | 20,344 | ||||||
Essent Group Ltd. | 434 | 19,760 | ||||||
OneMain Holdings, Inc. | 329 | 16,463 | ||||||
Western Union Co. | 884 | 15,771 | ||||||
Janus Henderson Group plc | 368 | 15,434 | ||||||
Markel Corp.* | 11 | 13,574 | ||||||
Fulton Financial Corp. | 763 | 12,971 | ||||||
Synchrony Financial | 265 | 12,293 | ||||||
Affiliated Managers Group, Inc. | 65 | 10,693 | ||||||
Ameris Bancorp1 | 183 | 9,091 | ||||||
Douglas Elliman, Inc.* | 503 | 5,785 | ||||||
Total Financial | 909,009 | |||||||
Industrial - 18.7% | ||||||||
Knowles Corp.* | 2,031 | 47,424 | ||||||
Garmin Ltd. | 333 | 45,345 | ||||||
Mueller Industries, Inc.1 | 720 | 42,739 | ||||||
Toro Co.1 | 421 | 42,062 | ||||||
Snap-on, Inc.1 | 182 | 39,199 | ||||||
3M Co.1 | 217 | 38,546 | ||||||
Sanmina Corp.*,1 | 847 | 35,117 | ||||||
Keysight Technologies, Inc.*,1 | 170 | 35,107 | ||||||
Encore Wire Corp.1 | 238 | 34,058 | ||||||
Vishay Intertechnology, Inc.1 | 1,412 | 30,880 | ||||||
Packaging Corporation of America | 210 | 28,592 | ||||||
Sturm Ruger & Company, Inc. | 419 | 28,500 | ||||||
Hillenbrand, Inc.1 | 543 | 28,231 | ||||||
Huntington Ingalls Industries, Inc. | 150 | 28,011 | ||||||
Vontier Corp. | 895 | 27,503 | ||||||
TTM Technologies, Inc.* | 1,800 | 26,820 | ||||||
Donaldson Company, Inc. | 420 | 24,889 | ||||||
MDU Resources Group, Inc.1 | 793 | 24,456 | ||||||
Oshkosh Corp. | 214 | 24,120 | ||||||
OSI Systems, Inc.* | 250 | 23,300 | ||||||
Crane Co. | 212 | 21,567 | ||||||
Boise Cascade Co. | 280 | 19,936 | ||||||
Owens Corning1 | 217 | 19,638 | ||||||
Eagle Materials, Inc. | 112 | 18,644 | ||||||
Louisiana-Pacific Corp. | 223 | 17,472 | ||||||
Worthington Industries, Inc.1 | 305 | 16,671 | ||||||
Textron, Inc. | 197 | 15,208 | ||||||
Albany International Corp. — Class A | 147 | 13,002 | ||||||
Dorian LPG Ltd. | 918 | 11,649 | ||||||
Insteel Industries, Inc. | 263 | 10,470 | ||||||
Atkore, Inc.* | 94 | 10,452 | ||||||
Simpson Manufacturing Company, Inc. | 68 | 9,457 | ||||||
Total Industrial | 839,065 | |||||||
Consumer, Non-cyclical - 17.3% | ||||||||
Amgen, Inc.1 | 201 | 45,219 | ||||||
Gilead Sciences, Inc.1 | 619 | 44,945 | ||||||
Bristol-Myers Squibb Co.1 | 720 | 44,892 | ||||||
Johnson & Johnson1 | 258 | 44,136 | ||||||
John B Sanfilippo & Son, Inc.1 | 483 | 43,547 | ||||||
Quest Diagnostics, Inc.1 | 218 | 37,716 | ||||||
Innoviva, Inc.*,1 | 2,056 | 35,466 | ||||||
Hologic, Inc.*,1 | 412 | 31,543 | ||||||
AbbVie, Inc.1 | 227 | 30,736 | ||||||
Regeneron Pharmaceuticals, Inc.*,1 | 46 | 29,050 | ||||||
USANA Health Sciences, Inc.* | 276 | 27,931 | ||||||
Perdoceo Education Corp.* | 2,323 | 27,318 | ||||||
Eagle Pharmaceuticals, Inc.* | 472 | 24,034 | ||||||
Bio-Rad Laboratories, Inc. — Class A* | 31 | 23,423 | ||||||
EVERTEC, Inc. | 457 | 22,841 | ||||||
Prestige Consumer Healthcare, Inc.*,1 | 375 | 22,744 | ||||||
Incyte Corp.*,1 | 286 | 20,992 | ||||||
Amphastar Pharmaceuticals, Inc.* | 869 | 20,239 | ||||||
Vanda Pharmaceuticals, Inc.* | 1,244 | 19,518 | ||||||
United Therapeutics Corp.*,1 | 88 | 19,015 | ||||||
Merck & Company, Inc.1 | 229 | 17,551 | ||||||
Waters Corp.* | 46 | 17,140 | ||||||
Vertex Pharmaceuticals, Inc.*,1 | 78 | 17,129 | ||||||
Laboratory Corporation of America Holdings* | 49 | 15,397 | ||||||
Molson Coors Beverage Co. — Class B | 331 | 15,342 | ||||||
Royalty Pharma plc — Class A | 381 | 15,183 | ||||||
Pfizer, Inc. | 244 | 14,408 | ||||||
Vector Group Ltd. | 1,006 | 11,549 | ||||||
PerkinElmer, Inc. | 52 | 10,455 | ||||||
Halozyme Therapeutics, Inc.* | 251 | 10,093 | ||||||
Exelixis, Inc.* | 507 | 9,268 | ||||||
Coherus Biosciences, Inc.* | 569 | 9,081 | ||||||
Total Consumer, Non-cyclical | 777,901 | |||||||
Consumer, Cyclical - 15.3% | ||||||||
LKQ Corp. | 789 | 47,364 | ||||||
AutoZone, Inc.*,1 | 22 | 46,121 | ||||||
Gentex Corp.1 | 1,314 | 45,793 | ||||||
O’Reilly Automotive, Inc.*,1 | 64 | 45,199 | ||||||
160 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Value | ||||||
Cummins, Inc.1 | 175 | $ | 38,175 | |||||
NVR, Inc.* | 6 | 35,453 | ||||||
Whirlpool Corp.1 | 127 | 29,802 | ||||||
Allison Transmission Holdings, Inc.1 | 765 | 27,808 | ||||||
Acushnet Holdings Corp. | 470 | 24,948 | ||||||
Brunswick Corp.1 | 236 | 23,772 | ||||||
Dolby Laboratories, Inc. — Class A1 | 232 | 22,091 | ||||||
Buckle, Inc. | 515 | 21,790 | ||||||
Ethan Allen Interiors, Inc. | 822 | 21,610 | ||||||
Zumiez, Inc.* | 385 | 18,476 | ||||||
Lennar Corp. — Class A | 152 | 17,656 | ||||||
AutoNation, Inc.*,1 | 151 | 17,644 | ||||||
Dick’s Sporting Goods, Inc.1 | 146 | 16,788 | ||||||
Methode Electronics, Inc. | 310 | 15,243 | ||||||
Autoliv, Inc. | 147 | 15,201 | ||||||
Polaris, Inc.1 | 138 | 15,167 | ||||||
Tri Pointe Homes, Inc.* | 533 | 14,866 | ||||||
Gentherm, Inc.*,1 | 168 | 14,599 | ||||||
Tapestry, Inc. | 355 | 14,413 | ||||||
PulteGroup, Inc. | 236 | 13,490 | ||||||
Foot Locker, Inc. | 277 | 12,085 | ||||||
MarineMax, Inc.* | 193 | 11,395 | ||||||
Oxford Industries, Inc. | 111 | 11,269 | ||||||
Hibbett, Inc. | 148 | 10,646 | ||||||
Jack in the Box, Inc.1 | 121 | 10,585 | ||||||
Kontoor Brands, Inc. | 190 | 9,737 | ||||||
Shoe Carnival, Inc. | 238 | 9,301 | ||||||
Haverty Furniture Companies, Inc. | 278 | 8,498 | ||||||
Total Consumer, Cyclical | 686,985 | |||||||
Utilities - 9.7% | ||||||||
Chesapeake Utilities Corp.1 | 318 | 46,368 | ||||||
National Fuel Gas Co.1 | 718 | 45,909 | ||||||
UGI Corp.1 | 995 | 45,680 | ||||||
PPL Corp. | 1,518 | 45,631 | ||||||
IDACORP, Inc.1 | 401 | 45,437 | ||||||
Portland General Electric Co. | 851 | 45,035 | ||||||
WEC Energy Group, Inc.1 | 455 | 44,167 | ||||||
MGE Energy, Inc.1 | 533 | 43,839 | ||||||
Southern Co.1 | 542 | 37,170 | ||||||
American States Water Co.1 | 297 | 30,722 | ||||||
CMS Energy Corp. | 136 | 8,847 | ||||||
Total Utilities | 438,805 | |||||||
Communications - 6.2% | ||||||||
Viavi Solutions, Inc.*,1 | 2,701 | 47,592 | ||||||
Cisco Systems, Inc.1 | 742 | 47,021 | ||||||
Omnicom Group, Inc.1 | 544 | 39,859 | ||||||
Verizon Communications, Inc.1 | 678 | 35,229 | ||||||
Juniper Networks, Inc.1 | 535 | 19,105 | ||||||
InterDigital, Inc.1 | 256 | 18,337 | ||||||
Cogent Communications Holdings, Inc. | 206 | 15,075 | ||||||
Telephone & Data Systems, Inc.1 | 736 | 14,830 | ||||||
Shenandoah Telecommunications Co. | 560 | 14,280 | ||||||
Yelp, Inc. — Class A* | 260 | 9,422 | ||||||
F5, Inc.* | 38 | 9,299 | ||||||
T-Mobile US, Inc.*,1 | 78 | 9,046 | ||||||
Total Communications | 279,095 | |||||||
Technology - 5.9% | ||||||||
CSG Systems International, Inc.1 | 793 | 45,693 | ||||||
Rambus, Inc.*,1 | 1,000 | 29,390 | ||||||
International Business Machines Corp. | 208 | 27,801 | ||||||
NetApp, Inc.1 | 261 | 24,009 | ||||||
Cirrus Logic, Inc.*,1 | 176 | 16,196 | ||||||
Xperi Holding Corp. | 852 | 16,111 | ||||||
Progress Software Corp. | 333 | 16,074 | ||||||
Intel Corp. | 296 | 15,244 | ||||||
Microsoft Corp. | 44 | 14,798 | ||||||
Texas Instruments, Inc.1 | 68 | 12,816 | ||||||
ExlService Holdings, Inc.* | 88 | 12,740 | ||||||
HP, Inc.1 | 335 | 12,620 | ||||||
Lumentum Holdings, Inc.* | 103 | 10,894 | ||||||
CommVault Systems, Inc.* | 137 | 9,442 | ||||||
Total Technology | 263,828 | |||||||
Basic Materials - 3.6% | ||||||||
Westlake Chemical Corp. | 339 | 32,927 | ||||||
Celanese Corp. — Class A | 170 | 28,570 | ||||||
LyondellBasell Industries N.V. — Class A | 278 | 25,640 | ||||||
Dow, Inc. | 321 | 18,207 | ||||||
Nucor Corp. | 153 | 17,465 | ||||||
Steel Dynamics, Inc. | 254 | 15,766 | ||||||
Newmont Corp. | 185 | 11,474 | ||||||
AdvanSix, Inc. | 233 | 11,009 | ||||||
Total Basic Materials | 161,058 | |||||||
Energy - 0.6% | ||||||||
Equitrans Midstream Corp. | 900 | 9,306 | ||||||
Antero Midstream Corp. | 946 | 9,157 | ||||||
Kinder Morgan, Inc. | 564 | 8,945 | ||||||
Total Energy | 27,408 | |||||||
Total Common Stocks | ||||||||
(Cost $4,093,277) | 4,383,154 | |||||||
MONEY MARKET FUND† - 2.6% | ||||||||
Goldman Sachs Financial Square Treasury Instruments Fund — Institutional Shares, 0.01%2 | 114,817 | 114,817 | ||||||
Total Money Market Fund | ||||||||
(Cost $114,817) | 114,817 | |||||||
Total Investments - 100.1% | ||||||||
(Cost $4,208,094) | $ | 4,497,971 | ||||||
Other Assets & Liabilities, net - (0.1)% | (2,789 | ) | ||||||
Total Net Assets - 100.0% | $ | 4,495,182 | ||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 161 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
Custom Basket Swap Agreements | |||||||||||||||||||
Counterparty | Reference Obligation | Type | Financing | Payment | Maturity | Notional | Value and | ||||||||||||
OTC Custom Basket Swap Agreements†† | |||||||||||||||||||
Goldman Sachs International | GS Equity Custom Basket | Pay | 0.53% (Federal Funds Rate + 0.45%) | At Maturity | 05/06/24 | $ | 1,064,594 | $ | 60,139 | ||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | Pay | 0.48% (Federal Funds Rate + 0.40%) | At Maturity | 02/01/24 | 1,064,593 | 59,940 | ||||||||||||
| $ | 2,129,187 | $ | 120,079 | ||||||||||||||||
OTC Custom Basket Swap Agreements Sold Short†† | |||||||||||||||||||
Morgan Stanley Capital Services LLC | MS Equity Custom Basket | Pay | (0.22)% (Federal Funds Rate - 0.30%) | At Maturity | 02/01/24 | $ | 1,790,041 | $ | (31,967 | ) | |||||||||
Goldman Sachs International | GS Equity Custom Basket | Pay | (0.12)% (Federal Funds Rate - 0.20%) | At Maturity | 05/06/24 | 1,790,041 | (32,696 | ) | |||||||||||
| $ | 3,580,082 | $ | (64,663 | ) | |||||||||||||||
| Shares | Percentage Notional Amount | Value and Unrealized Appreciation | ||||||||||
| MS EQUITY LONG CUSTOM BASKET | ||||||||||||
| Consumer, Non-cyclical | ||||||||||||
| Innoviva, Inc. | 506 | 0.85 | % | $ | 1,567 | |||||||
| Quest Diagnostics, Inc. | 53 | 0.89 | % | 1,566 | ||||||||
| United Therapeutics Corp. | 21 | 0.43 | % | 943 | ||||||||
| AbbVie, Inc. | 55 | 0.70 | % | 915 | ||||||||
| Prestige Consumer Healthcare, Inc. | 92 | 0.52 | % | 842 | ||||||||
| Eagle Pharmaceuticals, Inc. | 116 | 0.55 | % | 829 | ||||||||
| Molson Coors Beverage Co. — Class B | 81 | 0.35 | % | 824 | ||||||||
| Regeneron Pharmaceuticals, Inc. | 11 | 0.65 | % | 671 | ||||||||
| Amphastar Pharmaceuticals, Inc. | 214 | 0.47 | % | 659 | ||||||||
| PerkinElmer, Inc. | 12 | 0.23 | % | 656 | ||||||||
| Gilead Sciences, Inc. | 152 | 1.04 | % | 625 | ||||||||
| Vertex Pharmaceuticals, Inc. | 19 | 0.39 | % | 557 | ||||||||
| Johnson & Johnson | 63 | 1.01 | % | 537 | ||||||||
| Hologic, Inc. | 101 | 0.73 | % | 495 | ||||||||
| Perdoceo Education Corp. | 572 | 0.63 | % | 453 | ||||||||
| EVERTEC, Inc. | 112 | 0.53 | % | 421 | ||||||||
| John B Sanfilippo & Son, Inc. | 118 | 1.00 | % | 392 | ||||||||
| Coherus Biosciences, Inc. | 140 | 0.21 | % | 303 | ||||||||
| Waters Corp. | 11 | 0.39 | % | 241 | ||||||||
| Merck & Company, Inc. | 56 | 0.40 | % | 224 | ||||||||
| Vector Group Ltd. | 67 | 0.07 | % | 180 | ||||||||
| USANA Health Sciences, Inc. | 68 | 0.65 | % | 152 | ||||||||
| Halozyme Therapeutics, Inc. | 61 | 0.23 | % | 135 | ||||||||
| Laboratory Corporation of America Holdings | 12 | 0.35 | % | 132 | ||||||||
| Shares | Percentage | Value and | |||||||||
Bio-Rad Laboratories, Inc. — Class A | 7 | 0.50 | % | $ | 131 | |||||||
Royalty Pharma plc — Class A | 94 | 0.35 | % | 110 | ||||||||
Pfizer, Inc. | 60 | 0.33 | % | (51 | ) | |||||||
Incyte Corp. | 70 | 0.48 | % | (137 | ) | |||||||
Exelixis, Inc. | 125 | 0.21 | % | (153 | ) | |||||||
Bristol-Myers Squibb Co. | 177 | 1.04 | % | (364 | ) | |||||||
Amgen, Inc. | 49 | 1.04 | % | (386 | ) | |||||||
Vanda Pharmaceuticals, Inc. | 306 | 0.45 | % | (419 | ) | |||||||
Total Consumer, Non-cyclical | 13,050 | |||||||||||
Basic Materials | ||||||||||||
Westlake Chemical Corp. | 83 | 0.76 | % | 385 | ||||||||
Celanese Corp. — Class A | 42 | 0.66 | % | 314 | ||||||||
LyondellBasell Industries N.V. — Class A | 68 | 0.59 | % | 233 | ||||||||
AdvanSix, Inc. | 57 | 0.25 | % | 213 | ||||||||
Dow, Inc. | 79 | 0.42 | % | 170 | ||||||||
Newmont Corp. | 45 | 0.26 | % | 94 | ||||||||
Nucor Corp. | 37 | 0.40 | % | (26 | ) | |||||||
Steel Dynamics, Inc. | 62 | 0.36 | % | (26 | ) | |||||||
Total Basic Materials | 1,357 | |||||||||||
Consumer, Cyclical | ||||||||||||
AutoZone, Inc. | 5 | 0.98 | % | 3,094 | ||||||||
AutoNation, Inc. | 37 | 0.41 | % | 932 | ||||||||
O’Reilly Automotive, Inc. | 15 | 1.00 | % | 859 | ||||||||
NVR, Inc. | 1 | 0.56 | % | 775 | ||||||||
LKQ Corp. | 194 | 1.09 | % | 754 | ||||||||
Tri Pointe Homes, Inc. | 131 | 0.34 | % | 688 | ||||||||
Zumiez, Inc. | 94 | 0.42 | % | 638 | ||||||||
Gentex Corp. | 323 | 1.06 | % | 565 | ||||||||
Gentherm, Inc. | 41 | 0.33 | % | 535 | ||||||||
162 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Methode Electronics, Inc. | 76 | 0.35 | % | $ | 500 | |||||||
Autoliv, Inc. | 36 | 0.35 | % | 490 | ||||||||
Dick’s Sporting Goods, Inc. | 36 | 0.39 | % | 476 | ||||||||
MarineMax, Inc. | 47 | 0.26 | % | 457 | ||||||||
Ethan Allen Interiors, Inc. | 202 | 0.50 | % | 429 | ||||||||
Lennar Corp. — Class A | 37 | 0.40 | % | 369 | ||||||||
Acushnet Holdings Corp. | 115 | 0.57 | % | 312 | ||||||||
Buckle, Inc. | 126 | 0.50 | % | 292 | ||||||||
Whirlpool Corp. | 31 | 0.68 | % | 240 | ||||||||
Brunswick Corp. | 58 | 0.55 | % | 238 | ||||||||
PulteGroup, Inc. | 58 | 0.31 | % | 229 | ||||||||
Kontoor Brands, Inc. | 46 | 0.22 | % | 147 | ||||||||
Oxford Industries, Inc. | 27 | 0.26 | % | 130 | ||||||||
Shoe Carnival, Inc. | 58 | 0.21 | % | 89 | ||||||||
Tapestry, Inc. | 87 | 0.33 | % | (73 | ) | |||||||
Dolby Laboratories, Inc. — Class A | 57 | 0.51 | % | (79 | ) | |||||||
Haverty Furniture Companies, Inc. | 68 | 0.20 | % | (232 | ) | |||||||
Polaris, Inc. | 34 | 0.35 | % | (306 | ) | |||||||
Allison Transmission Holdings, Inc. | 188 | 0.64 | % | (340 | ) | |||||||
Foot Locker, Inc. | 68 | 0.28 | % | (551 | ) | |||||||
Jack in the Box, Inc. | 26 | 0.21 | % | (554 | ) | |||||||
Cummins, Inc. | 43 | 0.88 | % | (707 | ) | |||||||
Hibbett, Inc. | 36 | 0.24 | % | (766 | ) | |||||||
Total Consumer, Cyclical | 9,630 | |||||||||||
Financial | ||||||||||||
Stewart Information Services Corp. | 135 | 1.01 | % | 2,351 | ||||||||
Piper Sandler Cos. | 42 | 0.70 | % | 1,333 | ||||||||
Raymond James Financial, Inc. | 111 | 1.05 | % | 1,141 | ||||||||
Interactive Brokers Group, Inc. — Class A | 77 | 0.57 | % | 1,133 | ||||||||
Arch Capital Group Ltd. | 231 | 0.96 | % | 809 | ||||||||
Safety Insurance Group, Inc. | 127 | 1.01 | % | 723 | ||||||||
Preferred Bank/Los Angeles CA | 159 | 1.07 | % | 654 | ||||||||
Enstar Group Ltd. | 43 | 1.00 | % | 617 | ||||||||
First American Financial Corp. | 74 | 0.54 | % | 595 | ||||||||
HomeStreet, Inc. | 124 | 0.61 | % | 328 | ||||||||
United Bankshares, Inc. | 204 | 0.70 | % | 308 | ||||||||
Janus Henderson Group plc | 90 | 0.35 | % | 243 | ||||||||
Synchrony Financial | 65 | 0.28 | % | 196 | ||||||||
Douglas Elliman, Inc. | 34 | 0.04 | % | 190 | ||||||||
Citigroup, Inc. | 180 | 1.02 | % | 189 | ||||||||
National Bank Holdings Corp. — Class A | 202 | 0.83 | % | 157 | ||||||||
Fulton Financial Corp. | 188 | 0.30 | % | 130 | ||||||||
Everest Re Group Ltd. | 21 | 0.54 | % | 101 | ||||||||
Markel Corp. | 2 | 0.23 | % | 59 | ||||||||
Affiliated Managers Group, Inc. | 16 | 0.25 | % | 56 | ||||||||
Western Union Co. | 217 | 0.36 | % | (10 | ) | |||||||
BankUnited, Inc. | 145 | 0.58 | % | (20 | ) | |||||||
Essent Group Ltd. | 106 | 0.45 | % | (60 | ) | |||||||
Ameris Bancorp | 45 | 0.21 | % | (100 | ) | |||||||
MGIC Investment Corp. | 494 | 0.67 | % | (127 | ) | |||||||
Evercore, Inc. — Class A | 62 | 0.79 | % | (149 | ) | |||||||
Old Republic International Corp. | 410 | 0.95 | % | (343 | ) | |||||||
Meta Financial Group, Inc. | 84 | 0.47 | % | (365 | ) | |||||||
Hilltop Holdings, Inc. | 143 | 0.47 | % | (395 | ) | |||||||
Radian Group, Inc. | 329 | 0.65 | % | (413 | ) | |||||||
AMERISAFE, Inc. | 150 | 0.76 | % | (506 | ) | |||||||
OneMain Holdings, Inc. | 81 | 0.38 | % | (567 | ) | |||||||
Mercury General Corp. | 191 | 0.95 | % | (1,079 | ) | |||||||
Total Financial | 7,179 | |||||||||||
Energy | ||||||||||||
Equitrans Midstream Corp. | 221 | 0.21 | % | 303 | ||||||||
Kinder Morgan, Inc. | 139 | 0.21 | % | 21 | ||||||||
Antero Midstream Corp. | 233 | 0.21 | % | (171 | ) | |||||||
Total Energy | 153 | |||||||||||
Communications | ||||||||||||
Cisco Systems, Inc. | 182 | 1.08 | % | 2,103 | ||||||||
Juniper Networks, Inc. | 131 | 0.44 | % | 1,357 | ||||||||
Viavi Solutions, Inc. | 665 | 1.10 | % | 599 | ||||||||
F5, Inc. | 9 | 0.21 | % | 434 | ||||||||
InterDigital, Inc. | 63 | 0.42 | % | 48 | ||||||||
Shenandoah Telecommunications Co. | 138 | 0.33 | % | (90 | ) | |||||||
Yelp, Inc. — Class A | 64 | 0.22 | % | (94 | ) | |||||||
Cogent Communications Holdings, Inc. | 50 | 0.34 | % | (115 | ) | |||||||
T-Mobile US, Inc. | 19 | 0.21 | % | (148 | ) | |||||||
Verizon Communications, Inc. | 167 | 0.82 | % | (293 | ) | |||||||
Telephone & Data Systems, Inc. | 181 | 0.34 | % | (411 | ) | |||||||
Omnicom Group, Inc. | 134 | 0.92 | % | (517 | ) | |||||||
Total Communications | 2,873 | |||||||||||
Industrial | ||||||||||||
Mueller Industries, Inc. | 177 | 0.99 | % | 2,395 | ||||||||
Encore Wire Corp. | 58 | 0.78 | % | 2,311 | ||||||||
Knowles Corp. | 500 | 1.10 | % | 1,872 | ||||||||
Keysight Technologies, Inc. | 41 | 0.80 | % | 1,569 | ||||||||
Hillenbrand, Inc. | 133 | 0.65 | % | 797 | ||||||||
Boise Cascade Co. | 69 | 0.46 | % | 776 | ||||||||
Louisiana-Pacific Corp. | 55 | 0.40 | % | 771 | ||||||||
Atkore, Inc. | 23 | 0.24 | % | 517 | ||||||||
Eagle Materials, Inc. | 27 | 0.42 | % | 449 | ||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 163 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Sanmina Corp. | 208 | 0.81 | % | $ | 400 | |||||||
Albany International Corp. — Class A | 36 | 0.30 | % | 370 | ||||||||
Crane Co. | 52 | 0.50 | % | 351 | ||||||||
TTM Technologies, Inc. | 443 | 0.62 | % | 320 | ||||||||
Simpson Manufacturing Company, Inc. | 16 | 0.21 | % | 299 | ||||||||
Oshkosh Corp. | 52 | 0.55 | % | 178 | ||||||||
Packaging Corporation of America | 51 | 0.65 | % | 170 | ||||||||
Textron, Inc. | 48 | 0.35 | % | 140 | ||||||||
Insteel Industries, Inc. | 64 | 0.24 | % | 41 | ||||||||
Owens Corning | 53 | 0.45 | % | 7 | ||||||||
Dorian LPG Ltd. | 226 | 0.27 | % | 2 | ||||||||
Worthington Industries, Inc. | 75 | 0.39 | % | (38 | ) | |||||||
Garmin Ltd. | 82 | 1.05 | % | (67 | ) | |||||||
Donaldson Company, Inc. | 103 | 0.57 | % | (210 | ) | |||||||
OSI Systems, Inc. | 61 | 0.53 | % | (234 | ) | |||||||
MDU Resources Group, Inc. | 195 | 0.56 | % | (267 | ) | |||||||
Vishay Intertechnology, Inc. | 347 | 0.71 | % | (304 | ) | |||||||
3M Co. | 53 | 0.88 | % | (337 | ) | |||||||
Snap-on, Inc. | 44 | 0.89 | % | (392 | ) | |||||||
Toro Co. | 103 | 0.97 | % | (420 | ) | |||||||
Huntington Ingalls Industries, Inc. | 37 | 0.65 | % | (561 | ) | |||||||
Vontier Corp. | 220 | 0.64 | % | (576 | ) | |||||||
Sturm Ruger & Company, Inc. | 103 | 0.66 | % | (720 | ) | |||||||
Total Industrial | 9,609 | |||||||||||
Technology | ||||||||||||
CSG Systems International, Inc. | 195 | 1.06 | % | 2,223 | ||||||||
Rambus, Inc. | 246 | 0.68 | % | 1,671 | ||||||||
ExlService Holdings, Inc. | 21 | 0.29 | % | 779 | ||||||||
NetApp, Inc. | 64 | 0.55 | % | 710 | ||||||||
HP, Inc. | 82 | 0.29 | % | 635 | ||||||||
Lumentum Holdings, Inc. | 25 | 0.25 | % | 556 | ||||||||
Cirrus Logic, Inc. | 43 | 0.37 | % | 524 | ||||||||
International Business Machines Corp. | 51 | 0.64 | % | 279 | ||||||||
Progress Software Corp. | 82 | 0.37 | % | 128 | ||||||||
Intel Corp. | 72 | 0.35 | % | 54 | ||||||||
Microsoft Corp. | 10 | 0.32 | % | 41 | ||||||||
Texas Instruments, Inc. | 16 | 0.28 | % | 15 | ||||||||
CommVault Systems, Inc. | 33 | 0.21 | % | (361 | ) | |||||||
Xperi Holding Corp. | 209 | 0.37 | % | (372 | ) | |||||||
Total Technology | 6,882 | |||||||||||
Utilities | ||||||||||||
National Fuel Gas Co. | 177 | 1.06 | % | 1,861 | ||||||||
Chesapeake Utilities Corp. | 78 | 1.07 | % | 1,810 | ||||||||
American States Water Co. | 73 | 0.71 | % | 1,467 | ||||||||
IDACORP, Inc. | 98 | 1.04 | % | 1,284 | ||||||||
Southern Co. | 133 | 0.86 | % | 719 | ||||||||
MGE Energy, Inc. | 131 | 1.01 | % | 706 | ||||||||
Portland General Electric Co. | 209 | 1.04 | % | 586 | ||||||||
UGI Corp. | 245 | 1.06 | % | 363 | ||||||||
WEC Energy Group, Inc. | 112 | 1.02 | % | 266 | ||||||||
PPL Corp. | 373 | 1.05 | % | 145 | ||||||||
CMS Energy Corp. | 33 | 0.20 | % | — | ||||||||
Total Utilities | 9,207 | |||||||||||
Total MS Equity Long Custom Basket | $ | 59,940 | ||||||||||
MS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Technology | ||||||||||||
Coupa Software, Inc. | 55 | (0.46 | )% | $ | 5,854 | |||||||
Twilio, Inc. — Class A | 34 | (0.50 | )% | 2,871 | ||||||||
Clarivate plc | 350 | (0.46 | )% | 1,191 | ||||||||
Avalara, Inc. | 34 | (0.25 | )% | 1,104 | ||||||||
Zscaler, Inc. | 16 | (0.29 | )% | 388 | ||||||||
Allscripts Healthcare Solutions, Inc. | 525 | (0.54 | )% | 104 | ||||||||
Smartsheet, Inc. — Class A | 63 | (0.27 | )% | (104 | ) | |||||||
Leidos Holdings, Inc. | 104 | (0.52 | )% | (129 | ) | |||||||
Snowflake, Inc. — Class A | 30 | (0.57 | )% | (971 | ) | |||||||
Ceridian HCM Holding, Inc. | 110 | (0.64 | )% | (1,497 | ) | |||||||
KBR, Inc. | 638 | (1.70 | )% | (4,024 | ) | |||||||
Total Technology | 4,787 | |||||||||||
Industrial | ||||||||||||
Stericycle, Inc. | 388 | (1.29 | )% | 5,468 | ||||||||
Boeing Co. | 138 | (1.55 | )% | 2,170 | ||||||||
US Ecology, Inc. | 509 | (0.91 | )% | 2,162 | ||||||||
Jacobs Engineering Group, Inc. | 242 | (1.88 | )% | 88 | ||||||||
TransDigm Group, Inc. | 16 | (0.57 | )% | (16 | ) | |||||||
Howmet Aerospace, Inc. | 527 | (0.94 | )% | (1,011 | ) | |||||||
Waste Management, Inc. | 129 | (1.20 | )% | (3,807 | ) | |||||||
Republic Services, Inc. — Class A | 178 | (1.39 | )% | (5,360 | ) | |||||||
Tetra Tech, Inc. | 114 | (1.08 | )% | (7,055 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 307 | (1.46 | )% | (8,723 | ) | |||||||
Total Industrial | (16,084 | ) | ||||||||||
Utilities | ||||||||||||
ONE Gas, Inc. | 445 | (1.93 | )% | (878 | ) | |||||||
Atmos Energy Corp. | 333 | (1.95 | )% | (1,305 | ) | |||||||
CenterPoint Energy, Inc. | 1,055 | (1.64 | )% | (1,749 | ) | |||||||
Edison International | 492 | (1.88 | )% | (5,053 | ) | |||||||
Total Utilities | (8,985 | ) | ||||||||||
Financial | ||||||||||||
Americold Realty Trust | 493 | (0.90 | )% | 2,537 | ||||||||
164 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Park Hotels & Resorts, Inc. | 1,518 | (1.60 | )% | $ | 185 | |||||||
Welltower, Inc. | 293 | (1.40 | )% | 140 | ||||||||
RLJ Lodging Trust | 1,874 | (1.46 | )% | 138 | ||||||||
Lincoln National Corp. | 262 | (1.00 | )% | 122 | ||||||||
DiamondRock Hospitality Co. | 1,662 | (0.89 | )% | (21 | ) | |||||||
Sunstone Hotel Investors, Inc. | 1,931 | (1.27 | )% | (282 | ) | |||||||
Wells Fargo & Co. | 475 | (1.27 | )% | (495 | ) | |||||||
Safehold, Inc. | 342 | (1.53 | )% | (516 | ) | |||||||
Sun Communities, Inc. | 64 | (0.75 | )% | (518 | ) | |||||||
Xenia Hotels & Resorts, Inc. | 876 | (0.89 | )% | (825 | ) | |||||||
Pebblebrook Hotel Trust | 1,066 | (1.33 | )% | (1,053 | ) | |||||||
Northern Trust Corp. | 120 | (0.80 | )% | (1,084 | ) | |||||||
Signature Bank | 54 | (0.98 | )% | (1,360 | ) | |||||||
Bank of New York Mellon Corp. | 358 | (1.16 | )% | (1,375 | ) | |||||||
Equitable Holdings, Inc. | 740 | (1.36 | )% | (1,487 | ) | |||||||
Western Alliance Bancorporation | 249 | (1.50 | )% | (1,503 | ) | |||||||
Host Hotels & Resorts, Inc. | 1,728 | (1.68 | )% | (1,536 | ) | |||||||
Ryman Hospitality Properties, Inc. | 284 | (1.46 | )% | (1,646 | ) | |||||||
Kennedy-Wilson Holdings, Inc. | 1,356 | (1.81 | )% | (1,735 | ) | |||||||
Outfront Media, Inc. | 802 | (1.20 | )% | (1,969 | ) | |||||||
Apartment Income REIT Corp. | 589 | (1.80 | )% | (2,123 | ) | |||||||
Equinix, Inc. | 30 | (1.42 | )% | (2,210 | ) | |||||||
State Street Corp. | 332 | (1.72 | )% | (2,394 | ) | |||||||
Comerica, Inc. | 384 | (1.87 | )% | (2,697 | ) | |||||||
Howard Hughes Corp. | 247 | (1.40 | )% | (4,307 | ) | |||||||
Total Financial | (28,014 | ) | ||||||||||
Consumer, Cyclical | ||||||||||||
Freshpet, Inc. | 91 | (0.48 | )% | 6,171 | ||||||||
United Airlines Holdings, Inc. | 723 | (1.77 | )% | 5,061 | ||||||||
Delta Air Lines, Inc. | 809 | (1.77 | )% | 2,876 | ||||||||
Frontier Group Holdings, Inc. | 649 | (0.49 | )% | 2,067 | ||||||||
Spirit Airlines, Inc. | 574 | (0.70 | )% | 1,991 | ||||||||
Tesla, Inc. | 9 | (0.53 | )% | 1,089 | ||||||||
American Airlines Group, Inc. | 1,655 | (1.66 | )% | 65 | ||||||||
Royal Caribbean Cruises Ltd. | 185 | (0.79 | )% | (184 | ) | |||||||
Wynn Resorts Ltd. | 82 | (0.39 | )% | (279 | ) | |||||||
Las Vegas Sands Corp. | 194 | (0.41 | )% | (474 | ) | |||||||
IAA, Inc. | 332 | (0.94 | )% | (653 | ) | |||||||
Carnival Corp. | 735 | (0.83 | )% | (1,339 | ) | |||||||
Madison Square Garden Sports Corp. — Class A | 162 | (1.57 | )% | (1,631 | ) | |||||||
Copart, Inc. | 113 | (0.96 | )% | (1,793 | ) | |||||||
Total Consumer, Cyclical | 12,967 | |||||||||||
Consumer, Non-cyclical | ||||||||||||
Teladoc Health, Inc. | 145 | (0.74 | )% | 4,141 | ||||||||
Guardant Health, Inc. | 137 | (0.77 | )% | 3,822 | ||||||||
CoStar Group, Inc. | 288 | (1.27 | )% | 2,233 | ||||||||
Viad Corp. | 308 | (0.74 | )% | 1,058 | ||||||||
US Foods Holding Corp. | 281 | (0.55 | )% | 301 | ||||||||
ASGN, Inc. | 120 | (0.83 | )% | 225 | ||||||||
Brink’s Co. | 105 | (0.38 | )% | 11 | ||||||||
Verisk Analytics, Inc. — Class A | 72 | (0.92 | )% | (246 | ) | |||||||
Equifax, Inc. | 49 | (0.80 | )% | (559 | ) | |||||||
Rollins, Inc. | 483 | (0.92 | )% | (576 | ) | |||||||
TransUnion | 108 | (0.72 | )% | (601 | ) | |||||||
Dun & Bradstreet Holdings, Inc. | 836 | (0.96 | )% | (1,166 | ) | |||||||
Sysco Corp. | 228 | (1.00 | )% | (1,183 | ) | |||||||
Cintas Corp. | 64 | (1.58 | )% | (1,296 | ) | |||||||
Driven Brands Holdings, Inc. | 805 | (1.51 | )% | (3,971 | ) | |||||||
Total Consumer, Non-cyclical | 2,193 | |||||||||||
Energy | ||||||||||||
Plug Power, Inc. | 151 | (0.24 | )% | 1,458 | ||||||||
Denbury, Inc. | 126 | (0.54 | )% | (34 | ) | |||||||
Range Resources Corp. | 430 | (0.43 | )% | (234 | ) | |||||||
Marathon Petroleum Corp. | 206 | (0.74 | )% | (255 | ) | |||||||
Hess Corp. | 191 | (0.79 | )% | (497 | ) | |||||||
Schlumberger N.V. | 792 | (1.33 | )% | (556 | ) | |||||||
NOV, Inc. | 807 | (0.61 | )% | (667 | ) | |||||||
Halliburton Co. | 1,216 | (1.55 | )% | (727 | ) | |||||||
Pioneer Natural Resources Co. | 115 | (1.17 | )% | (820 | ) | |||||||
Patterson-UTI Energy, Inc. | 1,476 | (0.70 | )% | (958 | ) | |||||||
Total Energy | (3,290 | ) | ||||||||||
Communications | ||||||||||||
Okta, Inc. | 58 | (0.73 | )% | 2,564 | ||||||||
Uber Technologies, Inc. | 518 | (1.21 | )% | 1,874 | ||||||||
Airbnb, Inc. — Class A | 54 | (0.50 | )% | 1,267 | ||||||||
Zillow Group, Inc. — Class C | 136 | (0.49 | )% | (262 | ) | |||||||
Opendoor Technologies, Inc. | 577 | (0.47 | )% | (382 | ) | |||||||
Lyft, Inc. — Class A | 503 | (1.20 | )% | (602 | ) | |||||||
Total Communications | 4,459 | |||||||||||
Total MS Equity Short Custom Basket | $ | (31,967 | ) | |||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 165 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
GS EQUITY LONG CUSTOM BASKET | ||||||||||||
Consumer, Non-cyclical | ||||||||||||
Quest Diagnostics, Inc. | 53 | 0.89 | % | $ | 1,566 | |||||||
Innoviva, Inc. | 506 | 0.85 | % | 1,566 | ||||||||
United Therapeutics Corp. | 21 | 0.43 | % | 948 | ||||||||
AbbVie, Inc. | 55 | 0.70 | % | 914 | ||||||||
Prestige Consumer Healthcare, Inc. | 92 | 0.52 | % | 840 | ||||||||
Molson Coors Beverage Co. — Class B | 81 | 0.35 | % | 821 | ||||||||
Eagle Pharmaceuticals, Inc. | 116 | 0.55 | % | 801 | ||||||||
Regeneron Pharmaceuticals, Inc. | 11 | 0.65 | % | 666 | ||||||||
Amphastar Pharmaceuticals, Inc. | 214 | 0.47 | % | 657 | ||||||||
PerkinElmer, Inc. | 12 | 0.23 | % | 657 | ||||||||
Gilead Sciences, Inc. | 152 | 1.04 | % | 633 | ||||||||
Johnson & Johnson | 63 | 1.01 | % | 560 | ||||||||
Vertex Pharmaceuticals, Inc. | 19 | 0.39 | % | 549 | ||||||||
Hologic, Inc. | 101 | 0.73 | % | 500 | ||||||||
Perdoceo Education Corp. | 572 | 0.63 | % | 450 | ||||||||
EVERTEC, Inc. | 112 | 0.53 | % | 415 | ||||||||
John B Sanfilippo & Son, Inc. | 118 | 1.00 | % | 412 | ||||||||
Coherus Biosciences, Inc. | 140 | 0.21 | % | 307 | ||||||||
Waters Corp. | 11 | 0.39 | % | 245 | ||||||||
Merck & Company, Inc. | 56 | 0.40 | % | 223 | ||||||||
Vector Group Ltd. | 67 | 0.07 | % | 180 | ||||||||
USANA Health Sciences, Inc. | 68 | 0.65 | % | 158 | ||||||||
Laboratory Corporation of America Holdings | 12 | 0.35 | % | 145 | ||||||||
Halozyme Therapeutics, Inc. | 61 | 0.23 | % | 136 | ||||||||
Bio-Rad Laboratories, Inc. — Class A | 7 | 0.50 | % | 115 | ||||||||
Royalty Pharma plc — Class A | 94 | 0.35 | % | 114 | ||||||||
Pfizer, Inc. | 60 | 0.33 | % | (48 | ) | |||||||
Exelixis, Inc. | 125 | 0.21 | % | (151 | ) | |||||||
Incyte Corp. | 70 | 0.48 | % | (157 | ) | |||||||
Bristol-Myers Squibb Co. | 177 | 1.04 | % | (357 | ) | |||||||
Amgen, Inc. | 49 | 1.04 | % | (386 | ) | |||||||
Vanda Pharmaceuticals, Inc. | 306 | 0.45 | % | (426 | ) | |||||||
Total Consumer, Non-cyclical | 13,053 | |||||||||||
Consumer, Cyclical | ||||||||||||
AutoZone, Inc. | 5 | 0.98 | % | 3,087 | ||||||||
AutoNation, Inc. | 37 | 0.41 | % | 930 | ||||||||
O’Reilly Automotive, Inc. | 15 | 1.00 | % | 865 | ||||||||
NVR, Inc. | 1 | 0.56 | % | 719 | ||||||||
LKQ Corp. | 194 | 1.09 | % | 715 | ||||||||
Tri Pointe Homes, Inc. | 131 | 0.34 | % | 688 | ||||||||
Zumiez, Inc. | 94 | 0.42 | % | 595 | ||||||||
Gentex Corp. | 323 | 1.06 | % | 566 | ||||||||
Gentherm, Inc. | 41 | 0.33 | % | 534 | ||||||||
Methode Electronics, Inc. | 76 | 0.35 | % | 502 | ||||||||
Autoliv, Inc. | 36 | 0.35 | % | 490 | ||||||||
Dick’s Sporting Goods, Inc. | 36 | 0.39 | % | 474 | ||||||||
MarineMax, Inc. | 47 | 0.26 | % | 456 | ||||||||
Ethan Allen Interiors, Inc. | 202 | 0.50 | % | 424 | ||||||||
Lennar Corp. — Class A | 37 | 0.40 | % | 359 | ||||||||
Acushnet Holdings Corp. | 115 | 0.57 | % | 314 | ||||||||
Buckle, Inc. | 126 | 0.50 | % | 284 | ||||||||
Whirlpool Corp. | 31 | 0.68 | % | 244 | ||||||||
Brunswick Corp. | 58 | 0.55 | % | 243 | ||||||||
PulteGroup, Inc. | 58 | 0.31 | % | 225 | ||||||||
Kontoor Brands, Inc. | 46 | 0.22 | % | 148 | ||||||||
Oxford Industries, Inc. | 27 | 0.26 | % | 136 | ||||||||
Shoe Carnival, Inc. | 58 | 0.21 | % | 96 | ||||||||
Tapestry, Inc. | 87 | 0.33 | % | (68 | ) | |||||||
Dolby Laboratories, Inc. — Class A | 57 | 0.51 | % | (77 | ) | |||||||
Haverty Furniture Companies, Inc. | 68 | 0.20 | % | (235 | ) | |||||||
Polaris, Inc. | 34 | 0.35 | % | (299 | ) | |||||||
Allison Transmission Holdings, Inc. | 188 | 0.64 | % | (366 | ) | |||||||
Jack in the Box, Inc. | 26 | 0.21 | % | (540 | ) | |||||||
Foot Locker, Inc. | 68 | 0.28 | % | (548 | ) | |||||||
Cummins, Inc. | 43 | 0.88 | % | (708 | ) | |||||||
Hibbett, Inc. | 36 | 0.24 | % | (776 | ) | |||||||
Total Consumer, Cyclical | 9,477 | |||||||||||
Financial | ||||||||||||
Stewart Information Services Corp. | 135 | 1.01 | % | 2,349 | ||||||||
Piper Sandler Cos. | 42 | 0.70 | % | 1,342 | ||||||||
Raymond James Financial, Inc. | 111 | 1.05 | % | 1,131 | ||||||||
Interactive Brokers Group, Inc. — Class A | 77 | 0.57 | % | 1,128 | ||||||||
Arch Capital Group Ltd. | 231 | 0.96 | % | 801 | ||||||||
Enstar Group Ltd. | 43 | 1.00 | % | 790 | ||||||||
Safety Insurance Group, Inc. | 127 | 1.01 | % | 707 | ||||||||
Preferred Bank/Los Angeles CA | 159 | 1.07 | % | 671 | ||||||||
First American Financial Corp. | 74 | 0.54 | % | 589 | ||||||||
HomeStreet, Inc. | 124 | 0.61 | % | 334 | ||||||||
United Bankshares, Inc. | 204 | 0.70 | % | 297 | ||||||||
Janus Henderson Group plc | 90 | 0.35 | % | 244 | ||||||||
Citigroup, Inc. | 180 | 1.02 | % | 198 | ||||||||
166 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Synchrony Financial | 65 | 0.28 | % | $ | 195 | |||||||
Douglas Elliman, Inc. | 34 | 0.04 | % | 190 | ||||||||
National Bank Holdings Corp. — Class A | 202 | 0.83 | % | 179 | ||||||||
Fulton Financial Corp. | 188 | 0.30 | % | 118 | ||||||||
Everest Re Group Ltd. | 21 | 0.54 | % | 98 | ||||||||
Markel Corp. | 2 | 0.23 | % | 56 | ||||||||
Affiliated Managers Group, Inc. | 16 | 0.25 | % | 54 | ||||||||
Western Union Co. | 217 | 0.36 | % | (7 | ) | |||||||
BankUnited, Inc. | 145 | 0.58 | % | (32 | ) | |||||||
Essent Group Ltd. | 106 | 0.45 | % | (65 | ) | |||||||
Ameris Bancorp | 45 | 0.21 | % | (88 | ) | |||||||
MGIC Investment Corp. | 494 | 0.67 | % | (142 | ) | |||||||
Evercore, Inc. — Class A | 62 | 0.79 | % | (159 | ) | |||||||
Old Republic International Corp. | 410 | 0.95 | % | (343 | ) | |||||||
Meta Financial Group, Inc. | 84 | 0.47 | % | (372 | ) | |||||||
Hilltop Holdings, Inc. | 143 | 0.47 | % | (394 | ) | |||||||
Radian Group, Inc. | 329 | 0.65 | % | (424 | ) | |||||||
AMERISAFE, Inc. | 150 | 0.76 | % | (500 | ) | |||||||
OneMain Holdings, Inc. | 81 | 0.38 | % | (564 | ) | |||||||
Mercury General Corp. | 191 | 0.95 | % | (1,102 | ) | |||||||
Total Financial | 7,279 | |||||||||||
Utilities | ||||||||||||
National Fuel Gas Co. | 177 | 1.06 | % | 1,847 | ||||||||
Chesapeake Utilities Corp. | 78 | 1.07 | % | 1,812 | ||||||||
American States Water Co. | 73 | 0.71 | % | 1,460 | ||||||||
IDACORP, Inc. | 98 | 1.04 | % | 1,299 | ||||||||
Southern Co. | 133 | 0.86 | % | 735 | ||||||||
MGE Energy, Inc. | 131 | 1.01 | % | 706 | ||||||||
Portland General Electric Co. | 209 | 1.04 | % | 598 | ||||||||
UGI Corp. | 245 | 1.06 | % | 361 | ||||||||
WEC Energy Group, Inc. | 112 | 1.02 | % | 281 | ||||||||
PPL Corp. | 373 | 1.05 | % | 160 | ||||||||
CMS Energy Corp. | 33 | 0.20 | % | (4 | ) | |||||||
Total Utilities | 9,255 | |||||||||||
Basic Materials | ||||||||||||
Westlake Chemical Corp. | 83 | 0.76 | % | 357 | ||||||||
Celanese Corp. — Class A | 42 | 0.66 | % | 313 | ||||||||
LyondellBasell Industries N.V. — Class A | 68 | 0.59 | % | 233 | ||||||||
AdvanSix, Inc. | 57 | 0.25 | % | 211 | ||||||||
Dow, Inc. | 79 | 0.42 | % | 173 | ||||||||
Newmont Corp. | 45 | 0.26 | % | 95 | ||||||||
Steel Dynamics, Inc. | 62 | 0.36 | % | (17 | ) | |||||||
Nucor Corp. | 37 | 0.40 | % | (29 | ) | |||||||
Total Basic Materials | 1,336 | |||||||||||
Technology | ||||||||||||
CSG Systems International, Inc. | 195 | 1.06 | % | 2,219 | ||||||||
Rambus, Inc. | 246 | 0.68 | % | 1,664 | ||||||||
ExlService Holdings, Inc. | 21 | 0.29 | % | 778 | ||||||||
NetApp, Inc. | 64 | 0.55 | % | 713 | ||||||||
HP, Inc. | 82 | 0.29 | % | 633 | ||||||||
Lumentum Holdings, Inc. | 25 | 0.25 | % | 556 | ||||||||
Cirrus Logic, Inc. | 43 | 0.37 | % | 522 | ||||||||
International Business Machines Corp. | 51 | 0.64 | % | 281 | ||||||||
Progress Software Corp. | 82 | 0.37 | % | 131 | ||||||||
Intel Corp. | 72 | 0.35 | % | 59 | ||||||||
Microsoft Corp. | 10 | 0.32 | % | 39 | ||||||||
Texas Instruments, Inc. | 16 | 0.28 | % | 16 | ||||||||
CommVault Systems, Inc. | 33 | 0.21 | % | (366 | ) | |||||||
Xperi Holding Corp. | 209 | 0.37 | % | (391 | ) | |||||||
Total Technology | 6,854 | |||||||||||
Communications | ||||||||||||
Cisco Systems, Inc. | 182 | 1.08 | % | 2,104 | ||||||||
Juniper Networks, Inc. | 131 | 0.44 | % | 1,366 | ||||||||
Viavi Solutions, Inc. | 665 | 1.10 | % | 606 | ||||||||
F5, Inc. | 9 | 0.21 | % | 434 | ||||||||
InterDigital, Inc. | 63 | 0.42 | % | 45 | ||||||||
Yelp, Inc. — Class A | 64 | 0.22 | % | (94 | ) | |||||||
Shenandoah Telecommunications Co. | 138 | 0.33 | % | (102 | ) | |||||||
Cogent Communications Holdings, Inc. | 50 | 0.34 | % | (115 | ) | |||||||
T-Mobile US, Inc. | 19 | 0.21 | % | (145 | ) | |||||||
Verizon Communications, Inc. | 167 | 0.82 | % | (283 | ) | |||||||
Telephone & Data Systems, Inc. | 181 | 0.34 | % | (411 | ) | |||||||
Omnicom Group, Inc. | 134 | 0.92 | % | (510 | ) | |||||||
Total Communications | 2,895 | |||||||||||
Industrial | ||||||||||||
Encore Wire Corp. | 58 | 0.78 | % | 2,479 | ||||||||
Mueller Industries, Inc. | 177 | 0.99 | % | 2,407 | ||||||||
Knowles Corp. | 500 | 1.10 | % | 1,896 | ||||||||
Keysight Technologies, Inc. | 41 | 0.80 | % | 1,566 | ||||||||
Hillenbrand, Inc. | 133 | 0.65 | % | 817 | ||||||||
Boise Cascade Co. | 69 | 0.46 | % | 772 | ||||||||
Louisiana-Pacific Corp. | 55 | 0.40 | % | 768 | ||||||||
Atkore, Inc. | 23 | 0.24 | % | 524 | ||||||||
Eagle Materials, Inc. | 27 | 0.42 | % | 445 | ||||||||
Sanmina Corp. | 208 | 0.81 | % | 413 | ||||||||
Albany International Corp. — Class A | 36 | 0.30 | % | 373 | ||||||||
Crane Co. | 52 | 0.50 | % | 355 | ||||||||
TTM Technologies, Inc. | 443 | 0.62 | % | 306 | ||||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 167 |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Simpson Manufacturing Company, Inc. | 16 | 0.21 | % | $ | 295 | |||||||
Oshkosh Corp. | 52 | 0.55 | % | 180 | ||||||||
Packaging Corporation of America | 51 | 0.65 | % | 163 | ||||||||
Textron, Inc. | 48 | 0.35 | % | 138 | ||||||||
Insteel Industries, Inc. | 64 | 0.24 | % | 88 | ||||||||
Owens Corning | 53 | 0.45 | % | 7 | ||||||||
Dorian LPG Ltd. | 226 | 0.27 | % | — | ||||||||
Worthington Industries, Inc. | 75 | 0.39 | % | (59 | ) | |||||||
Garmin Ltd. | 82 | 1.05 | % | (68 | ) | |||||||
Donaldson Company, Inc. | 103 | 0.57 | % | (193 | ) | |||||||
OSI Systems, Inc. | 61 | 0.53 | % | (235 | ) | |||||||
MDU Resources Group, Inc. | 195 | 0.56 | % | (270 | ) | |||||||
Vishay Intertechnology, Inc. | 347 | 0.71 | % | (306 | ) | |||||||
3M Co. | 53 | 0.88 | % | (325 | ) | |||||||
Snap-on, Inc. | 44 | 0.89 | % | (416 | ) | |||||||
Toro Co. | 103 | 0.97 | % | (431 | ) | |||||||
Huntington Ingalls Industries, Inc. | 37 | 0.65 | % | (558 | ) | |||||||
Vontier Corp. | 220 | 0.64 | % | (565 | ) | |||||||
Sturm Ruger & Company, Inc. | 103 | 0.66 | % | (727 | ) | |||||||
Total Industrial | 9,839 | |||||||||||
Energy | ||||||||||||
Equitrans Midstream Corp. | 221 | 0.21 | % | 303 | ||||||||
Kinder Morgan, Inc. | 139 | 0.21 | % | 17 | ||||||||
Antero Midstream Corp. | 233 | 0.21 | % | (169 | ) | |||||||
Total Energy | 151 | |||||||||||
Total GS Equity Long Custom Basket | $ | 60,139 | ||||||||||
GS EQUITY SHORT CUSTOM BASKET | ||||||||||||
Financial | ||||||||||||
Americold Realty Trust | 493 | (0.87 | )% | $ | 2,499 | |||||||
Park Hotels & Resorts, Inc. | 1,518 | (1.60 | )% | 232 | ||||||||
Lincoln National Corp. | 262 | (1.00 | )% | 168 | ||||||||
Welltower, Inc. | 293 | (1.40 | )% | 134 | ||||||||
RLJ Lodging Trust | 1,874 | (1.46 | )% | 39 | ||||||||
DiamondRock Hospitality Co. | 1,662 | (0.89 | )% | (27 | ) | |||||||
Sunstone Hotel Investors, Inc. | 1,931 | (1.27 | )% | (340 | ) | |||||||
Wells Fargo & Co. | 475 | (1.27 | )% | (502 | ) | |||||||
Sun Communities, Inc. | 64 | (0.75 | )% | (510 | ) | |||||||
Safehold, Inc. | 342 | (1.53 | )% | (539 | ) | |||||||
Xenia Hotels & Resorts, Inc. | 876 | (0.89 | )% | (663 | ) | |||||||
Pebblebrook Hotel Trust | 1,066 | (1.33 | )% | (1,089 | ) | |||||||
Northern Trust Corp. | 120 | (0.80 | )% | (1,206 | ) | |||||||
Signature Bank | 54 | (0.98 | )% | (1,365 | ) | |||||||
Bank of New York Mellon Corp. | 358 | (1.16 | )% | (1,450 | ) | |||||||
Western Alliance Bancorporation | 249 | (1.50 | )% | (1,495 | ) | |||||||
Equitable Holdings, Inc. | 740 | (1.36 | )% | (1,531 | ) | |||||||
Host Hotels & Resorts, Inc. | 1,728 | (1.68 | )% | (1,542 | ) | |||||||
Ryman Hospitality Properties, Inc. | 284 | (1.46 | )% | (1,658 | ) | |||||||
Kennedy-Wilson Holdings, Inc. | 1,356 | (1.81 | )% | (1,750 | ) | |||||||
Outfront Media, Inc. | 802 | (1.20 | )% | (1,968 | ) | |||||||
Equinix, Inc. | 30 | (1.42 | )% | (2,189 | ) | |||||||
Apartment Income REIT Corp. | 589 | (1.80 | )% | (2,224 | ) | |||||||
State Street Corp. | 332 | (1.72 | )% | (2,382 | ) | |||||||
Comerica, Inc. | 384 | (1.87 | )% | (2,622 | ) | |||||||
Howard Hughes Corp. | 247 | (1.40 | )% | (4,269 | ) | |||||||
Total Financial | (28,249 | ) | ||||||||||
Industrial | ||||||||||||
Stericycle, Inc. | 388 | (1.29 | )% | 5,463 | ||||||||
Boeing Co. | 138 | (1.55 | )% | 2,142 | ||||||||
US Ecology, Inc. | 509 | (0.91 | )% | 2,141 | ||||||||
Jacobs Engineering Group, Inc. | 242 | (1.88 | )% | 92 | ||||||||
TransDigm Group, Inc. | 16 | (0.57 | )% | (16 | ) | |||||||
Howmet Aerospace, Inc. | 527 | (0.94 | )% | (1,027 | ) | |||||||
Waste Management, Inc. | 129 | (1.20 | )% | (3,808 | ) | |||||||
Republic Services, Inc. — Class A | 178 | (1.39 | )% | (5,398 | ) | |||||||
Tetra Tech, Inc. | 114 | (1.08 | )% | (7,072 | ) | |||||||
Casella Waste Systems, Inc. — Class A | 307 | (1.46 | )% | (8,733 | ) | |||||||
Total Industrial | (16,216 | ) | ||||||||||
Consumer, Non-cyclical | ||||||||||||
Teladoc Health, Inc. | 145 | (0.74 | )% | 4,147 | ||||||||
Guardant Health, Inc. | 137 | (0.77 | )% | 3,822 | ||||||||
CoStar Group, Inc. | 288 | (1.27 | )% | 2,206 | ||||||||
Viad Corp. | 308 | (0.74 | )% | 1,017 | ||||||||
US Foods Holding Corp. | 281 | (0.55 | )% | 335 | ||||||||
ASGN, Inc. | 120 | (0.83 | )% | 213 | ||||||||
Brink’s Co. | 105 | (0.38 | )% | 35 | ||||||||
Verisk Analytics, Inc. — Class A | 72 | (0.92 | )% | (243 | ) | |||||||
Equifax, Inc. | 49 | (0.80 | )% | (575 | ) | |||||||
Rollins, Inc. | 483 | (0.92 | )% | (588 | ) | |||||||
TransUnion | 108 | (0.72 | )% | (613 | ) | |||||||
Sysco Corp. | 228 | (1.00 | )% | (1,126 | ) | |||||||
Dun & Bradstreet Holdings, Inc. | 836 | (0.96 | )% | (1,228 | ) | |||||||
Cintas Corp. | 64 | (1.58 | )% | (1,338 | ) | |||||||
168 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (continued) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
| Shares | Percentage | Value and | |||||||||
Driven Brands Holdings, Inc. | 805 | (1.51 | )% | $ | (3,952 | ) | ||||||
Total Consumer, Non-cyclical | 2,112 | |||||||||||
Technology | ||||||||||||
Coupa Software, Inc. | 55 | (0.49 | )% | 5,839 | ||||||||
Twilio, Inc. — Class A | 34 | (0.50 | )% | 2,863 | ||||||||
Clarivate plc | 350 | (0.46 | )% | 1,187 | ||||||||
Avalara, Inc. | 34 | (0.25 | )% | 1,113 | ||||||||
Zscaler, Inc. | 16 | (0.29 | )% | 375 | ||||||||
Allscripts Healthcare Solutions, Inc. | 525 | (0.54 | )% | 153 | ||||||||
Smartsheet, Inc. — Class A | 63 | (0.27 | )% | (112 | ) | |||||||
Leidos Holdings, Inc. | 104 | (0.52 | )% | (138 | ) | |||||||
Snowflake, Inc. — Class A | 30 | (0.57 | )% | (969 | ) | |||||||
Ceridian HCM Holding, Inc. | 110 | (0.64 | )% | (1,508 | ) | |||||||
KBR, Inc. | 638 | (1.70 | )% | (4,031 | ) | |||||||
Total Technology | 4,772 | |||||||||||
Energy | ||||||||||||
Plug Power, Inc. | 151 | (0.24 | )% | 1,464 | ||||||||
Denbury, Inc. | 126 | (0.54 | )% | (2 | ) | |||||||
Range Resources Corp. | 430 | (0.43 | )% | (198 | ) | |||||||
Marathon Petroleum Corp. | 206 | (0.74 | )% | (258 | ) | |||||||
Schlumberger N.V. | 792 | (1.33 | )% | (502 | ) | |||||||
Hess Corp. | 191 | (0.79 | )% | (507 | ) | |||||||
Halliburton Co. | 1,216 | (1.55 | )% | (674 | ) | |||||||
NOV, Inc. | 807 | (0.61 | )% | (686 | ) | |||||||
Pioneer Natural Resources Co. | 115 | (1.17 | )% | (800 | ) | |||||||
Patterson-UTI Energy, Inc. | 1,476 | (0.70 | )% | (951 | ) | |||||||
Total Energy | (3,114 | ) | ||||||||||
Communications | ||||||||||||
Okta, Inc. | 58 | (0.73 | )% | 2,558 | ||||||||
Uber Technologies, Inc. | 518 | (1.21 | )% | 1,874 | ||||||||
Airbnb, Inc. — Class A | 54 | (0.50 | )% | 1,296 | ||||||||
Zillow Group, Inc. — Class C | 136 | (0.49 | )% | (274 | ) | |||||||
Opendoor Technologies, Inc. | 577 | (0.47 | )% | (407 | ) | |||||||
Lyft, Inc. — Class A | 503 | (1.20 | )% | (667 | ) | |||||||
Total Communications | 4,380 | |||||||||||
Consumer, Cyclical | ||||||||||||
Freshpet, Inc. | 91 | (0.48 | )% | 6,171 | ||||||||
United Airlines Holdings, Inc. | 723 | (1.77 | )% | 5,063 | ||||||||
Delta Air Lines, Inc. | 809 | (1.77 | )% | 2,877 | ||||||||
Frontier Group Holdings, Inc. | 649 | (0.49 | )% | 2,069 | ||||||||
Spirit Airlines, Inc. | 574 | (0.70 | )% | 1,976 | ||||||||
Tesla, Inc. | 9 | (0.53 | )% | 1,076 | ||||||||
American Airlines Group, Inc. | 1,655 | (1.66 | )% | 44 | ||||||||
Royal Caribbean Cruises Ltd. | 185 | (0.79 | )% | (192 | ) | |||||||
Wynn Resorts Ltd. | 82 | (0.39 | )% | (283 | ) | |||||||
Las Vegas Sands Corp. | 194 | (0.41 | )% | (489 | ) | |||||||
IAA, Inc. | 332 | (0.94 | )% | (680 | ) | |||||||
Carnival Corp. | 735 | (0.83 | )% | (1,350 | ) | |||||||
Madison Square Garden Sports Corp. — Class A | 162 | (1.57 | )% | (1,675 | ) | |||||||
Copart, Inc. | 113 | (0.96 | )% | (1,844 | ) | |||||||
Total Consumer, Cyclical | 12,763 | |||||||||||
Utilities | ||||||||||||
ONE Gas, Inc. | 445 | (1.93 | )% | (927 | ) | |||||||
Atmos Energy Corp. | 333 | (1.95 | )% | (1,329 | ) | |||||||
CenterPoint Energy, Inc. | 1,055 | (1.64 | )% | (1,780 | ) | |||||||
Edison International | 492 | (1.88 | )% | (5,108 | ) | |||||||
Total Utilities | (9,144 | ) | ||||||||||
Total GS Equity Short Custom Basket | $ | (32,696 | ) | |||||||||
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
†† | Value determined based on Level 2 inputs — See Note 4. |
1 | All or a portion of this security is pledged as custom basket swap collateral at December 31, 2021. |
2 | Rate indicated is the 7-day yield as of December 31, 2021. |
GS — Goldman Sachs International | |
MS — Morgan Stanley Capital Services LLC | |
plc — Public Limited Company | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 169 |
SCHEDULE OF INVESTMENTS (concluded) | December 31, 2021 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
The following table summarizes the inputs used to value the Fund’s investments at December 31, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,383,154 | $ | — | $ | — | $ | 4,383,154 | ||||||||
Money Market Fund | 114,817 | — | — | 114,817 | ||||||||||||
Equity Custom Basket Swap Agreements** | — | 120,079 | — | 120,079 | ||||||||||||
Total Assets | $ | 4,497,971 | $ | 120,079 | $ | — | $ | 4,618,050 | ||||||||
Investments in Securities (Liabilities) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Equity Custom Basket Swap Agreements** | $ | — | $ | 64,663 | $ | — | $ | 64,663 | ||||||||
** | This derivative is reported as unrealized appreciation/depreciation at period end. |
170 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2021 |
Assets: | ||||
Investments, at value (cost $4,208,094) | $ | 4,497,971 | ||
Cash | 14,448 | |||
Unrealized appreciation on OTC swap agreements | 120,079 | |||
Prepaid expenses | 2,131 | |||
Receivables: | ||||
Investment Adviser | 9,203 | |||
Dividends | 3,301 | |||
Fund shares sold | 137 | |||
Total assets | 4,647,270 | |||
Liabilities: | ||||
Unrealized depreciation on OTC swap agreements | 64,663 | |||
Payable for: | ||||
Swap settlement | 39,301 | |||
Professional fees | 28,751 | |||
Fund accounting/administration fees | 3,898 | |||
Trustees’ fees* | 3,167 | |||
Transfer agent/maintenance fees | 2,114 | |||
Distribution and service fees | 937 | |||
Fund shares redeemed | 70 | |||
Miscellaneous | 9,187 | |||
Total liabilities | 152,088 | |||
Commitments and contingent liabilities (Note 12) | — | |||
Net assets | $ | 4,495,182 | ||
Net assets consist of: | ||||
Paid in capital | $ | 5,475,017 | ||
Total distributable earnings (loss) | (979,835 | ) | ||
Net assets | $ | 4,495,182 | ||
Capital shares outstanding | 268,201 | |||
Net asset value per share | $ | 16.76 | ||
STATEMENT OF OPERATIONS |
Year Ended December 31, 2021 |
Investment Income: | ||||
Dividends | $ | 106,607 | ||
Interest | 12 | |||
Total investment income | 106,619 | |||
Expenses: | ||||
Management fees | 40,695 | |||
Distribution and service fees | 11,304 | |||
Transfer agent/maintenance fees | 25,124 | |||
Professional fees | 40,898 | |||
Fund accounting/administration fees | 32,253 | |||
Custodian fees | 22,172 | |||
Trustees’ fees* | 17,221 | |||
Pricing service expense | 11,060 | |||
Line of credit fees | 228 | |||
Interest expense | 10 | |||
Miscellaneous | 6,316 | |||
Total expenses | 207,281 | |||
Less: | ||||
Expenses reimbursed by Adviser | (75,883 | ) | ||
Expenses waived by Adviser | (40,725 | ) | ||
Total waived/reimbursed expenses | (116,608 | ) | ||
Net expenses | 90,673 | |||
Net investment income | 15,946 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 1,284,741 | |||
Swap agreements | (1,056,284 | ) | ||
Net realized gain | 228,457 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (172,627 | ) | ||
Swap agreements | 504,312 | |||
Net change in unrealized appreciation (depreciation) | 331,685 | |||
Net realized and unrealized gain | 560,142 | |||
Net increase in net assets resulting from operations | $ | 576,088 | ||
* | 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 | 171 |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 15,946 | $ | 21,165 | ||||
Net realized gain (loss) on investments | 228,457 | (7,970 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 331,685 | (63,272 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 576,088 | (50,077 | ) | |||||
Distributions to shareholders | (28,089 | ) | (31,639 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | 50,760 | 78,547 | ||||||
Distributions reinvested | 28,089 | 31,639 | ||||||
Cost of shares redeemed | (667,050 | ) | (1,722,128 | ) | ||||
Net decrease from capital share transactions | (588,201 | ) | (1,611,942 | ) | ||||
Net decrease in net assets | (40,202 | ) | (1,693,658 | ) | ||||
Net assets: | ||||||||
Beginning of year | 4,535,384 | 6,229,042 | ||||||
End of year | $ | 4,495,182 | $ | 4,535,384 | ||||
Capital share activity: | ||||||||
Shares sold | 3,202 | 5,512 | ||||||
Shares issued from reinvestment of distributions | 1,805 | 2,180 | ||||||
Shares redeemed | (42,689 | ) | (120,777 | ) | ||||
Net decrease in shares | (37,682 | ) | (113,085 | ) | ||||
172 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SERIES Z (ALPHA OPPORTUNITY SERIES) |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.83 | $ | 14.87 | $ | 15.27 | $ | 20.05 | $ | 18.70 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .06 | .06 | .07 | .04 | (.04 | ) | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.97 | (.01 | ) | (.45 | ) | (2.28 | ) | 1.39 | ||||||||||||
Total from investment operations | 2.03 | .05 | (.38 | ) | (2.24 | ) | 1.35 | |||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.10 | ) | (.09 | ) | (.02 | ) | — | — | ||||||||||||
Net realized gains | — | — | — | (2.54 | ) | — | ||||||||||||||
Total distributions | (.10 | ) | (.09 | ) | (.02 | ) | (2.54 | ) | — | |||||||||||
Net asset value, end of period | $ | 16.76 | $ | 14.83 | $ | 14.87 | $ | 15.27 | $ | 20.05 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 13.81 | % | 0.27 | % | (2.45 | %) | (11.57 | %) | 7.22 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,495 | $ | 4,535 | $ | 6,229 | $ | 8,056 | $ | 12,317 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.35 | % | 0.41 | % | 0.44 | % | 0.22 | % | (0.23 | %) | ||||||||||
Total expensesc | 4.58 | % | 3.98 | % | 3.52 | % | 2.47 | % | 2.48 | % | ||||||||||
Net expensesd,e,f | 2.01 | % | 2.01 | % | 2.00 | % | 1.99 | % | 2.22 | % | ||||||||||
Portfolio turnover rate | 204 | % | 171 | % | 172 | % | 219 | % | 182 | % | ||||||||||
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not take into account any of the expenses associated with an investment in variable insurance products. If total return had taken into account these expenses, performance would have been lower. Shares of a series of Guggenheim Variable Funds Trust are available only through the purchase of such products. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
— | — | — | — | 0.15% |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |
2.00% | 2.00% | 2.00% | 1.99% | 2.13% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 173 |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
Guggenheim Variable Funds Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each Fund separately. At December 31, 2021, the Trust consisted of fourteen funds.The Trust offers shares of the funds to insurance companies for their variable annunity and variable life insurance contracts.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Series A (StylePlus—Large Core Series) | Diversified |
Series B (Large Cap Value Series) | Diversified |
Series D (World Equity Income Series) | Diversified |
Series E (Total Return Bond Series) | Diversified |
Series F (Floating Rate Strategies Series) | Diversified |
Series J (StylePlus—Mid Growth Series) | Diversified |
Series N (Managed Asset Allocation Series) | Diversified |
Series O (All Cap Value Series) | Diversified |
Series P (High Yield Series) | Diversified |
Series Q (Small Cap Value Series) | Diversified |
Series V (SMid Cap Value Series) | Diversified |
Series X (StylePlus—Small Growth Series) | Diversified |
Series Y (StylePlus—Large Growth Series) | Diversified |
Series Z (Alpha Opportunity Series) | Diversified |
Security Investors, LLC and Guggenheim Partners Investment Management, LLC (“GPIM”), which operates under the name Guggenheim Investments (“GI”), provides advisory services. GPIM provides advisory services to Series F (Floating Rate Strategies Series) and Security Investors, LLC provides advisory services to the remaining Funds covered in this report. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
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, 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 net asset value per share (“NAV”) of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, by the number of outstanding shares of that fund.
(a) Valuation of Investments
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 Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets 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, to 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 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 or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange (“NYSE”). The values of foreign securities are
174 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
determined as of the close of such foreign markets or the close of the NYSE, if earlier. All investments quoted in foreign currencies are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of U.S. business at 4:00 p.m. 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. In addition, under the Valuation Procedures, the Valuation Committee and Guggenheim Funds Investment Advisors, LLC (“GFIA” or the “Adviser”) are authorized to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds and closed-end investment companies are valued at the last quoted sale price.
U.S. Government securities are valued by independent pricing services, the last traded fill price, or at the reported bid price at the close of business.
Repurchase agreements are generally valued at amortized cost, provided such amounts approximate market value.
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, provided such amount approximates market value.
CLOs, CDOs, MBS, ABS, and other structured finance securities are generally valued using a pricing service.
Typically, loans are valued using information provided by an independent third party pricing service that uses broker quotes, among other inputs. If the pricing service cannot or does not provide a valuation for a particular loan, or such valuation is deemed unreliable, such investment is valued based on a quote from a broker-dealer or is fair valued by the Valuation Committee. Funds that invest in loans or asset-backed securities as part of their investment strategies may have a significant amount of these instruments that are fair valued.
Exchange-traded options are valued at the mean of the bid and ask prices on the principal exchange on which they are traded. Over-the-counter (“OTC”) options are valued using a price provided by a pricing service.
The value of futures contracts is accounted for using the unrealized appreciation or depreciation 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 interest rate swap agreements entered into by a fund is accounted for using the unrealized appreciation or depreciation on the agreements that is determined using the previous day’s primary exchange on which the swap is traded Exchange close price, adjusted for the current day’s spreads.
The values of other swap agreements entered into by a fund are accounted for using the unrealized appreciation or depreciation on the agreements that are determined by marking the agreements to the last quoted value of the index or other underlying position that the swaps pertain to at the close of the NYSE.
Forward foreign currency exchange contracts are valued daily based on the applicable exchange rate of the underlying currency.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’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 market prices; sale 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 U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative investments, such factors may include 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.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 175 |
NOTES TO FINANCIAL STATEMENTS (continued) |
(b) U.S. Government and Agency Obligations
Certain U.S. Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedules of Investments reflect the effective rates paid at the time of purchase by the Funds. Other securities bear interest at the rates shown, payable at fixed dates through maturity.
(c) Senior Floating Rate Interests and Loan Investments
Senior floating rate interests in which the Trust invests 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 one-month or three-month 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 disclosed in the Funds’ Schedules of Investments.
The Funds invest in loans and other similar debt obligations (“obligations”). A portion of the Funds’ investments in these obligations is sometimes referred to as “covenant lite” loans or obligations (“covenant lite obligations”), which are obligations that lack covenants or possess fewer or less restrictive covenants or constraints on borrowers than certain other types of obligations. The Funds may also obtain exposure to covenant lite obligations through investment in securitization vehicles and other structured products. In recent market conditions, many new or reissued obligations have not featured traditional covenants, which are intended to protect lenders and investors by (i) imposing certain restrictions or other limitations on a borrower’s operations or assets or (ii) providing certain rights to lenders. The Funds may have fewer rights with respect to covenant lite obligations, including fewer protections against the possibility of default and fewer remedies in the event of default. As a result, investments in (or exposure to) covenant lite obligations are subject to more risk than investments in (or exposure to) certain other types of obligations. The Funds are subject to other risks associated with investments in (or exposure to) obligations, including that obligations may not be considered “securities” and, as a result, the Funds may not be entitled to rely on the anti-fraud protections under the federal securities laws and instead may have to resort to state law and direct claims.
(d) Interest on When-Issued Securities
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 Funds 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.
(e) Short Sales
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.
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 Fund may also receive rebate income from the broker resulting from the investment of the proceeds from securities sold short.
(f) Options
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).
176 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
(g) Futures Contracts
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 appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
(h) Swap Agreements
Swap agreements are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
Upon entering into certain centrally-cleared swap transactions, a Fund is required to deposit with its clearing broker an amount of cash or securities as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in the fair value of the reference entity and are recorded by the Fund as unrealized appreciation or depreciation. 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.
Upfront payments received or made by a Fund on credit default swap agreements and interest rate swap agreements are amortized over the expected life of the agreement. Periodic payments received or paid by a Fund are recorded as realized gains or losses. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses.
(i) Forward Foreign Currency Exchange Contracts
The change in value of a forward foreign currency exchange contract is recorded as unrealized appreciation or depreciation until the contract is closed. When the contract is closed, the Funds record 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.
(j) Currency Translations
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 gain or loss and unrealized appreciation or depreciation 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 appreciation and depreciation 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.
(k) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of December 31, 2021, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(l) Security Transactions
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 a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. 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. Interest income also includes paydown gains and losses on mortgage-backed and asset-backed securities and senior
THE GUGGENHEIM FUNDS ANNUAL REPORT | 177 |
NOTES TO FINANCIAL STATEMENTS (continued) |
and subordinated loans. Amendment fees are earned as compensation for evaluating and accepting changes to the original loan agreement and are recognized when received. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, 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 realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
Income from residual collateralized loan obligations is recognized using the effective interest method. At the time of purchase, management estimates the future expected cash flows and determines the effective yield and estimated maturity date based on the estimated cash flows. Subsequent to the purchase, the estimated cash flows are updated periodically and a revised yield is calculated prospectively.
Certain Funds may receive other income from investments in senior loan interests including amendment fees, consent fees and commitment fees. For funded loans, these fees are recorded as income when received by the Funds and included in interest income on the Statements of Operations. For unfunded loans, commitment fees are included in realized gain on investments on the Statement of Operations at the end of the commitment period.
(m) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Normally, all distributions of a Fund will automatically be reinvested without charge in additional shares of the same Fund. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
(n) Expenses
Expenses directly attributable to a Fund are charged directly to the Fund. Other expenses common to various funds within the fund complex are generally allocated amongst such funds on the basis of average net assets.
(o) Earnings Credits
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. Earnings credits for the year ended December 31, 2021, are disclosed in the Statements of Operations.
(p) Cash
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, which was 0.07% at December 31, 2021.
(q) Indemnifications
Under the Funds’ organizational documents, the 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.
(r) Special Purpose Acquisition Companies
The Funds may acquire an interest in a special purpose acquisition company (“SPAC”) in an initial public offering or a secondary market transaction. SPAC investments carry many of the same risks as investments in initial public offering securities, such as erratic price movements, greater risk of loss, lack of information about the issuer, limited operating and little public or no trading history, and higher transaction costs. An investment in a SPAC is typically subject to a higher risk of dilution by additional later offerings of interests in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC and interests in SPACs may be illiquid and/or be subject to restrictions on resale. A SPAC is a publicly traded company that raises investment capital for the purpose of acquiring the equity securities of one or more existing companies (or interests therein) via merger, combination, acquisition or other similar transactions. Unless and until an acquisition is completed, a SPAC generally invests its assets (less a portion retained to cover expenses) in U.S. government securities, money market securities and cash and does not typically pay dividends in respect of its common stock. SPAC investments are also subject to the risk that a significant portion of the funds raised by the SPAC may be expended during the search for a target acquisition or merger and that the SPAC may have limited time in which to conduct due diligence on potential business combination targets. Because SPACs are in essence blank check companies without operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable acquisition. Among other conflicts of interest, the economic interests of the management, directors, officers and related parties of a SPAC can differ from the economic interests of public shareholders, which may lead to conflicts as they evaluate, negotiate and recommend
178 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
business combination transactions to shareholders. This risk may become more acute as the deadline for the completion of a business combination nears. There is no guarantee that the SPACs in which the Funds invest will complete an acquisition or that any acquisitions that are completed will be profitable.
Note 2 – Financial Instruments and Derivatives
As part of their investment strategy, the Funds may utilize short sales and a variety of derivative instruments. These investments involve, to varying degrees, elements of market risk and risks in excess of amounts recognized on the Statements of Assets and Liabilities. Valuation and accounting treatment of these instruments can be found under Significant Accounting Policies in Note 1 of these Notes to Financial Statements.
Short Sales
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, the Fund will realize a gain on the transaction. Conversely, if the security increases in price during the period, the Fund will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales.
Derivatives
Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities, currencies, commodities or indices. Derivative instruments may be used to increase investment flexibility (including to maintain cash reserves while maintaining exposure to certain other assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative instruments may also be used to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why a 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 Funds may utilize derivatives for the following purposes:
Duration: the use of an instrument to manage the interest rate risk of a portfolio.
Hedge: an investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position to protect against broad market moves.
Income: the use of any instrument that distributes cash flows typically based upon some rate of interest.
Index Exposure: the use of an instrument to obtain exposure to a listed or other type of index.
Leverage: gaining total exposure to equities or other assets on the long and short sides at greater than 100% of invested capital.
Speculation: the use of an instrument to express macro-economic and other investment views.
For any Fund whose investment strategy consistently involves applying 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 or other asset. In addition, because an investment in derivative instruments generally requires a small investment relative to the amount of investment exposure assumed, an opportunity for increased net income is created; but, at the same time, leverage risk will increase. 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 they had not been leveraged.
Options Purchased and Written
A call option on a security gives the purchaser of the option the right to buy, and the writer of a call option the obligation to sell, the underlying security. The purchaser of a put option has the right to sell, and the writer of the put option the obligation to buy, the underlying security at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid.
The following table represents the Funds’ use and volume of call/put options purchased on a monthly basis:
THE GUGGENHEIM FUNDS ANNUAL REPORT | 179 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Average Notional Amount | |||||||||
Fund | Use | Call | Put | ||||||
Series E (Total Return Bond Series) | Duration, Hedge | $ | 85,108,333 | $ | 1,455,523 | ||||
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 where a Fund may not be able to enter into a closing transaction because of an illiquid secondary market; or, for OTC options, a Fund may be at risk because of the counterparty’s inability to perform.
The following table represents the Funds’ use and volume of call/put options written on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Call | Put | ||||||
Series E (Total Return Bond Series) | Duration, Hedge | $ | 3,289 | $ | 1,455,523 | ||||
Futures Contracts
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 a 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 segregated cash with broker on the Statements of Assets and Liabilities; securities held as collateral are noted on the Schedules of Investments.
The following table represents the Funds’ use and volume of futures on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Series A (StylePlus—Large Core Series) | Index exposure | $ | 4,183,435 | $ | — | ||||
Series D (World Equity Income Series) | Hedge | — | 10,905,892 | ||||||
Series J (StylePlus—Mid Growth Series) | Index exposure | 2,993,144 | — | ||||||
Series N (Managed Asset Allocation Series) | Index exposure, Speculation | 11,399,973 | 574,341 | ||||||
Series X (StylePlus—Small Growth Series) | Index exposure | 1,032,053 | — | ||||||
Series Y (StylePlus—Large Growth Series) | Index exposure | 952,976 | — | ||||||
Swap Agreements
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. When utilizing OTC swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts. For a fund utilizing centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. 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.
180 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Total return and custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset (such as an index or custom basket of securities) for a fixed or variable interest rate. Total return and custom basket swaps will usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange, with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement. When utilizing total return or custom basket swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in value.
The following table represents the Funds’ use and volume of total return swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Series A (StylePlus—Large Core Series) | Index exposure | $ | 206,398,441 | $ | — | ||||
Series E (Total Return Bond Series) | Index exposure, Income | 345,308 | 54,205 | ||||||
Series J (StylePlus—Mid Growth Series) | Index exposure | 163,684,227 | — | ||||||
Series P (High Yield Series) | Index exposure, Income | 1,077,411 | — | ||||||
Series X (StylePlus—Small Growth Series) | Index exposure | 31,432,889 | — | ||||||
Series Y (StylePlus—Large Growth Series) | Index exposure | 43,518,714 | — | ||||||
The following table represents the Funds’ use and volume of custom basket swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Long | Short | ||||||
Series Z (Alpha Opportunity Series) | Hedge, Leverage | $ | 1,327,466 | $ | 3,753,525 | ||||
Interest rate swaps involve the exchange by the Funds with another party for their respective commitment to pay or receive a fixed or variable interest rate on a notional amount of principal. Interest rate swaps are generally centrally-cleared, but central clearing does not make interest rate swap transactions risk free.
The following table represents the Funds’ use and volume of interest rate swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Pay Floating Rate | Receive Floating Rate | ||||||
Series E (Total Return Bond Series) | Duration, Hedge | $ | 14,366,667 | $ | — | ||||
Credit default swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or entities, from one counterparty to the other. A fund enters into credit default swaps as a “seller” or “buyer” of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the stream of payments and have no further obligations to the fund selling the credit protection. For a fund utilizing centrally cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit default swaps, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which a fund is selling credit protection, the default of a third party issuer.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 181 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The quoted market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following table represents the Funds’ use and volume of credit default swaps on a monthly basis:
Average Notional Amount | |||||||||
Fund | Use | Protection Sold | Protection Purchased | ||||||
Series E (Total Return Bond Series) | Income, Index exposure | $ | 163,333 | $ | 600,000 | ||||
Series P (High Yield Series) | Index exposure | 466,667 | — | ||||||
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract is an agreement between two parties to exchange two designated currencies at a specific time in the future. Certain types of contracts may be cash settled, in an amount equal to the change in exchange rates during the term of the contract. The contracts can be used to hedge or manage exposure to foreign currency risks with portfolio investments or to gain exposure to foreign currencies.
The market value of a forward foreign currency exchange contract changes with fluctuations in foreign currency exchange rates. Furthermore, the Funds may be exposed to risk if the counterparties cannot meet the contract terms or if the currency value changes unfavorably as compared to the U.S. dollar.
The following table represents the Funds’ use and volume of forward foreign currency exchange contracts on a monthly basis:
Average Value | |||||||||
Fund | Use | Purchased | Sold | ||||||
Series E (Total Return Bond Series) | Hedge, Income | $ | 4,509,529 | $ | 4,848,354 | ||||
Series P (High Yield Series) | Hedge | 12,217 | 302,080 | ||||||
Derivative Investment Holdings Categorized by Risk Exposure
The following is a summary of the location of derivative investments on the Funds’ Statements of Assets and Liabilities as of December 31, 2021:
Derivative Investment Type | Asset Derivatives | Liability Derivatives |
Equity/interest rate futures contracts | — | Variation margin on futures contracts |
Currency forward contracts | Unrealized appreciation on forward foreign currency exchange contracts | Unrealized depreciation on forward foreign currency exchange contracts |
Equity/interest rate swap contracts | Unrealized appreciation on OTC swap agreements Unamortized upfront premiums paid on interest rate swap agreements Variation margin on interest rate swaps agreements | Unrealized depreciation on OTC swap agreements
— |
Curency/equity/interest rate option contracts | Investments in unaffiliated issuers, at value | Options written, at value |
182 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables set forth the fair value of the Funds’ derivative investments categorized by primary risk exposure at December 31, 2021:
Asset Derivative Investments Value | ||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Options | Forward | Options | Total Value at | ||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 100,275 | $ | 19,979,155 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 20,079,430 | ||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | — | — | 88,299 | 132,515 | 220,814 | ||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 67,206 | 5,052,896 | — | — | — | — | — | 5,120,102 | ||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 106,088 | — | 17,656 | — | — | — | — | 123,744 | ||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | 25,864 | — | — | — | — | — | — | 25,864 | ||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 24,999 | 4,743,001 | — | — | — | — | — | 4,768,000 | ||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | 120,079 | — | — | — | — | — | 120,079 | ||||||||||||||||||||||||
Liability Derivative Investments Value | ||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Swaps | Options | Forward | Options | Total Value at | ||||||||||||||||||||||||
Series E (Total Return Bond Series) | $ | — | $ | — | $ | — | $ | 146,804 | $ | 620 | $ | 61,927 | $ | — | $ | 209,351 | ||||||||||||||||
Series N (Managed Asset Allocation Series) | 2,816 | — | 873 | — | — | — | — | 3,689 | ||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | 11,883 | — | 11,883 | ||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | — | 99,596 | — | — | — | — | — | 99,596 | ||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | 64,663 | — | — | — | — | — | 64,663 | ||||||||||||||||||||||||
* | Includes cumulative appreciation (depreciation) of exchange-traded, OTC and centrally-cleared derivatives contracts as reported on the Schedules of Investments. For exchange-traded and centrally-cleared derivatives, variation margin is reported within the Statements of Assets and Liabilities. |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the year ended December 31, 2021:
Derivative Investment Type | Location of Gain (Loss) on Derivatives |
Currency/equity/interest rate futures contracts | Net realized gain (loss) on futures contracts Net change in unrealized appreciation (depreciation) on futures contracts |
Currency forward contracts | Net realized gain (loss) on forward foreign currency exchange contracts Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts |
Equity/interest rate option contracts | Net realized gain (loss) on options purchased Net change in unrealized appreciation (depreciation) on options purchased Net realized gain (loss) on options options written Net change in unrealized appreciation (depreciation) on options written |
Credit/equity/interest rate swap contracts | Net realized gain (loss) on swap agreements Net change in unrealized appreciation (depreciation) on swap agreements |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 183 |
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 December 31, 2021:
Realized Gain (Loss) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Options | Forward | Options | Total | |||||||||||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 1,323,011 | $ | 52,295,640 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 53,618,651 | ||||||||||||||||||||||
Series D (World Equity Income Series) | — | — | 80,880 | — | — | — | — | — | — | — | 80,880 | |||||||||||||||||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | — | (555,860 | ) | 50,144 | 74,950 | (159,835 | ) | 598,296 | 329,101 | 336,796 | |||||||||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 575,767 | 39,413,847 | — | — | — | — | — | — | — | — | 39,989,614 | |||||||||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | 1,034,241 | — | (5,993 | ) | (141,110 | ) | — | — | — | — | — | — | 887,138 | |||||||||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | 230,367 | — | — | 37,491 | — | 267,858 | |||||||||||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | 127,994 | 7,976,409 | — | — | — | — | — | — | — | — | 8,104,403 | |||||||||||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 305,195 | 9,966,431 | — | — | — | — | — | — | — | — | 10,271,626 | |||||||||||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | (1,056,284 | ) | — | — | — | — | — | — | — | — | (1,056,284 | ) | |||||||||||||||||||||||||||||||
Change in Unrealized Appreciation (Depreciation) on Derivative Investments Recognized on the Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||
Fund | Futures | Swaps | Futures | Futures | Swaps | Swaps | Options | Options | Forward | Options | Total | |||||||||||||||||||||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 68,935 | $ | (1,710,537 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,641,602 | ) | ||||||||||||||||||||
Series E (Total Return Bond Series) | — | — | — | — | (92,418 | ) | (50,227 | ) | 2,596 | — | (581,829 | ) | (375,189 | ) | (1,097,067 | ) | ||||||||||||||||||||||||||||
Series J (StylePlus—Mid Growth Series) | 50,533 | (20,061,120 | ) | — | — | — | — | — | — | — | — | (20,010,587 | ) | |||||||||||||||||||||||||||||||
Series N (Managed Asset Allocation Series) | (90,555 | ) | — | 865 | 14,474 | — | — | — | — | — | — | (75,216 | ) | |||||||||||||||||||||||||||||||
Series P (High Yield Series) | — | — | — | — | — | (155,839 | ) | — | — | (11,883 | ) | — | (167,722 | ) | ||||||||||||||||||||||||||||||
Series X (StylePlus—Small Growth Series) | 21,857 | (7,083,134 | ) | — | — | — | — | — | — | — | — | (7,061,277 | ) | |||||||||||||||||||||||||||||||
Series Y (StylePlus—Large Growth Series) | 16,943 | 344,865 | — | — | — | — | — | — | — | — | 361,808 | |||||||||||||||||||||||||||||||||
Series Z (Alpha Opportunity Series) | — | 504,312 | — | — | — | — | — | — | — | — | 504,312 | |||||||||||||||||||||||||||||||||
In conjunction with short sales and the use of derivative instruments, the Funds are required to maintain collateral in various forms. Depending on the financial instrument utilized and the broker involved, the Funds use margin deposits at the broker, cash and/or securities segregated at the custodian bank, discount notes or repurchase agreements allocated to the Funds as collateral.
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.
184 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Foreign Investments
There are several risks associated with exposure to foreign currencies, foreign issuers and emerging markets.A fund’s indirect and direct exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar, or in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Funds may incur transaction costs in connection with conversions between various currencies. The Funds may, but is not obligated to, engage in currency hedging transactions, which generally involve buying currency forward, options or futures contracts. However, not all currency risks may be effectively hedged, and in some cases the costs of hedging techniques may outweigh expected benefits. In such instances, the value of securities denominated in foreign currencies can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
The Funds may invest in securities of foreign companies directly, or in financial instruments, such as ADRs and exchange-traded funds, which are indirectly linked to the performance of foreign issuers. Foreign markets can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Investing in securities of foreign companies directly, or in financial instruments that are indirectly linked to the performance of foreign issuers, may involve risks not typically associated with investing in U.S. issuers. The value of securities denominated in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets may fluctuate more than those of securities traded on U.S. markets. Many foreign countries lack accounting and disclosure standards comparable to those that apply to U.S. companies, and it may be more difficult to obtain reliable information regarding a foreign issuer’s financial condition and operations. Transaction costs and costs associated with custody services are generally higher for foreign securities than they are for U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries portions of these taxes are recoverable, the non-recovered portion will reduce the income received by the Funds.
Note 3 – 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 from 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, are reported separately on the Statements of Assets and Liabilities as segregated cash with broker/receivable for variation margin, or payable for swap settlement/variation margin. Cash and/or securities pledged or received as collateral by the Funds in connection with an OTC derivative subject to an ISDA Master Agreement generally may not be invested, sold or rehypothecated by the counterparty or the Funds, as applicable, absent an event of default under such agreement, in which case such collateral generally may be applied towards obligations due to and payable by such counterparty or the Funds, as applicable. 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 | 185 |
NOTES TO FINANCIAL STATEMENTS (continued) |
The following tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series A (StylePlus—Large Core Series) | Swap equity contracts | $ | 19,979,155 | $ | — | $ | 19,979,155 | $ | — | $ | (19,979,155 | ) | $ | — | |||||||||||
Series E (Total Return Bond Series) | Forward foreign currency exchange contracts | 88,299 | — | 88,299 | (30,176 | ) | (58,123 | ) | — | ||||||||||||||||
Series E (Total Return Bond Series) | Options Purchased | 132,515 | — | 132,515 | (16,963 | ) | (44,663 | ) | 70,889 | ||||||||||||||||
Series J (StylePlus—Mid Growth Series) | Swap equity contracts | 5,052,896 | — | 5,052,896 | — | (5,052,896 | ) | — | |||||||||||||||||
Series Y (StylePlus—Large Growth Series) | Swap equity contracts | 4,743,001 | — | 4,743,001 | — | (4,743,001 | ) | — | |||||||||||||||||
Series Z (Alpha Opportunity Series) | Custom basket swap agreements | 120,079 | — | 120,079 | (64,663 | ) | — | 55,416 | |||||||||||||||||
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series E (Total Return Bond Series) | Forward foreign currency exchange contracts | $ | 61,927 | $ | — | $ | 61,927 | $ | (47,139 | ) | $ | — | $ | 14,788 | |||||||||||
Series P (High Yield Series) | Forward foreign currency exchange contracts | 11,883 | — | 11,883 | — | — | 11,883 | ||||||||||||||||||
Series X (StylePlus—Small Growth Series) | Swap equity contracts | 99,596 | — | 99,596 | — | — | 99,596 | ||||||||||||||||||
Series Z (Alpha Opportunity Series) | Custom basket swap agreements | 64,663 | — | 64,663 | (64,663 | ) | — | — | |||||||||||||||||
1 | Exchange-traded or centrally-cleared derivatives are excluded from these reported amounts. |
186 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The Funds have the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative investments as of December 31, 2021.
Fund | Counterparty | Asset Type | Cash Pledged | Cash Received | ||||||
Series A (StylePlus—Large Core Series) | Morgan Stanley Capital Services LLC | Futures contracts | $ | 250,000 | $ | — | ||||
| Wells Fargo Bank, N.A. | Total return swap agreements | — | 20,280,000 | ||||||
Series A (StylePlus—Large Core Series) Total |
|
| 250,000 | 20,280,000 | ||||||
Series D (World Equity Income Series) | BofA Securities, Inc. | Futures contracts | 89,100 | — | ||||||
Series E (Total Return Bond Series) | BofA Securities, Inc. | Interest rate swap agreements | — | 1,553 | ||||||
Goldman Sachs International | Forward foreign currency exchange contracts | — | 70,000 | |||||||
| Morgan Stanley Capital Services LLC | Options | — | 83,357 | ||||||
Series E (Total Return Bond Series) Total |
|
| — | 154,910 | ||||||
Series J (StylePlus—Mid Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 136,500 | — | ||||||
| Wells Fargo Bank, N.A. | Total return swap agreements | — | 5,640,000 | ||||||
Series J (StylePlus—Mid Growth Series) Total |
|
| 136,500 | 5,640,000 | ||||||
Series X (StylePlus—Small Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 72,500 | — | ||||||
Series Y (StylePlus—Large Growth Series) | Morgan Stanley Capital Services LLC | Futures contracts | 69,000 | — | ||||||
| Wells Fargo Bank, N.A. | Total return swap agreements | — | 5,020,000 | ||||||
Series Y (StylePlus—Large Growth Series) Total |
|
| 69,000 | 5,020,000 | ||||||
Note 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.
Independent pricing services are used to value a majority of the Funds’ investments. When values are not available from a pricing service, they will 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 U.S. Treasury securities, and other information and analysis. A significant portion of the Funds’ assets and liabilities are categorized as Level 2, as indicated in this report.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 187 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Quotes from broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may also be 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 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 a quote would generally result in significant changes in the fair value of the security.
Certain fixed income securities are valued by obtaining a monthly quote from a broker-dealer, adjusted for fluctuations in criteria such as credit spreads and interest rates. Certain loans and other securities are valued using a single daily broker quote or a price from a third party vendor based on a single daily or monthly broker quote.
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.
Note 5 – Investment Advisory Agreement and Other Agreements
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:
Fund | Management Fees | |||
Series A (StylePlus—Large Core Series) | 0.75 | % | ||
Series B (Large Cap Value Series) | 0.65 | % | ||
Series D (World Equity Income Series) | 0.70 | % | ||
Series E (Total Return Bond Series) | 0.39 | % | ||
Series F (Floating Rate Strategies Series) | 0.65 | %1 | ||
Series J (StylePlus—Mid Growth Series) | 0.75 | % | ||
Series N (Managed Asset Allocation Series) | 0.40 | % | ||
Series O (All Cap Value Series) | 0.70 | % | ||
Series P (High Yield Series) | 0.60 | % | ||
Series Q (Small Cap Value Series) | 0.75 | % | ||
Series V (SMid Cap Value Series) | 0.75 | % | ||
Series X (StylePlus—Small Growth Series) | 0.75 | % | ||
Series Y (StylePlus—Large Growth Series) | 0.65 | % | ||
Series Z (Alpha Opportunity Series) | 0.90 | % | ||
1 | The Series F management fee is subject to a 0.05% reduction on assets over $5 billion. |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Board has adopted a Distribution and Shareholder Services Plan pursuant to Rule 12b-1 under the 1940 Act that allows those Funds to pay distribution and shareholder services fees to GFD. The Funds will pay distribution and shareholder services fees to GFD at an annual rate not to exceed 0.25% of average daily net assets. GFD may, in turn, pay all or a portion of the proceeds from the distribution and shareholder services fees to insurance companies or their affiliates and qualified plan administrators (“intermediaries”) for services they provide on behalf of the Funds to current and prospective variable contract owners and qualified plan participants that invest in the Funds through the intermediaries.
188 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Contractual expense limitation agreements for the following Funds provide that the total expenses be limited to a percentage of average net assets for the Funds, exclusive of brokerage costs, dividends or interest 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:
| Limit | Effective | Contract | |||||||||
Series A (StylePlus—Large Core Series) | 0.91 | % | 05/01/17 | 05/01/22 | ||||||||
Series B (Large Cap Value Series) | 0.80 | % | 05/01/17 | 05/01/22 | ||||||||
Series D (World Equity Income Series) | 0.90 | % | 05/01/17 | 05/01/22 | ||||||||
Series E (Total Return Bond Series) | 0.81 | % | 11/30/12 | 05/01/22 | ||||||||
Series F (Floating Rate Strategies Series) | 1.15 | % | 04/22/13 | 05/01/22 | ||||||||
Series J (StylePlus—Mid Growth Series) | 0.94 | % | 05/01/17 | 05/01/22 | ||||||||
Series O (All Cap Value Series) | 0.88 | % | 05/01/17 | 05/01/22 | ||||||||
Series P (High Yield Series) | 1.07 | % | 10/20/14 | 05/01/22 | ||||||||
Series Q (Small Cap Value Series) | 1.14 | % | 05/01/17 | 05/01/22 | ||||||||
Series V (Mid Cap Value Series) | 0.91 | % | 05/01/17 | 05/01/22 | ||||||||
Series X (StylePlus—Small Growth Series) | 1.06 | % | 05/01/17 | 05/01/22 | ||||||||
Series Y (StylePlus—Large Growth Series) | 0.93 | % | 05/01/17 | 05/01/22 | ||||||||
Series Z (Alpha Opportunity Series) | 2.00 | % | 05/31/17 | 05/01/22 | ||||||||
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. For purposes of this arrangement, GI is entitled to recoupment of previously waived fees or reimbursed expenses for 36 months from the date of the waiver or reimbursement by GI. At December 31, 2021, the amount of fees waived or expenses reimbursed that are subject to recoupment and will expire during the years ended December 31, are presented in the following table:
Fund | 2022 | 2023 | 2024 | Total | ||||||||||||
Series A (StylePlus—Large Core Series) | $ | 627,973 | $ | 609,622 | $ | 578,663 | $ | 1,816,258 | ||||||||
Series B (Large Cap Value Series) | 596,531 | 569,190 | 555,924 | 1,721,645 | ||||||||||||
Series D (World Equity Income Series) | 384,683 | 358,470 | 347,403 | 1,090,556 | ||||||||||||
Series E (Total Return Bond Series) | 159,891 | 102,283 | 72,779 | 334,953 | ||||||||||||
Series F (Floating Rate Strategies Series) | 92,992 | 97,708 | 76,984 | 267,684 | ||||||||||||
Series J (StylePlus—Mid Growth Series) | 429,212 | 445,780 | 434,128 | 1,309,120 | ||||||||||||
Series O (All Cap Value Series) | 319,350 | 288,584 | 268,200 | 876,134 | ||||||||||||
Series P (High Yield Series) | 112,110 | 111,843 | 90,246 | 314,199 | ||||||||||||
Series Q (Small Cap Value Series) | 107,646 | 89,756 | 58,292 | 255,694 | ||||||||||||
Series V (SMid Cap Value Series) | 531,107 | 493,187 | 452,499 | 1,476,793 | ||||||||||||
Series X (StylePlus—Small Growth Series) | 151,315 | 130,501 | 130,621 | 412,437 | ||||||||||||
Series Y (StylePlus—Large Growth Series) | 163,763 | 153,061 | 141,551 | 458,375 | ||||||||||||
Series Z (Alpha Opportunity Series) | 108,215 | 101,516 | 116,608 | 326,339 | ||||||||||||
For the year ended December 31 2021, no amounts were recouped by GI.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 189 |
NOTES TO FINANCIAL STATEMENTS (continued) |
If a Fund invests in a fund that is advised by the same adviser or an affiliated adviser, the investing Fund’s adviser has agreed to waive fees at the investing fund level to the extent necessary to offset the proportionate share of any management fee paid by each Fund with respect to its investment in such affiliated fund. 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. For the year ended December 31, 2021, the following Funds waived fees related to investments in affiliated funds:
Fund | Amount Waived | |||
Series A (StylePlus—Large Core Series) | $ | 143,333 | ||
Series E (Total Return Bond Series) | 34,801 | |||
Series J (StylePlus—Mid Growth Series) | 101,748 | |||
Series N (Managed Asset Allocation Series) | 2,608 | |||
Series X (StylePlus—Small Growth Series) | 20,818 | |||
Series Y (StylePlus—Large Growth Series) | 25,691 | |||
Certain trustees and officers of the Trust are also officers of GI and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GI or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. The Bank of New York Mellon Corp. (“BNY”) acts as the Funds’ custodian. As custodian, BNY is responsible for the custody of the Funds’ assets. For providing the aforementioned administrative and accounting services, MUIS is entitled to receive a monthly fee equal to a percentage of the Funds’ average daily net assets and out of pocket expenses. For providing the aforementioned transfer agent and custodian services, MUIS and BNY are entitled to receive a monthly fee based on the number of transactions during the month and the number of accounts under management, subject to certain minimum monthly fees, and out of pocket expenses.
Note 6 – 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 or federal excise 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 U.S. 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’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended December 31, 2021 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Series A (StylePlus—Large Core Series) | $ | 26,897,830 | $ | — | $ | 26,897,830 | ||||||
Series B (Large Cap Value Series) | 4,627,125 | 12,501 | 4,639,626 | |||||||||
Series D (World Equity Income Series) | 2,031,098 | — | 2,031,098 | |||||||||
Series E (Total Return Bond Series) | 5,202,765 | 2,465,765 | 7,668,530 | |||||||||
Series F (Floating Rate Strategies Series) | 1,106,221 | — | 1,106,221 | |||||||||
Series J (StylePlus—Mid Growth Series) | 27,828,628 | 1,704 | 27,830,332 | |||||||||
Series N (Managed Asset Allocation Series) | 900,457 | 2,575,357 | 3,475,814 | |||||||||
Series O (All Cap Value Series) | 1,808,620 | 523,822 | 2,332,442 | |||||||||
Series P (High Yield Series) | 2,204,042 | — | 2,204,042 | |||||||||
Series Q (Small Cap Value Series) | 557,150 | — | 557,150 | |||||||||
Series V (SMid Cap Value Series) | 3,140,125 | — | 3,140,125 | |||||||||
Series X (StylePlus—Small Growth Series) | 1,474,151 | — | 1,474,151 | |||||||||
Series Y (StylePlus—Large Growth Series) | 11,035,296 | — | 11,035,296 | |||||||||
Series Z (Alpha Opportunity Series) | 28,089 | — | 28,089 | |||||||||
190 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax character of distributions paid during the year ended December 31, 2020 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Series A (StylePlus—Large Core Series) | $ | 12,350,787 | $ | — | $ | 12,350,787 | ||||||
Series B (Large Cap Value Series) | 3,913,860 | 13,318,423 | 17,232,283 | |||||||||
Series D (World Equity Income Series) | 3,479,403 | 1,215,536 | 4,694,939 | |||||||||
Series E (Total Return Bond Series) | 2,739,180 | — | 2,739,180 | |||||||||
Series F (Floating Rate Strategies Series) | 2,229,065 | — | 2,229,065 | |||||||||
Series J (StylePlus—Mid Growth Series) | 9,832,328 | — | 9,832,328 | |||||||||
Series N (Managed Asset Allocation Series) | 1,463,049 | 1,736,981 | 3,200,030 | |||||||||
Series O (All Cap Value Series) | 1,587,955 | 4,713,044 | 6,300,999 | |||||||||
Series P (High Yield Series) | 3,157,421 | — | 3,157,421 | |||||||||
Series Q (Small Cap Value Series) | 1,453,190 | 3,494,871 | 4,948,061 | |||||||||
Series V (SMid Cap Value Series) | 1,965,149 | 6,227,332 | 8,192,481 | |||||||||
Series X (StylePlus—Small Growth Series) | 390,463 | — | 390,463 | |||||||||
Series Y (StylePlus—Large Growth Series) | 2,418,053 | 45,170 | 2,463,223 | |||||||||
Series Z (Alpha Opportunity Series) | 31,639 | — | 31,639 | |||||||||
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
The tax components of distributable earnings/(loss) as of December 31, 2021 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Total | |||||||||||||||
Series A (StylePlus—Large Core Series) | $ | 58,472,857 | $ | 255,841 | $ | 27,584,926 | $ | — | $ | 86,313,624 | ||||||||||
Series B (Large Cap Value Series) | 4,784,503 | 18,052,547 | 68,787,874 | — | 91,624,924 | |||||||||||||||
Series D (World Equity Income Series) | 20,302,879 | 6,856,672 | 14,579,938 | — | 41,739,489 | |||||||||||||||
Series E (Total Return Bond Series) | 4,733,547 | — | 3,266,002 | (84,212 | ) | 7,915,337 | ||||||||||||||
Series F (Floating Rate Strategies Series) | 1,070,948 | — | (436,656 | ) | (3,673,709 | ) | (3,039,417 | ) | ||||||||||||
Series J (StylePlus—Mid Growth Series) | 43,846,919 | — | 7,640,507 | — | 51,487,426 | |||||||||||||||
Series N (Managed Asset Allocation Series) | 646,522 | 3,402,931 | 13,233,414 | — | 17,282,867 | |||||||||||||||
Series O (All Cap Value Series) | 2,559,861 | 8,818,369 | 28,156,264 | — | 39,534,494 | |||||||||||||||
Series P (High Yield Series) | 2,217,001 | — | (618,651 | ) | (7,830,697 | ) | (6,232,347 | ) | ||||||||||||
Series Q (Small Cap Value Series) | 1,571,083 | 2,238,636 | 14,191,615 | — | 18,001,334 | |||||||||||||||
Series V (SMid Cap Value Series) | 5,230,979 | 14,835,809 | 38,922,136 | — | 58,988,924 | |||||||||||||||
Series X (StylePlus—Small Growth Series) | 8,872,917 | 80,941 | 818,010 | — | 9,771,868 | |||||||||||||||
Series Y (StylePlus—Large Growth Series) | 10,461,273 | 10,993 | 7,298,724 | — | 17,770,990 | |||||||||||||||
Series Z (Alpha Opportunity Series) | 16,413 | — | 339,452 | (1,335,700 | ) | (979,835 | ) | |||||||||||||
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of December 31, 2021, capital loss carryforwards for the Funds were as follows:
Unlimited | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Series F (Floating Rate Strategies Series) | $ | (415,505 | ) | $ | (3,258,204 | ) | $ | (3,673,709 | ) | |||
Series P (High Yield Series) | — | (7,830,697 | ) | (7,830,697 | ) | |||||||
Series Z (Alpha Opportunity Series) | (1,335,700 | ) | — | (1,335,700 | ) | |||||||
THE GUGGENHEIM FUNDS ANNUAL REPORT | 191 |
NOTES TO FINANCIAL STATEMENTS (continued) |
For the year ended December 31, 2021, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
Series D (World Equity Income Series) | $ | 3,274,927 | ||
Series P (High Yield Series) | 1,215,787 | |||
Series Q (Small Cap Value Series) | 4,360,702 | |||
Series V (SMid Cap Value Series) | 3,024,879 | |||
Series Z (Alpha Opportunity Series) | 197,443 | |||
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 investments in real estate investment trusts, foreign currency gains and losses, losses deferred due to wash sales, distributions in connection with redemption of fund shares, return of capital distributions received, income accruals on certain investments, income recharacterization from certain investments, investments in swap agreements, and the “mark-to-market,” recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional differences may result from the tax treatment of bond premium/discount amortization, losses deferred due to straddles, and the “mark-to-market” of certain derivatives. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of December 31, 2021 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Series A (StylePlus—Large Core Series) | $ | 4,564,688 | $ | (4,564,688 | ) | |||
Series B (Large Cap Value Series) | 1,615,452 | (1,615,452 | ) | |||||
Series D (World Equity Income Series) | 2,190,719 | (2,190,719 | ) | |||||
Series E (Total Return Bond Series) | 1,739,065 | (1,739,065 | ) | |||||
Series J (StylePlus—Mid Growth Series) | 4,440,317 | (4,440,317 | ) | |||||
Series N (Managed Asset Allocation Series) | 388,758 | (388,758 | ) | |||||
Series O (All Cap Value Series) | 1,069,989 | (1,069,989 | ) | |||||
Series Q (Small Cap Value Series) | 223,788 | (223,788 | ) | |||||
Series V (SMid Cap Value Series) | 1,648,690 | (1,648,690 | ) | |||||
Series X (StylePlus—Small Growth Series) | 766,278 | (766,278 | ) | |||||
Series Y (StylePlus—Large Growth Series) | 1,604,112 | (1,604,112 | ) | |||||
Series Z (Alpha Opportunity Series) | (28 | ) | 28 | |||||
192 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
At December 31, 2021, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax | ||||||||||||
Series A (StylePlus—Large Core Series) | $ | 263,177,265 | $ | 28,183,504 | $ | (598,578 | ) | $ | 27,584,926 | |||||||
Series B (Large Cap Value Series) | 168,015,864 | 70,625,908 | (1,838,034 | ) | 68,787,874 | |||||||||||
Series D (World Equity Income Series) | 123,412,541 | 17,069,790 | (2,493,175 | ) | 14,576,615 | |||||||||||
Series E (Total Return Bond Series) | 173,140,887 | 4,694,468 | (1,428,181 | ) | 3,266,287 | |||||||||||
Series F (Floating Rate Strategies Series) | 54,314,450 | 96,291 | (533,913 | ) | (437,622 | ) | ||||||||||
Series J (StylePlus—Mid Growth Series) | 196,293,192 | 8,441,671 | (801,164 | ) | 7,640,507 | |||||||||||
Series N (Managed Asset Allocation Series) | 33,588,325 | 13,479,601 | (246,167 | ) | 13,233,434 | |||||||||||
Series O (All Cap Value Series) | 74,802,959 | 29,419,963 | (1,263,699 | ) | 28,156,264 | |||||||||||
Series P (High Yield Series) | 45,369,928 | 925,544 | (1,544,307 | ) | (618,763 | ) | ||||||||||
Series Q (Small Cap Value Series) | 59,609,384 | 17,910,347 | (3,718,732 | ) | 14,191,615 | |||||||||||
Series V (SMid Cap Value Series) | 148,499,281 | 46,078,634 | (7,156,498 | ) | 38,922,136 | |||||||||||
Series X (StylePlus—Small Growth Series) | 36,179,623 | 1,067,236 | (249,226 | ) | 818,010 | |||||||||||
Series Y (StylePlus—Large Growth Series) | 55,700,529 | 7,429,435 | (130,711 | ) | 7,298,724 | |||||||||||
Series Z (Alpha Opportunity Series) | 4,213,935 | 473,458 | (134,006 | ) | 339,452 | |||||||||||
Note 7 – Securities Transactions
For the year ended December 31, 2021, 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 | ||||||
Series A (StylePlus—Large Core Series) | $ | 123,764,875 | $ | 81,053,906 | ||||
Series B (Large Cap Value Series) | 49,602,360 | 75,155,264 | ||||||
Series D (World Equity Income Series) | 246,322,369 | 257,324,044 | ||||||
Series E (Total Return Bond Series) | 86,799,036 | 103,350,193 | ||||||
Series F (Floating Rate Strategies Series) | 36,143,045 | 24,144,974 | ||||||
Series J (StylePlus—Mid Growth Series) | 115,018,268 | 114,245,440 | ||||||
Series N (Managed Asset Allocation Series) | 11,962,656 | 13,202,771 | ||||||
Series O (All Cap Value Series) | 25,855,158 | 38,423,804 | ||||||
Series P (High Yield Series) | 35,266,671 | 37,687,993 | ||||||
Series Q (Small Cap Value Series) | 22,648,377 | 30,251,101 | ||||||
Series V (SMid Cap Value Series) | 62,008,461 | 89,511,853 | ||||||
Series X (StylePlus—Small Growth Series) | 23,907,918 | 26,240,559 | ||||||
Series Y (StylePlus—Large Growth Series) | 27,399,235 | 20,381,768 | ||||||
Series Z (Alpha Opportunity Series) | 9,547,537 | 11,222,902 | ||||||
For the year ended December 31, 2021, the cost of purchases and proceeds from sales of government securities were as follows:
Fund | Purchases | Sales | ||||||
Series E (Total Return Bond Series) | $ | 48,227,621 | $ | 35,224,910 | ||||
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common
THE GUGGENHEIM FUNDS ANNUAL REPORT | 193 |
NOTES TO FINANCIAL STATEMENTS (continued) |
trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended December 31, 2021, the Funds engaged in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act, as follows:
Fund | Purchases | Sales | Realized Gain | |||||||||
Series E (Total Return Bond Series) | $ | 739,384 | $ | 3,633,092 | $ | 335,125 | ||||||
Series F (Floating Rate Strategies Series) | — | 845,948 | 8,216 | |||||||||
Series P (High Yield Series) | 597,641 | 3,337,689 | 87,290 | |||||||||
Note 8 – Unfunded Loan Commitments
Pursuant to the terms of certain loan agreements, certain Funds held unfunded loan commitments as of December 31, 2021. The Funds are obligated to fund these loan commitments at the borrower’s discretion.
The unfunded loan commitments as of December 31, 2021, were as follows:
Fund | Borrower | Maturity Date | Face Amount | Value | |||||||||
Series E (Total Return Bond Series) | |||||||||||||
Authentic Brands | 12/10/28 | $ | 396,269 | $ | 1,982 | ||||||||
Higginbotham | 11/25/26 | 93,937 | 1,147 | ||||||||||
MB2 Dental Solutions LLC | 01/29/27 | 95,679 | 1,619 | ||||||||||
National Mentor Holdings, Inc. | 03/02/28 | 4,467 | 18 | ||||||||||
Pacific Bells, LLC | 10/06/28 | 1,546 | 8 | ||||||||||
Service Logic Acquisition, Inc. | 10/29/27 | 7,612 | 29 | ||||||||||
KKR Core Holding Company LLC | 07/15/31 | 440,000 | — | ||||||||||
| $ | 1,039,510 | $ | 4,803 | ||||||||||
Series F (Floating Rate Strategies Series) | |||||||||||||
Aveanna Healthcare LLC | 07/17/28 | $ | 37,736 | $ | 229 | ||||||||
Medical Solutions Parent Holdings, Inc. | 11/01/28 | 80,000 | 171 | ||||||||||
Mission Veterinary Partners | 04/27/28 | 250,000 | 1,250 | ||||||||||
National Mentor Holdings, Inc. | 03/02/28 | 20,587 | 85 | ||||||||||
Osmosis Holdings Australia II Pty Ltd. | 07/31/28 | 8,889 | — | ||||||||||
Pro Mach Group, Inc. | 08/31/28 | 22,346 | — | ||||||||||
| $ | 419,558 | $ | 1,735 | ||||||||||
Series P (High Yield Series) | |||||||||||||
Boyd Corp. | 07/24/26 | $ | 50,000 | $ | 63 | ||||||||
Confluent Health LLC | 10/27/28 | 13,274 | 22 | ||||||||||
FR Refuel LLC | 11/02/28 | 8,750 | 66 | ||||||||||
National Mentor Holdings, Inc. | 03/02/28 | 4,467 | 18 | ||||||||||
Pro Mach Group, Inc. | 08/31/28 | 8,380 | — | ||||||||||
SCP Eye Care Services LLC | 03/16/28 | 22,159 | — | ||||||||||
Taxware Holdings (Sovos Compliance LLC) | 08/11/28 | 11,045 | — | ||||||||||
| $ | 118,075 | $ | 169 | ||||||||||
194 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 9 – Restricted Securities
The securities below are considered illiquid and restricted under guidelines established by the Board:
Fund | Restricted Securities | Acquisition Date | Cost | Value | |||||||||
Series E (Total Return Bond Series) | |||||||||||||
Copper River CLO Ltd. | |||||||||||||
2007-1A, due 01/20/211 | 05/09/14 | $ | — | $ | 120 | ||||||||
FKRT | |||||||||||||
2.21% due 11/30/58 | 09/24/21 | 749,993 | 743,925 | ||||||||||
LSTAR Securities Investment Ltd. | |||||||||||||
2021-1, 1.90% (1 Month USD LIBOR + 1.80%, Rate Floor: 1.80%) due 02/01/262 | 02/04/21 | 269,230 | 270,000 | ||||||||||
LSTAR Securities Investment Ltd. | |||||||||||||
2021-2, 1.80% (1 Month USD LIBOR + 1.70%, Rate Floor: 1.70%) due 03/02/262 | 03/17/21 | 233,544 | 234,224 | ||||||||||
| $ | 1,252,767 | $ | 1,248,269 | ||||||||||
Series P (High Yield Series) | |||||||||||||
Basic Energy Services, Inc. | |||||||||||||
due 10/15/233 | 09/25/18 | $ | 174,194 | $ | 12,250 | ||||||||
Mirabela Nickel Ltd. | |||||||||||||
due 06/24/193 | 12/31/13 | 353,909 | 19,504 | ||||||||||
| $ | 528,103 | $ | 31,754 | ||||||||||
1 | Security has no stated coupon. However, it is expected to receive residual cash flow payments on defined deal dates. |
2 | Variable rate security. Rate indicated is the rate effective at December 31, 2021. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread amounts are shown, the effective rate is based on a weighted average. |
3 | Security is in default of interest and/or principal obligations. |
Note 10 – Line of Credit
The Trust, along with other affiliated trusts, secured a 364-day committed, $1,230,000,000 line of credit from Citibank, N.A., which was in place through October 2, 2021, at which time the line of credit was renewed. A Fund may draw (borrow) from the line of credit as a temporary measure for emergency purposes, to facilitate redemption requests, or for other short-term liquidity purposes consistent with the Fund’s investment objective and program. For example, it may be advantageous for the Fund to borrow money rather than sell existing portfolio positions to meet redemption requests. Fees related to borrowings, if any, vary under this arrangement between the greater of Citibank’s “base rate”, LIBOR plus 1%, or the federal funds rate plus 1/2 of 1%.
The commitment fee that may be paid by the Funds is at an annualized rate of 0.15% of the average daily amount of their allocated unused commitment amount. The commitment fee amount is allocated to the individual Funds based on the respective net assets of each participating Fund and is referenced in the Statement of Operations under “Line of credit fees”. The Funds did not have any borrowings under this agreement as of and for the year ended December 31, 2021.
In addition, Series E (Total Return Bond Series) and Series F (Floating Rate Strategies Series)(the “Funds”) entered into an additional unlimited credit facility agreement with BNP Paribas Prime Brokerage, Inc. (the “counterparty”) whereby the counterparty has agreed to provide secured financing to the Funds and the Funds will provide pledged collateral to the counterparty. Fees related to borrowings, if any, equate to 1 month LIBOR plus 0.90%. The Funds did not have any borrowings under this agreement at or during the year ended December 31, 2021.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 195 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 11 – 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 December 31, 2021, the following Funds entered into reverse repurchase agreements:
Fund | Number of Days | Balance at | Average Balance | Average | ||||||||||||
Series E (Total Return Bond Series) | 216 | $ | 12,707,001 | $ | 5,445,402 | (0.07 | %) | |||||||||
Series P (High Yield Series) | 359 | 271,094 | 2,106,579 | 0.32 | % | |||||||||||
The following table presents reverse repurchase agreements that are subject to netting arrangements and offset in the Statements of Assets of Liabilities in conformity with U.S. GAAP:
Gross Amounts Not Offset | |||||||||||||||||||||||||
Fund | Instrument | Gross | Gross | Net Amount | Financial | Cash | Net | ||||||||||||||||||
Series E (Total Return Bond Series) | Reverse repurchase agreements | $ | 12,707,001 | $ | — | $ | 12,707,001 | $ | (12,707,001 | ) | $ | — | $ | — | |||||||||||
Series P (High Yield Series) | Reverse repurchase agreements | 271,094 | — | 271,094 | (271,094 | ) | — | — | |||||||||||||||||
As of December 31, 2021, the Series E (Total Return Bond Series) Fund and Series P (High Yield Series) Fund had $12,707,001 and $271,094, respectively, in reverse repurchase agreements outstanding with various counterparties. Details of the reverse repurchase agreements by counterparty are as follows:
Fund | Counterparty | Interest Rate(s) | Maturity Date(s) | Face Value | ||||||
Series E (Total Return Bond Series) | BofA Securities, Inc | (0.09% - 0.1%) | 1/03/22-1/04/22 | $ | 6,429,371 | |||||
Barclays Bank plc | (0.1%) | 1/4/2022 | 4,950,000 | |||||||
| Bank of Montreal | 0.15% | 1/3/2022 | 1,327,630 | ||||||
|
|
|
| $ | 12,707,001 | |||||
Series P (High Yield Series) | Barclays Bank plc | (2.00%)* | Open Maturity | $ | 271,094 | |||||
* | The rate is adjusted periodically by the counterparty, subject to approval by the Adviser, and is not based upon a set reference rate and spread. Rate indicated is the rate effective as of December 31, 2021. |
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NOTES TO FINANCIAL STATEMENTS (continued) |
The following is a summary of the remaining contractual maturities of the reverse repurchase agreements outstanding as of period-end, aggregated by asset class of the related collateral pledged by the Fund:
Fund | Asset Type | Up to 30 days | Overnight and | Total | ||||||||||||
Series E (Total Return Bond Series) | U.S. Government Securities | $ | 12,707,001 | $ | — | $ | 12,707,001 | |||||||||
Gross amount of recognized liabilities for reverse repurchase agreements |
| $ | 12,707,001 | $ | — | $ | 12,707,001 | |||||||||
Series P (High Yield Series) | Corporate Bonds | $ | — | $ | 271,094 | $ | 271,094 | |||||||||
Gross amount of recognized liabilities for reverse repurchase agreements |
| $ | — | $ | 271,094 | $ | 271,094 | |||||||||
Note 12 – Legal Proceedings
Tribune Company
SBL Fund has been named as a defendant and a putative member of the proposed defendant class of shareholders in the case entitled Kirschner v. FitzSimons, No. 12-2652 (S.D.N.Y.) (formerly Official Committee of Unsecured Creditors of Tribune Co. v. FitzSimons, Adv. Pro. No. 10-54010 (Bankr. D. Del.)) (the “FitzSimons action”), as a result of ownership by certain series of the SBL Fund of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. In his complaint, the plaintiff has alleged that, in connection with the LBO, Tribune insiders and shareholders were overpaid for their Tribune stock using financing that the insiders knew would, and ultimately did, leave Tribune insolvent. The plaintiff has asserted claims against certain insiders, major shareholders, professional advisers, and others involved in the LBO. The plaintiff is also attempting to obtain from former Tribune shareholders, including the SBL Fund, the proceeds they received in connection with the LBO.
In June 2011, a group of Tribune creditors filed multiple actions against former Tribune shareholders involving state law constructive fraudulent conveyance claims arising out of the 2007 LBO (the “SLCFC actions”). SBL Fund has been named as a defendant in two of the SLCFC actions: Deutsche Bank Trust Co. Americas v. Ohlson Enter., No. 12-0064 (S.D.N.Y.) and Deutsche Bank Trust Co. Americas v. Cantor Fitzgerald & Co., No. 11-4900 (S.D.N.Y.). In those actions, the creditors seek to recover from Tribune’s former shareholders the proceeds received in connection with the 2007 LBO.
The FitzSimons action and the SLCFC actions have been consolidated with the majority of the other Tribune LBO-related lawsuits in a multidistrict litigation proceeding captioned In re Tribune Company Fraudulent Conveyance Litig., No. 11-md-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the SLCFC actions, on the basis that the creditors lacked standing. On September 30, 2013, the creditors filed a notice of appeal of the September 23 order. On October 28, 2013, the defendants filed a joint notice of cross-appeal of that same order. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal of the SLCFC actions. The appeals court affirmed the district court’s dismissal of those lawsuits, but on different grounds than the district court. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. On April 12, 2016, the Plaintiffs in the SLCFC actions filed a petition seeking rehearing en banc before the appeals court. On July 22, 2016, the appeals court denied the petition. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision that the safe harbor of Section 546(e) applied to their claims. The shareholder defendants, including the Funds, filed a joint brief in opposition to the petition for certiorari on October 24, 2016. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed a response to plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the Second Circuit issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The Second Circuit denied the petition on February 6, 2020. On July 6, 2020,
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NOTES TO FINANCIAL STATEMENTS (continued) |
plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include SBL Fund. Defendants filed an opposition to the petition for certiorari on August 26, 2020, and plaintiffs filed a reply in support of the petition for certiorari on September 8, 2020. The Court denied the petition for certiorari on April 19, 2021.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss the intentional fraudulent conveyance claim in the FitzSimons action. The Court concluded that the plaintiff had failed to allege that Tribune entered the LBO with actual intent to hinder, delay, or defraud its creditors, and therefore the complaint failed to state a claim. In dismissing the intentional fraudulent conveyance claim, the Court denied the plaintiff’s request to amend the complaint. The plaintiff requested that the Court direct entry of a final judgment in order to make the order immediately appealable. On February 23, 2017, the Court issued an order stating that it intended to permit an interlocutory appeal of the dismissal order, but would wait to do so until it has resolved outstanding motions to dismiss filed by other defendants.
On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The shareholder defendants opposed that request. On August 24, 2017, the Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, the plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management Group LP v. FTI Consulting, Inc. The shareholder defendants opposed that request. On June 18, 2018 the District Court ordered that the request would be stayed pending further action by the Second Circuit in the SLCFC actions.
On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would not lift the stay prior to further action from the Second Circuit in the SLCFC actions. The court further stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation, to commence on January 28, 2019. The mediation did not result in a settlement of the claims against the shareholder defendants.
On April 4, 2019, plaintiff filed a motion to amend the Fifth Amended Complaint to assert a federal constructive fraudulent transfer claim against certain shareholder defendants. On April 10, 2019, the shareholder defendants filed a brief in opposition to plaintiff’s motion to amend. On April 12, 2019, the plaintiff filed a reply brief. On April 23, 2019, the court denied the plaintiff’s motion to amend. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, the Plaintiff filed a notice of appeal with respect to the dismissal of his claims and the District Court’s denial of his motion for leave to amend. Plaintiff filed an appellate brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff filed a reply brief on May 18, 2020. The Court held oral argument on August 24, 2020. On August 20, 2021, the Second Circuit affirmed the District Court’s orders: (1) dismissing the intentional fraudulent conveyance claims against the shareholder-defendants; and (2) denying the plaintiff leave to amend the complaint to add a constructive fraudulent conveyance claim against the shareholder-defendants. Plaintiff filed a petition for rehearing en banc on September 3, 2021. On October 7, 2021, the Second Circuit denied the petition. On January 5, 2022, Plaintiff filed a petition for certiorari in the U.S. Supreme Court. That petition was denied on February 22, 2022.
None of these lawsuits alleges any wrongdoing on the part of Guggenheim Variable Funds Trust f/k/a SBL Fund. The following series of Guggenheim Variable Funds Trust held shares of Tribune and tendered these shares as part of Tribune’s LBO: Series A (StylePlus–Large Core Series) f/k/a Series H (Enhanced Index Series), Series N (Managed Asset Allocation Series) and Series O (All Cap Value Series) (the “Funds”). The value of the proceeds received by the foregoing Funds was $158,950, $51,000 and $3,774,000, respectively. At this stage of the proceedings, Guggenheim Variable Funds Trust is not able to make a reliable predication as to the outcome of these lawsuits or the effect, if any, on a Fund’s net asset value.
Note 13 – COVID-19
The outbreak of COVID-19 and the recovery response causes at times disruption to consumer demand, economic output, and supply chains. There are still travel restrictions, quarantines, and disparate global vaccine distributions. As with other serious economic disruptions, governmental authorities and regulators have responded to this situation with significant fiscal and monetary policy changes. These include
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NOTES TO FINANCIAL STATEMENTS (concluded) |
providing direct capital infusions into companies, introducing new monetary programs, and considerably lowering interest rates. In some cases, these responses resulted in negative interest rates and higher inflation. Recently, the U.S. and other governments have also made investments and engaged in infrastructure modernization projects that have also increased public debt and spending. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets, reduce market liquidity, continue to cause higher inflation, heighten investor uncertainty, and adversely affect the value of the Funds’ investments and the performance of the Funds. These actions also contribute to a risk that asset prices have a higher degree of correlation than historically seen across markets and asset classes. The duration and extent of COVID-19 over the long term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
Note 14 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 199 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders and the Board of Trustees of Guggenheim Variable Funds Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Guggenheim Variable Funds Trust (the “Trust”) (comprising Series A (Style Plus—Large Core Series), Series B (Large Cap Value Series), Series D (World Equity Income Series), Series E (Total Return Bond Series), Series F (Floating Rate Strategies Series), Series J (Style Plus—Mid Growth Series), Series N (Managed Asset Allocation Series), Series O (All Cap Value Series), Series P (High Yield Series), Series Q (Small Cap Value Series), Series V (SMid Cap Value Series), Series X (Style Plus—Small Growth Series), Series Y (Style Plus—Large Growth Series) and Series Z (Alpha Opportunity Series) (collectively referred to as the “Funds”)), including the schedules of investments, as of December 31, 2021, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising Guggenheim Variable Funds Trust at December 31, 2021, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021, by correspondence with the custodian, transfer agent, paying agents, and brokers or by other appropriate auditing procedures where replies from paying agents or brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
February 28, 2022
200 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited) |
Federal Income 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.
In January 2022, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2021.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending December 31, 2021, the following Funds had the corresponding percentages qualify for the dividends received deduction for corporations.
Fund | Dividend | |||
Series A (StylePlus—Large Core Series) | 2.56 | % | ||
Series B (Large Cap Value Series) | 100.00 | % | ||
Series D (World Equity Income Series) | 78.76 | % | ||
Series E (Total Return Bond Series) | 0.13 | % | ||
Series J (StylePlus—Mid Growth Series) | 0.85 | % | ||
| Series N (Managed Asset Allocation Series) | 18.21 | % | ||
Series O (All Cap Value Series) | 100.00 | % | ||
Series P (High Yield Series) | 0.35 | % | ||
Series Q (Small Cap Value Series) | 100.00 | % | ||
Series V (SMid Cap Value Series) | 100.00 | % | ||
Series X (StylePlus—Small Growth Series) | 2.34 | % | ||
Series Y (StylePlus—Large Growth Series) | 0.85 | % | ||
Series Z (Alpha Opportunity Series) | 100.00 | % | ||
With respect to the taxable year ended December 31, 2021, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Series A (StylePlus—Large Core Series) | $ | — | $ | 4,564,688 | ||||
Series B (Large Cap Value Series) | 12,501 | 1,615,452 | ||||||
Series D (World Equity Income Series) | — | 2,190,719 | ||||||
Series E (Total Return Bond Series) | 2,465,765 | 1,413,793 | ||||||
Series J (StylePlus—Mid Growth Series) | 1,704 | 4,140,317 | ||||||
Series N (Managed Asset Allocation Series) | 2,575,357 | 388,759 | ||||||
Series O (All Cap Value Series) | 523,822 | 1,069,989 | ||||||
Series Q (Small Cap Value Series) | — | 223,788 | ||||||
Series V (SMid Cap Value Series) | — | 1,648,690 | ||||||
Series X (StylePlus—Small Growth Series) | — | 766,278 | ||||||
Series Y (StylePlus—Large Growth Series) | — | 1,059,766 | ||||||
Delivery of Shareholder Reports
Paper copies of the Funds’ annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from the insurance company that offers your contract or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website address to access the report. You may elect to receive paper copies of all future shareholder reports free of charge. You can inform the insurance company that you wish to receive paper copies of reports by following the instructions provided by the insurance company. Your election to receive reports in paper may apply to all portfolio companies available under your contract.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 201 |
OTHER INFORMATION (Unaudited)(concluded) |
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 https://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 https://www.sec.gov.
Sector Classification
Information in the “Schedule of Investments” is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. Each Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Funds usually classify sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
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 as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Funds’ Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
202 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge, upon request, by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2014 (Trustee)
Since 2020 (Chair of the Valuation Oversight Committee) | Current: Private Investor (2001-present). | 156 | Current: Advent Convertible and Income Fund (2005-present); Purpose Investments Funds (2013-present). |
Angela Brock-Kyle (1959) | Trustee | Since 2019 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). | 155 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present); Director, GDX Index Partners, LLC (2021-present). | 155 | Current: US Global Investors, Inc. (GROW) (1995-present). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 203 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - continued | |||||
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2014 | Current: Of Counsel, Momkus LLP (2016-present). | 156 | Current: Advent Convertible and Income Fund (2005-present); PPM Funds (2) (2018-present); NorthShore-Edward-Elmhurst Health (2012-present). |
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Audit Committee) | Current: Retired. | 155 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present).
Former: Guggenheim Enhanced Equity Income Fund (2019-2021); Guggenheim Credit Allocation Fund (2019-2021); SSGA Master Trust (1) (2018-2020). |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2014 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). | 155 | Former: Guggenheim Enhanced Equity Income Fund (2005-2021); Guggenheim Credit Allocation Fund (2013-2021); Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 205 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee)
Since 2014 (Chief Legal Officer)
Since 2007 (Vice President) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). | 155 | Former: Guggenheim Enhanced Equity Income Fund (2018-2021); Guggenheim Credit Allocation Fund (2018-2021). |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Energy & Income Fund, Guggenheim Active Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Fund under the 1940 Act by reason of her position with the Fund’s Investment Manager and/or the parent of the Investment Manager. |
206 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2018 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). |
James M. Howley (1972) | Assistant Treasurer | Since 2014 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). |
Mark E. Mathiasen (1978) | Secretary | Since 2014 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2014 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance Officer | Since 2012 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC
Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018) |
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INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2014 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). |
Bryan Stone (1979) | Vice President | Since 2014 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2014 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Director, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
208 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
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GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its 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. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
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 as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
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How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We 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 e-mail 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 and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
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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 it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Sandra G. Sponem. Ms. Sponem is “independent,” meaning that she is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and she does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in her capacity as a Board or committee member).
(Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as amended, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.)
| Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees. The aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2021 and December 31, 2020 were $335,517, and $335,517, respectively.
(b) Audit-Related Fees. The aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services 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 for the fiscal years ended December 31, 2021 and December 31, 2020 were $0 and $0, respectively.
The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the registrant’s investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant (“Service Affiliates”) which required pre-approval by the Audit Committee which related to the review of the transfer agent function for the fiscal years ended December 31, 2021 and December 31, 2020 were $0 and $0, respectively.
(c) Tax Fees. The aggregate Tax Fees billed by the registrant’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning, including preparation of tax returns and distribution assistance, for the fiscal years ended December 31, 2021 and December 31, 2020 were $86,828, and $86,584, respectively. 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].
(d) All Other Fees. The aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item, for the fiscal years ended December 31, 2021 and December 31, 2020 were $0 and $0, respectively.
(e) Audit Committee Pre-Approval Policies and Procedures.
(1) Audit Committee pre-approval policies and procedures:
To fulfill its responsibilities and duties the Audit Committee (the “Committee”) shall:
| 1. | Pre-Approval Policy (Trusts). Pre-approve any engagement of the independent auditors to provide any services, other than “prohibited non-audit services,” to the Trust, including the fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X). |
| (a) | The categories of services to be reviewed and considered for pre-approval include those services set forth under Section II.A.1. of the Background and Definitions for Audit Committee Charter (collectively, “Identified Services”). |
| (b) | The Committee has pre-approved Identified Services for which the estimated fees are less than $25,000. |
| (c) | For Identified Services with estimated fees of $25,000 or more, but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such Identified Services on behalf of the Committee. |
| (d) | For Identified Services with estimated fees of $50,000 or more, such Identified Services require pre-approval by the Committee. |
| (e) | All requests for Identified Services to be provided by the independent auditor that were pre-approved by the Committee shall be submitted to the Principal/Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form. The Trust’s CAO will determine whether such services are included within the list of services that have received the general pre-approval of the Committee. |
| (f) | The independent auditors or the CAO of the Trust (or an officer of the Trust who reports to the CAO) shall report to the Committee at each of its regular scheduled meetings all audit, audit-related and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan, as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under which pre-approval was obtained). |
| 2. | Pre-Approval Policy (Adviser or Any Control Affiliate). Pre-approve any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust), if the engagement relates directly to the operations or financial reporting of the Trust (unless an exception is available under Rule 2-01 of Regulation S-X). |
| (a) | The Chair or any member of the Committee designated by the Chair may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are less than $25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting. |
| (b) | For non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee. |
| a. | Pre-Approval Requirements |
| i. | Categories of Services to be Reviewed and Considered for Pre-Approval |
| 1. | Audit Services |
| a. | Annual financial statement audits |
| b. | Seed audits (related to new product filings, as required) |
| c. | SEC and regulatory filings and consents |
| 2. | Audit-Related Services |
| a. | Accounting consultations |
| b. | Fund merger/reorganization support services |
| c. | Other accounting related matters |
| d. | Agreed upon procedures reports |
| e. | Attestation reports |
| f. | Other internal control reports |
| 3. | Tax Services |
| a. | Recurring tax services: |
| i. | Preparation of Federal and state income tax returns, including extensions |
| ii. | Preparation of calculations of taxable income, including fiscal year tax designations |
| iii. | Preparation of annual Federal excise tax returns (if applicable) |
| iv. | Preparation of calendar year excise distribution calculations |
| v. | Calculation of tax equalization on an as-needed basis |
| vi. | Preparation of monthly/quarterly estimates of tax undistributed position for closed-end funds |
| vii. | Preparation of the estimated excise distribution calculations on an as-needed basis |
| viii. | Preparation of calendar year shareholder reporting designations on Form 1099 |
| ix. | Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis |
| x. | Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing purposes |
| xi. | Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes |
| b. | Permissible non-recurring tax services upon request: |
| i. | Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards |
| ii. | Assistance with corporate actions and tax treatment of complex securities and structured products |
| iii. | Assistance with IRS ruling requests and calculation of deficiency dividends |
| iv. | Conduct training sessions for the Adviser’s internal tax resources |
| v. | Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions |
| vi. | Tax services related to amendments to Federal, state and local returns and sales and use tax compliance |
| vii. | RIC qualification reviews |
| viii. | Tax distribution analysis and planning |
| ix. | Tax authority examination services |
| x. | Tax appeals support services |
| xi. | Tax accounting methods studies |
| xii. | Fund merger, reorganization and liquidation support services |
| xiii. | Tax compliance, planning and advice services and related projects |
| xiv. | Assistance with out of state residency status |
| xv. | Provision of tax compliance services in India for Funds with direct investments in India |
(2) None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Non-Audit Fees. The aggregate non-audit fees billed by the registrant’s accountant for the most recent fiscal year and the preceding fiscal year for services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant were $86,828, and $86,584, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant.
(h) 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 sub 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 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. |
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-end Management Investment Companies |
Not applicable
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
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 (as defined in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days of this filing and have concluded that based on such evaluation as required by Rule 30a-3(b) under the Investment Company Act, 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 within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(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 period 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. | Disclosure of Securities Lending Activities for Closed End Management Investment Companies. |
Not Applicable
| Item 13. | Exhibits. |
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR 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 Variable Funds Trust | |
| By (Signature and Title)* | /s/ Brian Binder | |
| Brian Binder, President and Chief Executive Officer | ||
| Date | March 10, 2022 |
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/ Brian Binder | |
Brian Binder, President and Chief Executive Officer | ||
| Date | March 10, 2022 | |
| By (Signature and Title)* | /s/ John L. Sullivan | |
| John L. Sullivan, Chief Financial Officer, Chief Accounting Officer and Treasurer | ||
| Date | March 10, 2022 |
| * | Print the name and title of each signing officer under his or her signature. |