UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03364
EMPOWER FUNDS, INC.
(Exact name of registrant as specified in charter)
8515 E. Orchard Road, Greenwood Village, Colorado 80111
(Address of principal executive offices)
(Address of principal executive offices)
Jonathan Kreider
President and Chief Executive Officer
Empower Funds, Inc.
Empower Funds, Inc.
8515 E. Orchard Road
Greenwood Village, Colorado 80111
(Name and address of agent for service)
Registrant's telephone number, including area code: (866) 831-7129
Date of fiscal year end: December 31
Date of reporting period: December 31, 2022
Item 1. REPORTS TO STOCKHOLDERS
EMPOWER FUNDS, INC.
Empower Global Bond Fund (Formerly Great-West Global Bond Fund)
(Institutional Class and Investor Class)
(Institutional Class and Investor Class)
Annual Report
December 31, 2022
This report and the financial statements attached are submitted for general information and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein is to be considered an offer of the sale of shares of the Fund. Such offering is made only by the prospectus of the Fund, which includes details as to offering price and other information.
Management Discussion
The Fund’s sub-advisers are BlueBay Asset Management LLP (“BlueBay”) and Insight North America LLC (“Insight”)
Fund Performance
For the twelve-month period ended December 31, 2022, the Fund (Investor Class shares) returned -14.65%, relative to a -16.25% return for the Bloomberg Global Aggregate Index, the Fund’s benchmark index.
BlueBay Commentary
For a long time, most investors and central banks viewed inflationary pressures as transitory. However, the first quarter began to see a shift in this narrative, with an acceptance that inflation was becoming more persistent and structural in nature. Solid demand and the events that unfolded in Ukraine - combined with supply disruptions from China and other parts of Asia that were fighting to maintain a ‘zero-Covid’ policy - continued to cause bottlenecks in supply chains and put upward pressure on inflation.
The turmoil in markets made for the worst year for risk assets in decades as inflation continued to rise, manifesting in more aggressive rate hikes being priced in by the markets. By mid-June, the markets in Europe were pricing in over 200 basis points (“bps”) of hikes to the end of the year. Although yields did fall back sharply from this point to the end of July, investor sentiment in the eurozone deteriorated further following Russia’s action to restrict gas supplies to Europe, fueling the recession narrative. It wasn’t long before the relentless move higher in gas prices caused markets to refocus on the inflation dynamics as investors moved once again to price in an increasingly aggressive response from the European Central Bank (“ECB”) to contain inflation.
Initially, the ECB was slow to react, preferring to keep to its pre-set sequencing of events. However, in July, both the ECB and the Federal Reserve (the “Fed”) ended forward guidance, becoming data-dependent, meeting by meeting, given the challenges faced. Having resisted any hike in rates until July, the ECB surprised with a 0.50% rate hike, after telling the market to expect 0.25% in June. It followed this up with two 75 bps hikes, in September and November, before a 50 bps hike in December, taking the ECB deposit rate to 2%.
In quarter four, we finally saw a peaking of U.S. inflation, with benign prints in November and December, allowing the Fed to move back to a 50 bps hike in December. This followed four consecutive hikes of 75 bps that started in June. However, hawkish revisions to the inflation and growth forecasts showed that most Fed officials still see rates above 5% at the end of 2023, in contrast to the market pricing a cut in quarter four next year. Key concerns for the Fed are the tightness of the U.S. labor market and the second-round effects on inflation caused by higher wage demands.
In other events, Giorgia Meloni’s Brothers of Italy party led a coalition to victory in September’s Italian election, replacing Mario Draghi’s technocratic government. This caused some anxiety in markets at the time, but since taking office, she has kept to the script and calmed markets. Nevertheless, the Italian economy remains fundamentally weak, and it is noticeable that as rate hikes feed into higher bond yields, there is a risk of triggering new concerns with respect to debt sustainability in Italian government bonds.
We had the political debacle in the U.K. in September, followed by a complete reshuffle of government and a rethinking of fiscal policy. By November, the U.K. had gone from a point of fiscal profligacy to one of austerity, causing huge financial stress in the U.K. pension industry in the meantime.
The Bank of Japan (“BoJ”) provided the surprise in December by raising its yield curve ceiling on asset purchases from 0.25% to 0.50%. This tweak to yield curve control is significant as we believe it heralds the beginning of a shift away from ultra-accommodative monetary policy. The curse of deflation seems to have been defeated, with inflation now comfortably above the BoJ’s 2% policy target.
As for markets, core rates saw significant weakness, rising 237 bps to 3.88% in 10-year U.S. Treasuries and 274 bps to 2.56% in the German Bund equivalent, with curves bear-flattening. European sovereign credit spreads were wider by 25 bps to 62 bps over the year, having hit a peak of 77 bps, before the ECB’s implementation of an anti-fragmentation tool mid-year helped to cap spreads. In emerging markets, the investment grade sovereigns to which we have been exposed – Mexico and Romania – saw aggressive spread widening in the first half of the year, particularly on the news of Russia’s invasion of Ukraine. Spreads recovered in the second half, leaving Mexican spreads tighter over the year. Romania did perform better in quarter four but remains significantly wider than at the start of the year. However, it is still a solid conviction for the coming year. Global corporate spreads were 50 bps wider at 147 bps, having reached a wide at 187 bps in mid-October, with Europe leading the weakness due to recession fears.
Most of the portfolio activity in 2022 centered around opportunities in the rates space, with a bias to be short duration for most of the year. From the start, we held a large short position in U.S. duration. We scaled this back during the first half of the year. We went short again in July and early August, as 10-year U.S. Treasury yields fell back to towards 2.60%, before closing in September and moving long as yields approached 4%. However, another high inflation print led us to close the position in October. In December, we once again implemented a short position in 10-year U.S. Treasuries, with yields down at 3.60%. We believe that a solid labor market and sticky service inflation mean we are unlikely to see the Fed cut rates in 2023.
We came into the year with a relative-value (“RV”) position long European duration versus short the U.K. We were expecting that U.K. rates would need to rise faster than the euro area, given the poor inflation dynamics in the U.K. This didn’t work particularly well, as the Bank of England was slow to raise rates aggressively. We closed the position in July. Throughout this period, we did hold some outright long positions in European duration (February, April and June). More recently, we held an RV in the U.K. market itself – long front-end swaps versus short 10-year Gilts. We closed the 10-year leg in early October and the swap late in the month. It had benefited from the change in prime minister and tighter fiscal policy.
Since March, the BlueBay sub-advised portion of the Fund (the “BlueBay portfolio”) has held a short position in Japan (-1-year duration), as we expected the BoJ to relax yield curve control, which it duly did in December. Before that, we had sold a third in September but increased to the original size in early December due to growing confidence in the view. We expect further normalization of rates in 2023 and are happy to hold the position. In the later stages of the year, we became a little more confident in emerging market local markets, with inflation rolling over and a clearer picture developing of a peak in U.S. rates just north of 5%.
Activity in sovereign credit spreads has been fairly quiet over the year. We were underweight early in the year, both in the semi-core markets and the periphery, as the ECB turned more hawkish, expecting
spreads to widen. Since then, positioning has been close to benchmark weight, although the composition has been to be underweight semi-core markets, neutral the periphery and long hard-currency bonds of Romania and Mexico in euros, where valuations look cheap in comparison.
In corporate credit, we started the year on a constructive note, but Russia’s aggression towards Ukraine led us to hedge the cash bonds through buying protection in credit default swaps (“CDS”) indices in February and March. We scaled the hedge back in subsequent months. We’ve used this type of approach throughout the year in periods of risk-off sentiment. Overall, on a pure spread-duration basis, the BlueBay portfolio has been modestly underweight virtually all year. However, on a beta-adjusted basis, given our preference for subordinated financials and corporate hybrids, the BlueBay portfolio has been overweight, but fluctuated due to the use of CDS indices. In pure cash bonds, over the course of the year, we have scaled back risk to both financials and non-financials. We’ve used the recent tightening in spreads to reduce risk and will look for an increase in supply and a deterioration in the economic environment to hopefully re-engage at better levels.
In foreign exchange (“FX”), we’ve generally been long the U.S. dollar and short sterling and Eastern European currencies, where inflation and the proximity to Ukraine have led to higher inflation. One exception is a recent long position in the Hungarian forint, where monetary policy has been tightened aggressively. We also maintain a position in the Norwegian krone as Norway has a solid current-account surplus. More recently, we’ve added positions in the Thai baht, a Chinese reopening story, and Brazil, with inflation rolling over.
The excess return for the BlueBay portfolio was positive compared to the benchmark index. Unsurprisingly, term structure delivered +206 bps, led by underweight positions in the U.S., which accounted for 155 bps of the excess. The U.K./Bund (RV) detracted value, although when combined with the U.K. RV position, the alpha was broadly flat. The Japanese underweight accounted for +36 bps, EMs like South Africa (+19 bps), Brazil (+13 bps) and Mexico (+11 bps) added, and an earlier short in Sweden added +15 bps. The main detractors otherwise were China (-35 bps) and Canada (-16 bps). Sovereign beta detracted -17 bps, while alpha delivered +15 bps, with longs in Mexico and supranationals and shorts in the periphery, partially offset by weakness in Tunisia, China and an underweight in France. Corporate credit detracted -73 bps, led by cyclicals (-45 bps) and financials (-43 bps). On the positive side, CDS index hedges added +65 bps. Single-name detractors were led by Samhallsbyggnadsbolaget i Norden and Rakuten. FX delivered a positive +62 bps, most of which was down to the long U.S. dollar, with smaller gains from the long Hungarian forint and Japanese yen positioning.
Insight Commentary
2022 was a tumultuous year for government bond markets for many reasons. Inflation rose sharply, as underlying pressures were stoked by the effects of the Russian invasion of Ukraine and the war that remains ongoing. Most major central banks raised interest rates, sharply in many cases, in a bid to choke those inflationary impulses. Consequently, government bond yields rose significantly in many cases. Ten-year U.S. Treasury yields started 2022 at 1.51% and rose steadily in the first half. Then they eased in the summer before rising again from August to October. After a brief market rally, yields rose once more into the year-end, closing at 3.87%, 236 bps higher. European governments were also weak with yields following a similar pattern to U.S. Treasuries. The yield on 10-year German government bonds began 2022 at less than zero before the steady increase in yields took hold, and ended the year at 2.57%, 275 bps above where they began. U.K. gilts at 10-year maturities rose by a similar amount, starting the year below 1% and rising 270 bps to 3.67%. However, they experienced even greater
volatility during the year, punctuated in September by the aborted fiscal easing plans announced by then-Chancellor Kwasi Kwarteng, during the brief administration of Prime Minister Liz Truss. Ten-year gilt yields briefly reached almost 4.5% before the proposals were recalled by Kwarteng’s replacement, Jeremy Hunt. Japanese government bonds (“JGB”) may be considered a sea of stability by comparison. Beginning the year close to the target level set by the BoJ, 10-year JGB yields rose to the top of the permitted target deviation of 0.25% either side of the 0% target and remained there for much of the remainder of the year. In December, under market pressure as inflation reached a 30-year high, the BoJ extended the band to permit greater deviation of ±0.5%, a move which saw the 10-year JGB yield rise to 0.42% by year end.
Risk assets also experienced a volatile year, with credit markets and many major equity indices generating substantially negative returns. U.S., Pan-European and Sterling investment grade credit markets all saw spread levels widen over the period, compounding the negative returns arising from weaker underlying government bonds. Despite credit spreads narrowing generally in the fourth quarter, the Bloomberg U.S. Aggregate Corporate Index spread expanded by 38 bps over the year, while the Bloomberg Euro Aggregate Corporate Index and the Bloomberg Sterling Aggregate Corporate Index were 78 bps and 80 bps wider respectively. High yield markets were also weaker as riskier assets typically suffered more extensive setbacks. The Bloomberg U.S. Aggregate High Yield Index widened by 186 bps over the period. The emerging markets also struggled during the year, as the yield of the JP Morgan Emerging Markets Index increased 114 bps to 6.86%.
Equity markets were mostly weaker as interest rates rose substantially and the economic outlook deteriorated. One notable exception was the FTSE 100 Index in the U.K., which gained 0.9%. The U.S. S&P 500® Index ended the year 19.4% lower, at 3840, more than 900 points below where it ended 2021. The Eurostoxx 50 Index declined by 11.7%, while Japan’s Nikkei 225 Index was 9.4% lower. Commodity prices were volatile, with oil, gas and wheat prices experiencing substantial swings in advance of and in the wake of the Russian invasion of Ukraine. However, the oil price ended 2022 close to where it began around $80/barrel having been driven above $120/barrel in March and again in May/June. However, the broad Commodity Research Bureau’s Commodity Index was lower by 4.1%% over the year.
In U.S. credit, the Bloomberg U.S. Investment Grade Credit Index had an excess return of -129 bps. At sector level, metals and mining generated positive excess returns as did most of the energy subsectors, with the exception being the midstream companies which dragged the sector overall into negative excess returns. Food and beverage, railroads and pharmaceuticals held up best, while cable satellite, media entertainment and real estate investment trusts (“REITs”) were notable laggards, along with chemicals and building materials. In euro credit markets, the Bloomberg Euro Aggregate Investment Grade Corporate Index generated a negative excess return of -154 bps over the year despite a stronger final quarter. The poorest performing sectors included financials, notably REITs and insurers and financial companies. Other sectors were also weak, such as natural gas, metals and mining and transportation. Those sectors that held up best included aerospace and defense, lodgings, restaurants, retailers, food and beverage companies and also energy and pharmaceuticals. In the sterling credit market, the Investment Grade Bloomberg Sterling Aggregate Corporate Index had an excess return of -241 bps over the year. REITs were similarly a significant drag, as were finance companies, building materials issuers, railroads and other industrials. Those that were less negative included the basic industries sector, particularly chemicals, and similar to the euro market, retailers, restaurants, food and beverage, pharmaceuticals and energy sectors.
With a rapid acceleration in global inflation and aggressive monetary policy tightening, 2022 was marked by large negative total returns from almost all fixed income assets. Developed market risk-free
rates were under steady upward pressure and, until the final months of year-end, spreads pushed steadily wider. Broadly speaking, the period’s alpha was driven by active positioning in developed market rates. More specifically, the portion of the Fund sub-advised by Insight (“Insight portfolio”) benefitted significantly from large underweights in the front end of the U.S., European and U.K. yield curves as risk-free rates rose and curves flattened. 10-year U.S. rates rose from 1.51% to 3.87% over the period and the Insight portfolio was able to capture the majority of this move. The bulk of the alpha generated from active rates positioning accrued in the first, second and fourth quarters with the underweight to U.K. rates performing notably well in August and September. While underweight most markets, the Insight portfolio captured a small amount of alpha through overweights in the Australian, Chinese and Korean local bond markets. The Insight portfolio also benefitted from a modest allocation to inflation-linked bonds with break-evens rising in tandem with realized inflation. Active positioning in credit markets had a modestly positive impact on relative returns with strong security selection complementing effective management of aggregate credit beta. The Insight portfolio took advantage of the material underperformance of Eurodollar denominated credit in the middle half of the year to establish a large overweight in this asset class. To keep aggregate credit risk roughly neutral, this overweight was paired with an offsetting underweight in U.S. dollar denominated credit risk. This position generated a large amount of alpha as the relationship between U.S. dollar and Eurodollar credit began to normalize in the fourth quarter. The Insight portfolio took advantage of the third quarter underperformance of risk assets to establish a modest overweight in credit risk. This position yielded significant excess returns in the fourth quarter as the macro-economic outlook improved and risk assets rallied. The Insight portfolio took only limited active FX risk but was able to capture a small amount of alpha as the dollar rallied and the value of the yen, pound and euro collapsed. Over the period in question the portfolio management team made extensive use of derivatives to tactically manage the risk profile of the Insight portfolio. Duration risk was managed primarily through the use of interest rate futures while aggregate exposure to corporate credit was modified through the use of index derivatives. The FX profile of the Insight portfolio was managed primarily through the use of FX forwards. At times the Insight portfolio both bought and sold listed and over-the-counter options. Performance benefitted significantly from the use of derivatives in 2022.
The views and opinions in this report were current as of December 31, 2022 and are subject to change at any time. They are not guarantees of performance or investment results and should not be taken as investment advice. Fund holdings are subject to change at any time. Fund returns are net of fees unless otherwise noted.
Growth of $10,000 (unaudited)
This graph compares the value of a hypothetical $10,000 investment in the Fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records) with the performance of the Fund’s benchmark index. Results include the reinvestment of all dividends and capital gains distributions. Past performance is no guarantee of future results. The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance does not include any fees or expenses of variable insurance contracts, individual retirement accounts (“IRA(s)”), qualified retirement plans or college savings programs. If such fees and expenses were included, returns would be lower.
Note: Performance for the Institutional Class shares may vary due to their differing fee structure. See returns table below.
Average Annual Total Returns for the Periods Ended December 31, 2022 (unaudited)
One Year | Five Year | Ten Year / Since Inception(a) | |
Institutional Class | -14.35% | -2.33% | -1.53% |
Investor Class | -14.65% | -2.68% | -1.22% |
(a) Institutional Class inception date was May 1, 2015. |
Results include the reinvestment of all dividends and capital gains distributions. Past performance is no guarantee of future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance does not include any fees or expenses of variable insurance contracts, IRAs, qualified retirement plans or college savings programs. If such fees and expenses were included, returns would be lower.
Summary of Investments by Country as of December 31, 2022 (unaudited)
Country | Percentage of Fund Investments |
United States | 44.71% |
Japan | 11.96 |
Mexico | 7.26 |
Germany | 4.11 |
France | 3.37 |
United Kingdom | 3.25 |
Canada | 2.53 |
Netherlands | 2.17 |
Romania | 2.16 |
Italy | 2.10 |
Spain | 1.70 |
Belgium | 1.61 |
South Africa | 1.56 |
Switzerland | 1.51 |
China | 1.39 |
Ireland | 1.26 |
Cayman Islands | 0.82 |
Egypt | 0.73 |
South Korea | 0.69 |
Togo | 0.65 |
Austria | 0.48 |
New Zealand | 0.45 |
Indonesia | 0.42 |
Luxembourg | 0.40 |
Iceland | 0.37 |
Australia | 0.30 |
Sweden | 0.29 |
Norway | 0.20 |
Malaysia | 0.18 |
Bermuda | 0.17 |
Brazil | 0.17 |
Philippines | 0.16 |
Finland | 0.16 |
Nigeria | 0.15 |
Singapore | 0.13 |
Thailand | 0.11 |
Poland | 0.10 |
Portugal | 0.10 |
Denmark | 0.06 |
Slovenia | 0.06 |
Total | 100.00% |
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2022 to December 31, 2022).
Actual Expenses
The first row of the table below provides information about actual account values and actual expenses. You may use the information in this row, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first row under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second row of the table below 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 you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second row of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value | Ending Account Value | Expenses Paid During Period* | |||
(07/01/22) | (12/31/22) | (07/01/22 – 12/31/22) | |||
Institutional Class | |||||
Actual | $1,000.00 | $ 999.20 | $3.28 | ||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.90 | $3.31 | ||
Investor Class | |||||
Actual | $1,000.00 | $ 997.60 | $5.04 | ||
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.20 | $5.09 |
* Expenses are equal to the Fund's annualized expense ratio of 0.65% for the Institutional Class shares and 1.00% for the Investor Class shares, multiplied by the average account value over the period, multiplied by 184/365 days to reflect the one-half year period. Performance does not include any fees or expenses of variable insurance contracts, IRAs, qualified retirement plans or college savings programs, if applicable. If such fees or expenses were included, returns would be lower. |
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
ASSET-BACKED SECURITIES | ||
Non-Agency — 2.21% | ||
140,308 | Americredit Automobile Receivables Trust Series 2022-1 Class A2 2.05%, 01/20/2026 | $ 138,648 |
289,844 | Carvana Auto Receivables Trust Series 2021-N2 Class C 1.07%, 03/10/2028 | 266,331 |
899,469 | CNH Capital Canada Receivables Trust(b) Series 2021-1A Class A2 CAD, 1.00%, 11/16/2026 | 634,194 |
289,773 | E-Carat 11 PLC(c) GBP, 3.96%, 05/18/2028 1-mo. SONIA + 0.58% | 349,866 |
800,000 | Exeter Automobile Receivables Trust Series 2021-2A Class C 0.98%, 06/15/2026 | 768,790 |
1,232,000 | Ford Auto Securitization Trust II Asset-Backed Notes(b) Series 2022-AA Class A3 CAD, 5.40%, 09/15/2028 | 913,245 |
116,049 | GMF Canada Leasing Trust(b) Series 2020-1A Class A3 CAD, 1.05%, 11/20/2025 | 85,550 |
421,162 | Invitation Homes Trust(b)(c) Series 2018-SFR4 Class A 5.44%, 01/17/2038 1-mo. LIBOR + 1.10% | 418,146 |
1,000,000 | MBarc Credit Canada Inc(b) Series 2021-AA Class A3 CAD, 0.93%, 02/17/2026 | 713,525 |
975,000 | OneMain Financial Issuance Trust(b) Series 2020-2A Class A 1.75%, 09/14/2035 | 851,731 |
462,781 | Oscar US Funding X LLC(b) Series 2019-10 Class A4 3.27%, 05/10/2026 | 456,937 |
336,344 | Purewest Funding LLC(b) Series 2021-1 Class A1 4.09%, 12/22/2036 | 318,889 |
410,522 | SpringCastle America Funding LLC(b) Series 2020-AA Class A 1.97%, 09/25/2037 | 370,199 |
300,000 | Tesla Auto Lease Trust(b) Series 2020-A Class B 1.18%, 01/22/2024 | 297,686 |
917,333 | Textainer Marine Containers VII Ltd(b) Series 2021-1A Class A 1.68%, 02/20/2046 | 770,496 |
Tricon American Homes Trust(b) | ||
Series 2017-SFR2 Class A | ||
1,337,552 | 2.93%, 01/17/2036 | 1,296,892 |
Series 2019-SFR1 Class A | ||
571,303 | 2.75%, 03/17/2038 | 523,402 |
Principal Amount(a) | Fair Value | |
Non-Agency — (continued) | ||
655,004 | Trinity Rail Leasing LLC(b) Series 2020-2A Class A1 1.83%, 11/19/2050 | $ 600,907 |
9,775,434 | ||
U.S. Government Agency — 0.18% | ||
293,264 | Federal Home Loan Mortgage Corp Structured Pass Through Certificates Series 2017-SR01 Class A3 3.09%, 11/25/2027 | 272,399 |
546,669 | Federal National Mortgage Association Grantor Trust Series 2017-T1 Class A 2.90%, 06/25/2027 | 509,881 |
782,280 | ||
TOTAL ASSET-BACKED SECURITIES — 2.39% (Cost $11,365,995) | $ 10,557,714 | |
CORPORATE BONDS AND NOTES | ||
Basic Materials — 0.55% | ||
225,000 | Braskem Idesa SAPI(b) 6.99%, 02/20/2032 | 160,609 |
Celanese US Holdings LLC | ||
470,000 | EUR, 4.78%, 07/19/2026 | 478,539 |
1,147,000 | EUR, 5.34%, 01/19/2029 | 1,161,402 |
173,000 | 6.38%, 07/15/2032 | 164,514 |
500,000 | Orano SA EUR, 2.75%, 03/08/2028 | 481,083 |
2,446,147 | ||
Communications — 2.51% | ||
AT&T Inc | ||
5,446,000 | 0.90%, 03/25/2024 | 5,171,628 |
370,000 | EUR, 0.25%, 03/04/2026 | 354,882 |
1,650,000 | EUR, 1.60%, 05/19/2028 | 1,566,952 |
270,000 | EUR, 3.55%, 12/17/2032 | 273,371 |
157,000 | EUR, 2.45%, 03/15/2035 | 136,106 |
1,100,000 | EUR, 2.60%, 05/19/2038 | 923,227 |
Charter Communications Operating LLC / Charter Communications Operating Capital | ||
683,000 | 4.80%, 03/01/2050 | 495,823 |
924,000 | 3.85%, 04/01/2061 | 534,405 |
1,957,000 | Rakuten Group Inc(d) EUR, 4.25%, Perpetual | 1,199,636 |
470,000 | T-Mobile USA Inc 5.20%, 01/15/2033 | 465,762 |
11,121,792 | ||
Consumer, Cyclical — 0.74% | ||
Ford Motor Co | ||
435,000 | 3.25%, 02/12/2032 | 326,225 |
864,000 | 6.10%, 08/19/2032 | 797,781 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
Consumer, Cyclical — (continued) | ||
436,000 | 4.75%, 01/15/2043 | $ 312,958 |
1,062,000 | Nissan Motor Co Ltd(b) 4.81%, 09/17/2030 | 901,289 |
Warnermedia Holdings Inc(b) | ||
347,000 | 5.05%, 03/15/2042 | 265,483 |
475,000 | 5.14%, 03/15/2052 | 345,309 |
430,000 | 5.39%, 03/15/2062 | 313,906 |
3,262,951 | ||
Consumer, Non-Cyclical — 1.70% | ||
1,056,000 | AbbVie Inc 2.95%, 11/21/2026 | 982,063 |
803,000 | Anheuser-Busch InBev SA EUR, 3.70%, 04/02/2040 | 792,118 |
ASTM SpA | ||
800,000 | EUR, 1.50%, 01/25/2030 | 660,590 |
600,000 | EUR, 2.38%, 11/25/2033 | 461,202 |
1,556,000 | Autostrade per l'Italia SpA EUR, 2.00%, 01/15/2030 | 1,316,619 |
825,000 | BAT International Finance PLC EUR, 2.25%, 01/16/2030 | 716,708 |
350,000 | British American Tobacco PLC(d) EUR, 3.00%, Perpetual | 290,099 |
475,000 | DH Europe Finance II SARL EUR, 0.20%, 03/18/2026 | 458,643 |
GE HealthCare Technologies Inc(b) | ||
520,000 | 5.91%, 11/22/2032(e) | 538,823 |
180,000 | 6.38%, 11/22/2052 | 191,180 |
540,000 | JBS USA LUX SA / JBS USA Food Co / JBS USA Finance Inc(b) 3.63%, 01/15/2032 | 437,400 |
Thermo Fisher Scientific Finance I BV | ||
150,000 | EUR, 1.63%, 10/18/2041 | 107,630 |
260,000 | EUR, 2.00%, 10/18/2051 | 174,705 |
646,000 | Viatris Inc 4.00%, 06/22/2050 | 398,025 |
7,525,805 | ||
Energy — 3.05% | ||
1,129,000 | Aker BP ASA(b) 3.10%, 07/15/2031 | 925,919 |
234,880,000 | Petroleos Mexicanos MXN, 7.19%, 09/12/2024 | 11,149,462 |
1,300,000 | Wintershall Dea Finance 2 BV(d) EUR, 3.00%, Perpetual | 1,010,315 |
Wintershall Dea Finance BV | ||
100,000 | EUR, 1.33%, 09/25/2028 | 86,584 |
400,000 | EUR, 1.82%, 09/25/2031 | 315,640 |
13,487,920 | ||
Financial — 11.77% | ||
ABN AMRO Bank NV | ||
1,100,000 | EUR, 0.50%, 09/23/2029 | 932,622 |
Principal Amount(a) | Fair Value | |
Financial — (continued) | ||
500,000 | EUR, 3.00%, 06/01/2032 | $ 484,451 |
Avolon Holdings Funding Ltd(b) | ||
2,599,000 | 4.25%, 04/15/2026 | 2,356,127 |
1,692,000 | 2.75%, 02/21/2028 | 1,358,225 |
1,200,000 | Banco de Sabadell SA(d) EUR, 5.75%, Perpetual | 1,114,334 |
Bank of America Corp | ||
300,000 | EUR, 0.69%, 03/22/2031 | 248,409 |
638,000 | EUR, 2.82%, 04/27/2033 | 596,584 |
880,000 | Berkshire Hathaway Finance Corp EUR, 1.50%, 03/18/2030 | 797,365 |
BNP Paribas SA | ||
990,000 | 7.75%, Perpetual(b)(d) | 977,625 |
1,300,000 | EUR, 0.88%, 07/11/2030 | 1,106,178 |
600,000 | EUR, 2.10%, 04/07/2032 | 530,784 |
400,000 | BPCE SA EUR, 0.25%, 01/14/2031 | 319,464 |
500,000 | Citigroup Inc 4.91%, 05/24/2033 | 468,217 |
1,200,000 | Commerzbank AG(d) EUR, 6.13%, Perpetual | 1,191,509 |
Credit Suisse Group AG | ||
700,000 | 9.75%, Perpetual(d) | 609,747 |
660,000 | EUR, 0.65%, 01/14/2028 | 526,827 |
1,923,000 | EUR, 2.88%, 04/02/2032 | 1,481,669 |
784,000 | 3.09%, 05/14/2032(b) | 541,702 |
830,000 | 9.02%, 11/15/2033(b) | 849,810 |
Deutsche Bank AG | ||
1,800,000 | EUR, 1.75%, 11/19/2030 | 1,512,371 |
300,000 | EUR, 5.63%, 05/19/2031 | 313,308 |
1,700,000 | 3.55%, 09/18/2031 | 1,362,870 |
325,000 | Digital Euro Finco LLC REIT EUR, 2.63%, 04/15/2024 | 337,347 |
1,225,000 | Hammerson Ireland Finance Designated Activity Co REIT EUR, 1.75%, 06/03/2027 | 1,015,935 |
800,000 | Ibercaja Banco SA EUR, 2.75%, 07/23/2030 | 745,030 |
ING Groep NV | ||
1,200,000 | EUR, 0.88%, 11/29/2030 | 1,010,117 |
500,000 | EUR, 1.75%, 02/16/2031 | 445,525 |
Intesa Sanpaolo SpA | ||
1,234,000 | EUR, 5.88%, Perpetual(d) | 1,060,681 |
1,568,000 | EUR, 7.75%, Perpetual(d) | 1,616,860 |
650,000 | 8.25%, 11/21/2033(b) | 659,419 |
JPMorgan Chase & Co | ||
2,610,000 | 3.85%, 06/14/2025 | 2,551,852 |
590,000 | EUR, 1.96%, 03/23/2030 | 550,834 |
1,070,000 | Kreditanstalt fuer Wiederaufbau EUR, 0.38%, 04/23/2030 | 947,321 |
2,013,000 | Morgan Stanley EUR, 5.15%, 01/25/2034 | 2,237,341 |
475,000 | MPT Operating Partnership LP / MPT Finance Corp REIT EUR, 0.99%, 10/15/2026 | 385,546 |
1,154,000 | Nasdaq Inc EUR, 0.90%, 07/30/2033 | 876,256 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
Financial — (continued) | ||
487,000 | National Australia Bank Ltd 3.93%, 08/02/2034 | $ 409,641 |
427,000 | Nationwide Building Society(d) GBP, 5.75%, Perpetual | 461,936 |
NatWest Group PLC(d) | ||
310,000 | 6.00%, Perpetual | 286,269 |
469,000 | 8.00%, Perpetual | 461,379 |
Raiffeisen Bank International AG | ||
100,000 | EUR, 0.05%, 09/01/2027 | 85,571 |
900,000 | EUR, 2.88%, 06/18/2032 | 781,899 |
300,000 | EUR, 7.38%, 12/20/2032 | 318,115 |
2,388,000 | Samhallsbyggnadsbolaget i Norden AB(d) EUR, 2.62%, Perpetual | 952,194 |
SBA Tower Trust REIT(b) | ||
600,000 | 2.84%, 01/15/2025 | 565,510 |
840,000 | 1.88%, 01/15/2026 | 738,762 |
1,773,000 | Simon International Finance SCA REIT EUR, 1.13%, 03/19/2033 | 1,367,973 |
250,000 | SLM Corp 4.20%, 10/29/2025 | 228,739 |
350,000 | Societe Generale SA(b)(d) 9.38%, Perpetual | 359,175 |
Spirit Realty LP REIT | ||
335,000 | 4.00%, 07/15/2029 | 290,745 |
565,000 | 3.20%, 02/15/2031 | 451,085 |
1,512,000 | Toronto-Dominion Bank EUR, 1.95%, 04/08/2030 | 1,396,114 |
UBS Group AG | ||
400,000 | 4.75%, 05/12/2028(b) | 382,790 |
1,051,000 | EUR, 0.88%, 11/03/2031 | 844,899 |
770,000 | 4.99%, 08/05/2033(b) | 712,775 |
1,482,000 | UniCredit SpA(d) EUR, 7.50%, Perpetual | 1,540,824 |
100,000 | Vonovia Finance BV EUR, 0.50%, 09/14/2029 | 78,447 |
Vonovia SE | ||
100,000 | EUR, 0.63%, 12/14/2029 | 78,590 |
1,200,000 | EUR, 2.38%, 03/25/2032 | 1,020,527 |
800,000 | EUR, 0.75%, 09/01/2032 | 567,300 |
703,000 | WEA Finance LLC / Westfield UK & Europe Finance PLC REIT(b) 4.75%, 09/17/2044 | 486,084 |
660,000 | WEA Finance LLC REIT(b) 2.88%, 01/15/2027 | 564,900 |
2,031,000 | Wells Fargo & Co EUR, 1.74%, 05/04/2030 | 1,840,894 |
792,000 | Westpac Banking Corp 4.11%, 07/24/2034 | 679,036 |
52,072,435 | ||
Industrial — 1.05% | ||
1,300,000 | Abertis Infraestructuras Finance BV(d) EUR, 3.25%, Perpetual | 1,174,493 |
1,920,000 | FedEx Corp EUR, 0.95%, 05/04/2033 | 1,466,323 |
Principal Amount(a) | Fair Value | |
Industrial — (continued) | ||
457,000 | General Electric Co EUR, 4.13%, 09/19/2035 | $ 481,847 |
1,440,000 | Honeywell International Inc EUR, 4.13%, 11/02/2034 | 1,521,589 |
4,644,252 | ||
Technology — 0.67% | ||
520,000 | Intel Corp 4.90%, 08/05/2052 | 460,021 |
Oracle Corp | ||
520,000 | 6.15%, 11/09/2029 | 539,742 |
1,074,000 | 3.65%, 03/25/2041 | 792,820 |
1,400,000 | Ubisoft Entertainment SA EUR, 0.88%, 11/24/2027 | 1,150,119 |
2,942,702 | ||
Utilities — 2.60% | ||
Amprion GmbH | ||
700,000 | EUR, 3.45%, 09/22/2027 | 734,997 |
600,000 | EUR, 3.97%, 09/22/2032 | 632,879 |
500,000 | EUR, 0.63%, 09/23/2033 | 375,123 |
400,000 | EDP Finance BV EUR, 1.88%, 09/21/2029 | 376,573 |
Electricite de France SA | ||
1,200,000 | EUR, 2.63%, Perpetual(d) | 996,884 |
200,000 | EUR, 3.00%, Perpetual(d) | 174,579 |
500,000 | EUR, 5.38%, Perpetual(d) | 507,793 |
400,000 | GBP, 6.00%, Perpetual(d) | 431,829 |
1,000,000 | EUR, 2.00%, 12/09/2049 | 643,620 |
310,000 | Enel Finance International NV(b) 7.50%, 10/14/2032 | 327,598 |
1,553,000 | National Grid North America Inc EUR, 1.05%, 01/20/2031 | 1,288,917 |
510,000 | Southern Co EUR, 1.88%, 09/15/2081 | 424,590 |
Suez SACA | ||
1,300,000 | EUR, 2.38%, 05/24/2030 | 1,218,606 |
100,000 | EUR, 2.88%, 05/24/2034 | 90,177 |
TenneT Holding BV | ||
1,185,000 | EUR, 2.13%, 11/17/2029 | 1,135,605 |
444,000 | EUR, 2.38%, 05/17/2033 | 409,920 |
Vistra Operations Co LLC(b) | ||
1,051,000 | 3.70%, 01/30/2027 | 958,325 |
834,000 | 4.30%, 07/15/2029 | 751,305 |
11,479,320 | ||
TOTAL CORPORATE BONDS AND NOTES — 24.64% (Cost $126,319,455) | $108,983,324 | |
FOREIGN GOVERNMENT BONDS AND NOTES | ||
739,000 | Africa Finance Corp 4.38%, 04/17/2026 | 692,147 |
African Export-Import Bank | ||
550,000 | 5.25%, 10/11/2023 | 546,729 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
Foreign Government Bonds and Notes — (continued) | ||
3,334,000 | 3.80%, 05/17/2031 | $ 2,756,551 |
500,000 | Australia Government Bond AUD, 3.00%, 03/21/2047 | 270,339 |
3,680,000 | Banque Ouest Africaine de Developpement EUR, 2.75%, 01/22/2033 | 2,957,582 |
4,700 (f) | Brazil Notas do Tesouro Nacional Serie F BRL, 10.00%, 01/01/2033 | 761,062 |
Bundesrepublik Deutschland Bundesanleihe | ||
1,500,000 | EUR, 2.46%, 02/15/2032 | 1,284,272 |
531,000 | EUR, 2.50%, 08/15/2046 | 571,936 |
4,300,000 | EUR, 0.00%, 08/15/2052 | 2,299,406 |
Bundesschatzanweisungen | ||
2,225,000 | EUR, 0.40%, 09/13/2024 | 2,293,847 |
3,275,000 | EUR, 2.20%, 12/12/2024 | 3,473,439 |
Canadian Government Bond | ||
1,450,000 | CAD, 1.00%, 09/01/2026 | 977,144 |
9,260,000 | CAD, 0.50%, 12/01/2030 | 5,515,657 |
850,000 | CAD, 3.50%, 12/01/2045 | 643,577 |
1,100,000 | CAD, 2.00%, 12/01/2051 | 617,172 |
40,050,000 | China Government Bond CNY, 3.81%, 09/14/2050 | 6,324,855 |
1,550,000 | Denmark Government Bond DKK, 4.50%, 11/15/2039 | 278,068 |
European Union | ||
1,200,000 | EUR, 1.38%, 10/04/2029 | 1,158,607 |
5,006,000 | EUR, 0.40%, 02/04/2037 | 3,632,395 |
1,250,000 | EUR, 0.45%, 07/04/2041 | 811,387 |
750,000 | Finland Government Bond(b) EUR, 0.50%, 09/15/2027 | 720,216 |
French Republic Government Bond OAT | ||
2,975,000 | EUR, 0.25%, 11/25/2026 | 2,892,294 |
366,034 | EUR, 2.92%, 11/25/2031 | 302,607 |
3,200,000 | EUR, 0.00%, 05/25/2032 | 2,576,641 |
950,000 | EUR, 0.75%, 05/25/2052 | 545,616 |
286,078,000 | Iceland Rikisbref ISK, 4.50%, 02/17/2042 | 1,678,772 |
Indonesia Treasury Bond | ||
18,827,000,000 | IDR, 7.00%, 09/15/2030 | 1,220,884 |
10,350,000,000 | IDR, 7.50%, 04/15/2040 | 682,959 |
Ireland Government Bond | ||
2,100,000 | EUR, 3.40%, 03/18/2024 | 2,265,920 |
2,925,000 | EUR, 0.35%, 10/18/2032 | 2,429,185 |
Italy Buoni Poliennali Del Tesoro | ||
956,000 | EUR, 0.90%, 04/01/2031 | 781,077 |
409,000 | EUR, 2.45%, 09/01/2033(b) | 356,725 |
1,002,000 | EUR, 0.95%, 03/01/2037(b) | 669,284 |
699,000 | EUR, 2.15%, 03/01/2072(b) | 418,659 |
Japan Government Five Year Bond | ||
1,297,950,000 | JPY, 0.10%, 03/20/2023 | 9,894,149 |
600,000,000 | JPY, 0.10%, 09/20/2023 | 4,575,983 |
125,650,000 | JPY, 0.01%, 09/20/2026 | 953,146 |
Japan Government Ten Year Bond | ||
669,400,000 | JPY, 0.10%, 03/20/2027 | 5,080,432 |
Principal Amount(a) | Fair Value | |
Foreign Government Bonds and Notes — (continued) | ||
600,000,000 | JPY, 0.10%, 12/20/2027 | $ 4,535,568 |
466,150,000 | JPY, 0.10%, 09/20/2031 | 3,429,527 |
202,000,000 | JPY, 0.20%, 06/20/2032 | 1,506,427 |
Japan Government Thirty Year Bond | ||
589,700,000 | JPY, 1.50%, 03/20/2045 | 4,600,505 |
163,700,000 | JPY, 0.80%, 12/20/2047 | 1,073,542 |
752,750,000 | JPY, 0.70%, 12/20/2048 | 4,744,436 |
29,150,000 | JPY, 0.40%, 03/20/2050 | 168,334 |
Japan Government Twenty Year Bond | ||
209,100,000 | JPY, 2.10%, 12/20/2029 | 1,775,677 |
22,250,000 | JPY, 1.70%, 09/20/2033 | 188,187 |
431,500,000 | JPY, 1.50%, 06/20/2034 | 3,568,719 |
793,450,000 | JPY, 0.40%, 03/20/2036 | 5,678,210 |
1,025,000 | Kingdom of Belgium Government Bond(b) EUR, 1.90%, 06/22/2038 | 907,232 |
Korea Treasury Bond | ||
1,676,920,000 | KRW, 1.88%, 03/10/2051 | 909,100 |
3,135,500,000 | KRW, 3.13%, 09/10/2052 | 2,220,195 |
3,490,000 | Malaysia Government Bond MYR, 4.23%, 06/30/2031 | 802,725 |
Mexican Bonos | ||
475,000 (g) | MXN, 5.75%, 03/05/2026 | 2,204,796 |
3,231,900 (g) | MXN, 7.75%, 05/29/2031(e) | 15,347,234 |
Mexico Government International Bond | ||
1,957,000 | EUR, 2.13%, 10/25/2051 | 1,136,463 |
3,990,000 | EUR, 4.00%, 03/15/2115 | 2,984,844 |
1,810,000 | Netherlands Government Bond(b) EUR, 0.75%, 07/15/2027 | 1,781,949 |
3,479,000 | New Zealand Government Bond NZD, 3.50%, 04/14/2033 | 2,031,473 |
700,000 | Philippine Government International Bond EUR, 4.29%, 02/03/2023 | 746,240 |
500,000 | Portugal Obrigacoes do Tesouro OT(b) EUR, 1.65%, 07/16/2032 | 455,323 |
1,225,000 | Republic of Austria Government Bond(b) EUR, 3.43%, 02/20/2031 | 1,024,686 |
2,312,000 | Republic of Poland Government Bond PLN, 3.25%, 07/25/2025 | 484,051 |
Republic of South Africa Government Bond | ||
39,966,000 | ZAR, 8.88%, 02/28/2035 | 1,980,512 |
109,472,885 | ZAR, 8.50%, 01/31/2037 | 5,105,996 |
Romanian Government International Bond | ||
2,229,000 | EUR, 2.75%, 02/26/2026 | 2,248,828 |
654,000 | EUR, 2.88%, 05/26/2028 | 605,205 |
151,000 | EUR, 2.50%, 02/08/2030 | 124,661 |
405,000 | EUR, 3.62%, 05/26/2030(b) | 353,600 |
98,000 | EUR, 3.62%, 05/26/2030 | 85,562 |
911,000 | EUR, 1.75%, 07/13/2030 | 676,402 |
584,000 | EUR, 2.12%, 07/16/2031 | 429,089 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
Foreign Government Bonds and Notes — (continued) | ||
362,000 | EUR, 3.88%, 10/29/2035 | $ 284,960 |
298,000 | EUR, 3.38%, 02/08/2038 | 214,994 |
2,579,000 | EUR, 2.63%, 12/02/2040 | 1,536,374 |
2,035,000 | EUR, 2.75%, 04/14/2041 | 1,218,804 |
2,123,000 | EUR, 2.88%, 04/13/2042 | 1,268,987 |
623,000 | EUR, 4.63%, 04/03/2049 | 481,113 |
457,000 | EUR, 3.38%, 01/28/2050 | 281,072 |
800,000 | Singapore Government Bond SGD, 2.63%, 05/01/2028 | 586,352 |
350,000 | Slovenia Government Bond EUR, 4.34%, 02/12/2031 | 276,900 |
7,055,000 | Spain Government Bond(b) EUR, 0.70%, 04/30/2032 | 5,882,185 |
3,975,000 | Sweden Government Bond(b) SEK, 2.25%, 06/01/2032 | 377,396 |
925,000 | Swiss Confederation Government Bond CHF, 0.50%, 06/27/2032 | 906,111 |
16,750,000 | Thailand Government Bond THB, 3.39%, 06/17/2037 | 503,639 |
United Kingdom Gilt | ||
900,000 | GBP, 1.25%, 07/22/2027 | 980,168 |
9,541 | GBP, 4.75%, 12/07/2030 | 12,435 |
3,765,000 | GBP, 1.00%, 01/31/2032 | 3,603,103 |
2,729,140 | GBP, 3.50%, 01/22/2045 | 3,031,056 |
4,880,000 | GBP, 1.25%, 07/31/2051 | 3,186,431 |
TOTAL FOREIGN GOVERNMENT BONDS AND NOTES — 39.90% (Cost $212,817,999) | $176,458,099 | |
MORTGAGE-BACKED SECURITIES | ||
Non-Agency — 1.20% | ||
289,993 | Brass No 10 PLC(b)(h) Series 10A Class A1 0.67%, 04/16/2069 | 276,576 |
900,000 | BXHPP Trust(b)(c) Series 2021-FILM Class B 5.22%, 08/15/2036 1-mo. LIBOR + 0.90% | 817,488 |
425,000 | CGDB Commercial Mortgage Trust(b)(c) Series 2019-MOB Class A 5.27%, 11/15/2036 1-mo. LIBOR + 0.95% | 414,836 |
297,752 | CHC Commercial Mortgage Trust(b)(c) Series 2019-CHC Class B 5.82%, 06/15/2034 1-mo. LIBOR + 1.50% | 283,284 |
1,150,000 | COMM Mortgage Trust(b) Series 2020-CX Class A 2.17%, 11/10/2046 | 891,934 |
478,552 | HPLY Trust(b)(c) Series 2019-HIT Class A 5.32%, 11/15/2036 1-mo. LIBOR + 1.00% | 466,505 |
270,000 | Lanark Master Issuer PLC(b)(c) Series 2020-1A Class 2A GBP, 3.85%, 12/22/2069 1-day SONIA + 0.57% | 326,491 |
Principal Amount(a) | Fair Value | |
Non-Agency — (continued) | ||
577,998 | New Residential Mortgage Loan Trust(b)(h) Series 2022-NQM1 Class A1 2.28%, 04/25/2061 | $ 496,619 |
200,000 | Paragon Mortgages No 25 PLC(c) Series 25 Class B GBP, 4.31%, 05/15/2050 1-day SONIA + 1.07% | 240,629 |
461,158 | Tower Bridge Funding PLC(c) Series 2021-2 Class A GBP, 4.05%, 11/20/2063 1-day SONIA + 0.78% | 547,967 |
590,864 | Wells Fargo Commercial Mortgage Trust(b)(c) Series 2021-SAVE Class A 5.47%, 02/15/2040 1-mo. LIBOR + 1.15% | 552,075 |
5,314,404 | ||
U.S. Government Agency — 16.95% | ||
553,750 | FARM Mortgage Trust(b)(h) Series 2021-1 Class A 2.18%, 01/25/2051 | 449,605 |
Federal Home Loan Mortgage Corp | ||
936,455 | 2.00%, 08/01/2051 | 768,972 |
4,093,213 | 2.00%, 04/01/2052 | 3,354,171 |
4,546,505 | 3.50%, 06/01/2052 | 4,131,812 |
4,344,705 | 4.00%, 06/01/2052 | 4,075,511 |
2,822,552 | 5.00%, 07/01/2052 | 2,783,518 |
160,065 | Federal Home Loan Mortgage Corp Multifamily Structured Credit Risk(b)(c) Series 2021-MN1 Class M1 5.93%, 01/25/2051 1-mo. SOFR + 2.00% | 149,795 |
Federal Home Loan Mortgage Corp Multifamily Structured Pass Through Certificates | ||
Series KC02 Class A2 | ||
297,385 | 3.37%, 07/25/2025 | 287,248 |
Series KL3W Class AFLW | ||
406,866 | 4.59%, 08/25/2025(c) 1-mo. LIBOR + 0.45% | 402,969 |
Federal National Mortgage Association | ||
3,005,000 | 2.50%, 08/01/2051 | 2,584,057 |
2,342,609 | 3.00%, 08/01/2051 | 2,096,774 |
2,270,375 | 2.00%, 11/01/2051 | 1,864,959 |
10,301,796 | 3.50%, 06/01/2052 | 9,362,183 |
4,613,329 | 4.00%, 06/01/2052 | 4,327,487 |
8,531,582 | 4.50%, 06/01/2052 | 8,212,790 |
3,690,936 | 5.00%, 07/01/2052 | 3,639,893 |
491,099 | 5.00%, 10/01/2052 | 484,307 |
8,000,000 | Government National Mortgage Association 3.50%, TBA | 7,348,922 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
U.S. Government Agency — (continued) | ||
Seasoned Credit Risk Transfer Trust | ||
Series 2017-4 Class M45T | ||
158,323 | 4.50%, 06/25/2057 | $ 154,296 |
Series 2018-4 Class M55D | ||
265,495 | 4.00%, 03/25/2058 | 254,034 |
Series 2019-3 Class M55D | ||
201,800 | 4.00%, 10/25/2058 | 191,805 |
Series 2020-3 Class TTU | ||
315,595 | 2.50%, 05/25/2060 | 290,597 |
Seasoned Loans Structured Transaction Trust | ||
Series 2018-2 Class A1 | ||
292,628 | 3.50%, 11/25/2028 | 279,135 |
Series 2019-1 Class A2 | ||
400,000 | 3.50%, 05/25/2029 | 366,883 |
Series 2019-2 Class A1C | ||
330,988 | 2.75%, 09/25/2029 | 304,394 |
Series 2019-3 Class A2C | ||
500,000 | 2.75%, 11/25/2029 | 433,328 |
Uniform Mortgage-Backed Security(i) | ||
5,700,000 | 2.00%, TBA | 4,636,723 |
3,000,000 | 2.50%, TBA | 2,539,543 |
10,500,000 | 3.00%, TBA | 9,212,377 |
74,988,088 | ||
TOTAL MORTGAGE-BACKED SECURITIES — 18.15% (Cost $84,465,126) | $ 80,302,492 | |
U.S. TREASURY BONDS AND NOTES | ||
United States Treasury Note/Bond | ||
2,300,000 | 1.38%, 02/15/2023(e) | 2,292,129 |
4,650,000 | 3.00%, 06/30/2024 | 4,538,654 |
6,000,000 | 1.75%, 07/31/2024 | 5,739,141 |
2,000,000 | 1.50%, 09/30/2024 | 1,899,141 |
5,000,000 | 0.50%, 03/31/2025 | 4,592,187 |
2,166,800 | 2.13%, 05/15/2025 | 2,059,052 |
5,406,800 | 0.88%, 06/30/2026 | 4,834,862 |
2,900,000 | 2.25%, 11/15/2027 | 2,672,305 |
2,699,400 | 2.88%, 05/15/2028 | 2,547,032 |
6,725,000 | 2.88%, 08/15/2028 | 6,332,796 |
1,200,000 | 5.50%, 08/15/2028 | 1,283,719 |
5,240,300 | 1.88%, 02/15/2032 | 4,445,453 |
2,240,000 | 2.75%, 08/15/2032 | 2,039,800 |
800,000 | 4.13%, 11/15/2032 | 816,375 |
8,460,000 | 1.13%, 05/15/2040 | 5,294,770 |
6,050,000 | 1.88%, 02/15/2041 | 4,276,121 |
1,732,800 | 3.63%, 08/15/2043 | 1,592,958 |
3,339,100 | 3.38%, 11/15/2048 | 2,945,451 |
3,050,000 | 2.25%, 02/15/2052 | 2,120,941 |
TOTAL U.S. TREASURY BONDS AND NOTES — 14.09% (Cost $67,688,416) | $ 62,322,887 |
Principal Amount(a) | Fair Value | |
SHORT TERM INVESTMENTS | ||
Repurchase Agreements — 3.56% | ||
$ 16,592 | Undivided interest of 0.11% in a repurchase agreement (principal amount/value $15,424,947 with a maturity value of $15,432,231) with HSBC Securities (USA) Inc, 4.25%, dated 12/31/22 to be repurchased at $16,592 on 1/3/23 collateralized by U.S. Treasury securities, 0.00% - 4.50%, 4/30/23 - 2/15/51, with a value of $15,733,446.(j) | $ 16,592 |
5,236,364 | Undivided interest of 4.79% in a repurchase agreement (principal amount/value $109,701,194 with a maturity value of $109,753,607) with RBC Capital Markets Corp, 4.30%, dated 12/31/22 to be repurchased at $5,236,364 on 1/3/23 collateralized by various U.S. Government Agency securities, 2.00% - 6.00%, 9/1/24 - 10/20/52, with a value of $111,895,218.(j) | 5,236,364 |
5,236,365 | Undivided interest of 4.82% in a repurchase agreement (principal amount/value $108,937,825 with a maturity value of $108,989,873) with Bank of America Securities Inc, 4.30%, dated 12/31/22 to be repurchased at $5,236,365 on 1/3/23 collateralized by Federal National Mortgage Association securities, 1.50% - 6.50%, 5/1/37 - 5/1/58, with a value of $111,116,581.(j) | 5,236,365 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
Principal Amount(a) | Fair Value | |
Repurchase Agreements — (continued) | ||
$ 5,236,364 | Undivided interest of 75.65% in a repurchase agreement (principal amount/value $6,934,084 with a maturity value of $6,937,358) with Citigroup Global Markets Inc, 4.25%, dated 12/31/22 to be repurchased at $5,236,364 on 1/3/23 collateralized by U.S. Treasury securities, 0.00% - 4.50%, 4/11/23 - 10/31/29, with a value of $7,072,766.(j) | $ 5,236,364 |
TOTAL SHORT TERM INVESTMENTS — 3.56% (Cost $15,725,685) | $ 15,725,685 | |
TOTAL INVESTMENTS — 102.73% (Cost $518,382,676) | $454,350,201 | |
OTHER ASSETS & LIABILITIES, NET — (2.73)% | $ (12,059,667) | |
TOTAL NET ASSETS — 100.00% | $442,290,534 |
(a) | Amount is stated in U.S. dollars unless otherwise noted. |
(b) | Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. |
(c) | Adjustable rate security; interest rate is subject to change. Interest rate shown reflects the rate in effect at December 31, 2022. |
(d) | Security has no contractual maturity date and pays an indefinite stream of interest. |
(e) | All or a portion of the security is on loan at December 31, 2022. |
(f) | Principal amount is stated in 1,000 Brazilian Real Units. |
(g) | Principal amount is stated in 100 Mexican Peso Units. |
(h) | Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above. |
(i) | Single-class security backed by mortgage loans purchased by either Freddie Mac or Fannie Mae. |
(j) | Collateral received for securities on loan. |
LIBOR | London Interbank Offered Rate is the interest rate banks charge each other for short-term loans. |
LP | Limited Partnership |
REIT | Real Estate Investment Trust |
SOFR | Secured Overnight Financing Rate is the secured interbank overnight interest rate and reference rate established as an alternative to LIBOR. |
SONIA | Sterling Overnight Interbank Average Rate is the effective overnight interest rate paid by banks for unsecured transactions in the British sterling market. |
TBA | To Be Announced |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022, the Fund held the following outstanding exchange traded futures contracts: | |||||
Description | Number of Contracts | Notional Amount | Expiration Date | Fair Value and Net Unrealized Appreciation/ (Depreciation) | |
Short | |||||
10 Year Euro Treasury Note Futures | 14 | EUR | 1,782,200 | March 2023 | $ 63,996 |
Euro-Bobl Futures | 154 | EUR | 17,825,500 | March 2023 | 361,934 |
Euro-Bund Futures | 224 | EUR | 29,776,320 | March 2023 | 1,975,557 |
Euro-Buxl 30 Year Bond Futures | 38 | EUR | 5,139,120 | March 2023 | 1,069,425 |
Japan 10 Year Bond Futures | 34 | JPY | 4,945,640,000 | March 2023 | 668,385 |
Long Gilt Futures | 2 | GBP | 199,800 | March 2023 | 16,792 |
U.S. 10 Year Treasury Note Futures | 43 | USD | 4,828,766 | March 2023 | 117,310 |
U.S. 10 Year Treasury Ultra Futures | 106 | USD | 12,537,813 | March 2023 | 78,775 |
U.S. 5 Year Treasury Note Futures | 138 | USD | 14,894,297 | March 2023 | 175,824 |
U.S. Long Bond Futures | 2 | USD | 250,688 | March 2023 | 1,967 |
Long | |||||
10 Year Commonwealth Treasury Bond Futures | 52 | AUD | 4,988,100 | March 2023 | (76,408) |
Canadian 10 Year Bond Futures | 18 | CAD | 2,205,900 | March 2023 | 1,024 |
Euro-Bobl Futures | 68 | EUR | 7,871,000 | March 2023 | (286,300) |
Euro-BTP Futures | 11 | EUR | 1,198,120 | March 2023 | (97,967) |
Euro-Schatz Futures | 91 | EUR | 9,593,220 | March 2023 | (127,712) |
Long Gilt Futures | 1 | GBP | 99,900 | March 2023 | (5,947) |
U.S. 10 Year Treasury Note Futures | 3 | USD | 336,891 | March 2023 | 47 |
U.S. 10 Year Treasury Ultra Futures | 29 | USD | 3,430,156 | March 2023 | (4,441) |
U.S. 2 Year Treasury Note Futures | 54 | USD | 11,074,219 | March 2023 | 12,405 |
U.S. Long Bond Futures | 40 | USD | 5,013,750 | March 2023 | 594 |
U.S. Ultra Bond Futures | 20 | USD | 2,686,250 | March 2023 | (35,351) |
Net Appreciation | $3,909,909 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022,the Fund held the following over-the-counter (OTC) forward foreign currency contracts: | ||||||
Counterparty | Currency Purchased | Quantity of Currency Purchased | Currency Sold | Quantity of Currency Sold | Settlement Date | Net Unrealized Appreciation/ (Depreciation) |
AZB | JPY | 12,250,000 | USD | 91,890 | January 19, 2023 | $1,709 |
AZB | NZD | 566,398 | USD | 318,787 | January 19, 2023 | 40,953 |
BA | BRL | 4,766,512 | USD | 888,115 | February 02, 2023 | 7,373 |
BA | EUR | 320,405 | PLN | 1,539,065 | January 19, 2023 | 15 |
BA | EUR | 12,724,354 | USD | 12,536,273 | January 19, 2023 | 1,106,025 |
BA | JPY | 623,479,950 | USD | 4,210,000 | January 19, 2023 | 553,866 |
BA | SGD | 743,586 | USD | 521,925 | January 19, 2023 | 33,467 |
BA | THB | 24,183,542 | USD | 704,033 | January 19, 2023 | (2,634) |
BA | USD | 680,186 | CNY | 4,922,844 | January 19, 2023 | (33,867) |
BA | USD | 740,000 | GBP | 657,933 | January 19, 2023 | (55,868) |
BA | USD | 4,320,000 | JPY | 628,389,360 | January 19, 2023 | (481,377) |
BA | USD | 8,073,009 | MXN | 164,085,521 | January 19, 2023 | (313,330) |
BA | USD | 385,081 | PLN | 1,917,800 | January 19, 2023 | (51,954) |
BA | USD | 811,477 | THB | 28,718,157 | January 19, 2023 | (21,440) |
BA | USD | 177,645 | ZAR | 3,235,000 | January 19, 2023 | (12,379) |
BB | BRL | 6,627,421 | USD | 1,261,885 | February 02, 2023 | (16,788) |
BB | COP | 940,251,000 | USD | 195,040 | January 18, 2023 | (1,871) |
BB | EUR | 1,200,000 | USD | 1,277,155 | January 18, 2023 | 9,312 |
BB | EUR | 2,500,000 | USD | 2,526,092 | January 19, 2023 | 154,260 |
BB | GBP | 2,800,000 | EUR | 3,203,588 | January 19, 2023 | (55,804) |
BB | KRW | 3,428,794,210 | USD | 2,389,837 | January 19, 2023 | 329,988 |
BB | MYR | 3,270,000 | USD | 741,160 | January 18, 2023 | 3,306 |
BB | NZD | 1,797,725 | USD | 1,148,000 | January 18, 2023 | (6,221) |
BB | THB | 7,420,000 | USD | 212,588 | January 18, 2023 | 2,567 |
BB | THB | 25,089,441 | USD | 679,839 | January 19, 2023 | 47,834 |
BB | TWD | 10,500,000 | USD | 342,768 | January 18, 2023 | (185) |
BB | USD | 315,000 | CNY | 2,197,023 | January 18, 2023 | (3,544) |
BB | USD | 18,647,498 | EUR | 17,548,542 | January 18, 2023 | (165,521) |
BB | USD | 3,370,000 | GBP | 2,825,997 | January 19, 2023 | (48,464) |
BB | USD | 224,736 | KRW | 288,817,000 | January 18, 2023 | (4,328) |
BB | USD | 89,179 | SGD | 121,351 | January 18, 2023 | (1,457) |
BB | USD | 876,026 | THB | 31,497,958 | January 19, 2023 | (37,514) |
BB | USD | 344,432 | TWD | 10,500,000 | January 18, 2023 | 1,849 |
BB | USD | 1,976,939 | ZAR | 34,828,471 | January 18, 2023 | (69,083) |
BBH | EUR | 2,100,000 | USD | 2,212,130 | January 19, 2023 | 39,366 |
BBH | USD | 937,756 | EUR | 900,000 | January 19, 2023 | (27,171) |
BBH | USD | 500,000 | JPY | 65,756,300 | January 19, 2023 | (2,429) |
BNP | COP | 901,130,163 | USD | 190,605 | January 19, 2023 | (5,511) |
BNP | CSK | 27,989,037 | EUR | 1,126,560 | January 19, 2023 | 11,824 |
BNP | DKK | 3,204,318 | USD | 426,091 | January 19, 2023 | 35,967 |
BNP | GBP | 2,616,267 | USD | 2,998,366 | January 19, 2023 | 166,398 |
BNP | USD | 340,000 | CNY | 2,367,217 | January 19, 2023 | (3,362) |
CA | EUR | 6,334,478 | GBP | 5,546,760 | January 19, 2023 | 119,282 |
CA | USD | 4,441,516 | MXN | 90,255,000 | January 19, 2023 | (171,377) |
CGM | AUD | 6,153,620 | USD | 4,118,990 | January 18, 2023 | 74,228 |
CGM | BRL | 750,653 | USD | 140,000 | February 02, 2023 | 1,026 |
CGM | CHF | 1,068,052 | EUR | 1,082,693 | January 18, 2023 | (2,464) |
CGM | CHF | 180,000 | USD | 194,123 | January 18, 2023 | 994 |
CGM | CLP | 86,382,401 | USD | 89,623 | January 19, 2023 | 11,821 |
CGM | EUR | 1,036,000 | CSK | 25,193,541 | January 18, 2023 | 2,776 |
CGM | EUR | 3,593,922 | CSK | 89,517,412 | January 19, 2023 | (49,981) |
CGM | JPY | 2,144,740,134 | USD | 15,595,281 | January 18, 2023 | 789,914 |
CGM | PEN | 436,242 | USD | 108,190 | January 19, 2023 | 6,249 |
CGM | SEK | 5,517,968 | USD | 532,758 | January 18, 2023 | (3,287) |
CGM | THB | 29,421,240 | USD | 845,681 | January 19, 2023 | 7,628 |
CGM | USD | 226,000 | AUD | 333,720 | January 18, 2023 | (1,405) |
CGM | USD | 770,278 | BRL | 4,130,000 | January 18, 2023 | (8,277) |
CGM | USD | 742,403 | CNY | 5,403,174 | January 19, 2023 | (41,321) |
CGM | USD | 196,222 | KRW | 253,740,000 | January 18, 2023 | (5,022) |
CGM | USD | 6,222,686 | MXN | 123,922,000 | January 19, 2023 | (110,913) |
CGM | USD | 1,241,081 | NZD | 1,961,117 | January 18, 2023 | (4,472) |
CGM | USD | 308,523 | THB | 10,943,325 | January 19, 2023 | (8,868) |
CGM | USD | 382,822 | ZAR | 6,667,464 | January 19, 2023 | (8,824) |
GS | CAD | 1,336,797 | USD | 979,287 | January 18, 2023 | 8,194 |
GS | CNY | 93,577,504 | USD | 13,434,070 | January 18, 2023 | 133,627 |
GS | CSK | 25,314,104 | EUR | 1,040,032 | January 18, 2023 | (3,406) |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022,the Fund held the following over-the-counter (OTC) forward foreign currency contracts: | ||||||
Counterparty | Currency Purchased | Quantity of Currency Purchased | Currency Sold | Quantity of Currency Sold | Settlement Date | Net Unrealized Appreciation/ (Depreciation) |
GS | CSK | 12,420,671 | EUR | 500,531 | January 19, 2023 | $4,315 |
GS | HUF | 58,034,303 | USD | 149,565 | January 18, 2023 | 5,050 |
GS | ILS | 1,120,000 | USD | 324,943 | January 18, 2023 | (6,080) |
GS | PEN | 450,000 | USD | 116,402 | January 18, 2023 | 1,669 |
GS | TWD | 16,701,000 | USD | 546,141 | January 18, 2023 | (1,239) |
GS | USD | 360,000 | EUR | 338,457 | January 18, 2023 | (2,845) |
GS | USD | 941,541 | GBP | 850,000 | January 19, 2023 | (86,661) |
GS | USD | 4,804,723 | MXN | 95,363,905 | January 18, 2023 | (70,276) |
GS | USD | 814,111 | MYR | 3,600,000 | January 18, 2023 | (5,485) |
HSB | AUD | 508,000 | NZD | 537,206 | January 18, 2023 | 5,393 |
HSB | CLP | 91,620,000 | USD | 104,529 | January 18, 2023 | 3,086 |
HSB | CNY | 14,596,113 | USD | 2,061,656 | January 19, 2023 | 55,493 |
HSB | CSK | 12,172,032 | EUR | 490,929 | January 19, 2023 | 4,197 |
HSB | CSK | 6,521,366 | USD | 284,643 | January 18, 2023 | 3,020 |
HSB | EUR | 529,595 | PLN | 2,545,498 | January 19, 2023 | (8) |
HSB | EUR | 781,309 | USD | 831,000 | January 18, 2023 | 6,607 |
HSB | GBP | 186,936 | USD | 225,000 | January 18, 2023 | 1,120 |
HSB | KRW | 747,866,000 | USD | 581,952 | January 18, 2023 | 11,189 |
HSB | THB | 66,611,864 | USD | 1,835,224 | January 19, 2023 | 96,730 |
HSB | TWD | 16,702,000 | USD | 546,889 | January 18, 2023 | (1,955) |
HSB | USD | 283,000 | CNY | 1,969,893 | January 18, 2023 | (2,613) |
HSB | USD | 1,419,814 | CNY | 10,272,215 | January 19, 2023 | (70,158) |
HSB | USD | 3,181,529 | EUR | 3,000,000 | January 18, 2023 | (34,639) |
HSB | USD | 447,266 | INR | 37,009,000 | January 18, 2023 | 364 |
HSB | USD | 1,253,974 | THB | 45,049,011 | January 19, 2023 | (52,589) |
HSB | USD | 1,091,780 | TWD | 33,403,000 | January 18, 2023 | 1,943 |
JPM | CHF | 523,312 | EUR | 530,000 | January 18, 2023 | 1,113 |
JPM | CNY | 134,073,832 | USD | 18,680,000 | January 19, 2023 | 767,252 |
JPM | CSK | 12,219,615 | EUR | 503,000 | January 18, 2023 | (1,868) |
JPM | DKK | 969,823 | USD | 138,645 | January 18, 2023 | 1,190 |
JPM | EUR | 537,000 | CHF | 527,893 | January 18, 2023 | 3,305 |
JPM | GBP | 328,215 | USD | 399,903 | January 18, 2023 | (2,890) |
JPM | IDR | 4,448,269,000 | USD | 283,962 | January 18, 2023 | 2,540 |
JPM | INR | 37,009,000 | USD | 446,228 | January 18, 2023 | 674 |
JPM | NOK | 2,465,577 | USD | 249,498 | January 18, 2023 | 2,380 |
JPM | NOK | 2,248,722 | USD | 213,778 | January 19, 2023 | 15,956 |
JPM | PLN | 1,657,674 | USD | 372,423 | January 18, 2023 | 5,363 |
JPM | RON | 710,000 | USD | 152,527 | January 18, 2023 | 1,127 |
JPM | USD | 1,483,000 | AUD | 2,207,348 | January 18, 2023 | (21,137) |
JPM | USD | 225,000 | GBP | 185,499 | January 18, 2023 | 618 |
JPM | USD | 1,103,000 | JPY | 146,980,668 | January 18, 2023 | (19,890) |
JPM | USD | 870,000 | JPY | 114,182,785 | January 19, 2023 | (2,444) |
JPM | USD | 1,071,375 | KRW | 1,401,452,000 | January 18, 2023 | (40,131) |
JPM | USD | 1,148,000 | NZD | 1,798,338 | January 18, 2023 | 5,831 |
MS | AUD | 3,682,500 | USD | 2,384,295 | January 19, 2023 | 125,156 |
MS | CAD | 776,598 | USD | 563,017 | January 19, 2023 | 10,655 |
MS | CHF | 1,051,360 | USD | 1,066,223 | January 19, 2023 | 73,573 |
MS | CNY | 2,704,194 | USD | 380,000 | January 19, 2023 | 12,240 |
MS | CSK | 21,180,292 | EUR | 853,431 | January 19, 2023 | 8,899 |
MS | CSK | 8,945,466 | USD | 352,149 | January 19, 2023 | 42,377 |
MS | EUR | 3,330,213 | PLN | 16,497,735 | January 19, 2023 | (93,963) |
MS | EUR | 4,100,000 | USD | 4,300,344 | January 19, 2023 | 95,433 |
MS | HUF | 1,365,322,303 | EUR | 3,137,940 | January 19, 2023 | 97,719 |
MS | MXN | 9,900,000 | USD | 498,014 | January 19, 2023 | 7,970 |
MS | NOK | 1,995,425 | EUR | 190,000 | January 19, 2023 | (1,776) |
MS | PLN | 2,118,356 | USD | 419,173 | January 19, 2023 | 63,565 |
MS | THB | 21,524,818 | USD | 566,054 | January 19, 2023 | 58,234 |
MS | USD | 90,000 | GBP | 78,090 | January 19, 2023 | (4,462) |
MS | USD | 358,296 | IDR | 5,550,114,119 | January 19, 2023 | 776 |
MS | USD | 720,000 | MXN | 14,141,863 | January 19, 2023 | (2,784) |
MS | USD | 172,000 | PLN | 830,127 | January 19, 2023 | (17,172) |
MS | USD | 4,521,865 | ZAR | 82,963,938 | January 19, 2023 | (351,434) |
RBS | JPY | 534,920,265 | USD | 3,640,278 | January 19, 2023 | 446,924 |
RBS | THB | 54,948,533 | USD | 1,522,725 | January 19, 2023 | 70,956 |
RBS | USD | 35,088,360 | EUR | 35,418,603 | January 19, 2023 | (2,885,365) |
SAH | THB | 53,212,175 | USD | 1,545,967 | January 19, 2023 | (2,646) |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022,the Fund held the following over-the-counter (OTC) forward foreign currency contracts: | ||||||
Counterparty | Currency Purchased | Quantity of Currency Purchased | Currency Sold | Quantity of Currency Sold | Settlement Date | Net Unrealized Appreciation/ (Depreciation) |
SEB | EUR | 2,280,000 | NOK | 23,827,166 | January 19, 2023 | $4,314 |
SEB | NOK | 56,635,452 | EUR | 5,414,199 | January 19, 2023 | (51,899) |
SEB | SEK | 3,788,447 | USD | 341,065 | January 19, 2023 | 22,476 |
SG | JPY | 43,691,289 | USD | 300,000 | January 19, 2023 | 33,835 |
SG | USD | 280,000 | KRW | 395,494,400 | January 19, 2023 | (33,718) |
SSB | GBP | 750,000 | USD | 886,797 | January 19, 2023 | 20,439 |
SSB | USD | 780,000 | EUR | 733,274 | January 19, 2023 | (6,173) |
TD | ILS | 1,294,691 | USD | 369,450 | January 19, 2023 | (838) |
TD | USD | 2,649,278 | MXN | 52,373,000 | January 19, 2023 | (27,483) |
UBS | CNY | 15,545,369 | USD | 2,198,344 | January 19, 2023 | 56,494 |
UBS | CSK | 9,156,634 | EUR | 368,550 | January 19, 2023 | 3,853 |
UBS | EUR | 2,130,000 | CHF | 2,099,743 | January 19, 2023 | (4,747) |
UBS | EUR | 220,000 | GBP | 189,408 | January 19, 2023 | 6,418 |
UBS | EUR | 1,334,942 | USD | 1,330,000 | January 19, 2023 | 101,246 |
UBS | HUF | 132,000,000 | USD | 304,506 | January 19, 2023 | 47,051 |
UBS | RON | 813,212 | USD | 158,309 | January 19, 2023 | 17,673 |
UBS | SEK | 5,988,693 | USD | 532,598 | January 19, 2023 | 42,080 |
UBS | THB | 20,914,099 | USD | 566,532 | January 19, 2023 | 40,043 |
UBS | USD | 1,347,597 | CNY | 9,802,149 | January 19, 2023 | (74,194) |
UBS | USD | 1,189,196 | GBP | 1,000,000 | January 19, 2023 | (20,453) |
UBS | USD | 14,775,977 | JPY | 2,166,073,956 | January 19, 2023 | (1,774,492) |
Net Depreciation | $(1,398,484) |
At December 31, 2022, the Fund held the following outstanding centrally cleared credit default swaps: | ||||||||
Reference Obligation | Notional Amount(c) | Value | Upfront Payments/ (Receipts) | Fixed Deal Pay/Receive Rate | Maturity Date | Net Unrealized Appreciation/ (Depreciation) | Implied Credit Spread(d) | Payment Frequency |
Buy Credit Protection | ||||||||
iTraxx Europe Crossover Series 38 Version 1 Index | $17,450,000 | $(180,707) | $(150,905) | 5.00% | December 20, 2027 | $(29,803) | 4.75% | Quarterly |
iTraxx Europe Series 38 Version 1 Index | 48,250,000 | 140,229 | 155,681 | 1.00% | December 20, 2027 | (15,450) | 0.91% | Quarterly |
CDX.EM.38 Version 1 Index(a) | 2,750,000 | 160,871 | 161,319 | 1.00% | December 20, 2027 | (448) | 2.39% | Quarterly |
iTraxx Europe Senior Financials Series 38 Version 1 Index | 18,500,000 | (2,218) | 7,562 | 1.00% | December 20, 2027 | (9,780) | 1.00% | Quarterly |
CDX.NA.IG.39 Index(b) | 42,900,000 | (354,418) | (367,869) | 1.00% | December 20, 2027 | 13,451 | 0.81% | Quarterly |
Net Depreciation | $(42,030) | |||||||
(a) Based on an index of Emerging Market bonds that trade in the credit default swap market. | ||||||||
(b) Based on an index of North American bonds with investment grade credit ratings that trade in the credit default swap market. | ||||||||
(c) The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. | ||||||||
(d) Implied credit spreads, represented in absolute terms, are utilized in determining the value of credit default swap agreements on sovereign issues of an emerging country as of period end, and serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads 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. |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022, the Fund held the following outstanding centrally cleared interest rate swaps: | ||||||
Rate Received by the Fund | Rate Paid by the Fund | Notional Amount | Maturity Date | Net Unreailzed Appreciation/ (Depreciation) | Payment Frequency | |
11.40% | 1-day BR4CDI | USD | 7,692,856 | January 4, 2027 | $ 64,013 | Daily |
11.33% | 1-day BR4CDI | USD | 7,600,171 | January 4, 2027 | (66,785) | Daily |
12.73% | 1-day BR4CDI | USD | 6,191,359 | January 4, 2027 | 9,173 | Daily |
12.93% | 1-day BR4CDI | USD | 4,515,614 | January 4, 2027 | 13,417 | Daily |
13.47% | 1-day BR4CDI | USD | 3,197,070 | January 4, 2027 | 22,015 | Daily |
13.29% | 1-day BR4CDI | USD | 6,796,899 | January 4, 2027 | 37,747 | Daily |
13.51% | 1-day BR4CDI | USD | 6,362,434 | January 4, 2027 | 45,420 | Daily |
13.41% | 1-day BR4CDI | USD | 13,401,120 | January 4, 2027 | 85,955 | Daily |
2.54% | 7-day CNRR | USD | 160,260,000 | January 19, 2028 | (273,777) | Quarterly |
2.71% | 7-day CNRR | USD | 66,763,081 | January 19, 2028 | (39,954) | Quarterly |
2.62% | 7-day CNRR | USD | 17,360,156 | January 19, 2028 | (20,811) | Quarterly |
6-mo. EURIBOR | 3.27% | EUR | 4,800,000 | January 19, 2028 | (11,792) | Semi Annual |
3.65% | 3-mo. TELBOR | ILS | 1,800,000 | January 19, 2028 | (519) | Quarterly |
PLN-WIBOR-WIBO | 6.14% | PLN | 2,602,757 | January 19, 2028 | 411 | Semi Annual |
PLN-WIBOR-WIBO | 6.12% | PLN | 7,497,243 | January 19, 2028 | 2,951 | Semi Annual |
PLN-WIBOR-WIBO | 6.04% | PLN | 12,300,000 | January 19, 2028 | 14,126 | Semi Annual |
PLN-WIBOR-WIBO | 5.64% | PLN | 5,495,817 | January 19, 2028 | 27,089 | Semi Annual |
PLN-WIBOR-WIBO | 5.58% | PLN | 6,004,183 | January 19, 2028 | 33,338 | Semi Annual |
4.16% | KRW-CD-KSDA | USD | 3,300,000,000 | January 19, 2028 | 70,426 | Quarterly |
28-day MXTIIE | 9.17% | MXN | 86,830,317 | January 6, 2033 | (122,553) | Monthly |
28-day MXTIIE | 9.34% | MXN | 45,169,683 | January 6, 2033 | (89,821) | Monthly |
3.43% | 6mo. EURIBOR | EUR | 5,046,417 | January 19, 2033 | 113,179 | Semi Annual |
3.96% | KRW-CD-KSDA | USD | 3,722,200,000 | January 19, 2033 | 120,816 | Quarterly |
Net Appreciation | $ 34,064 |
At December 31, 2022, the Fund held the following OTC written swaptions: | ||||||||||
Description | Counterparty | Rate Received by the Fund | Rate Paid by the Fund | Expiration Date | Notional Amount | Premium (Received)/Paid | Fair Value | |||
Credit Default Put Swaption, exercise price $0.90 | CIB | CDX.NA.IG.39 | 0.90% | January 18, 2023 | 48,000,000 | $(52,800) | $(342) | |||
Credit Default Put Swaption, exercise price EUR 1.03 | CIB | iTraxx Europe Series 37 | 1.03% | January 18, 2023 | 43,200,000 | (54,621) | (314) | |||
Credit Default Put Swaption, exercise price EUR 0.85 | CIB | iTraxx Europe Series 37 | 0.85% | January 18, 2023 | 22,100,000 | (65,657) | (868) | |||
Credit Default Call Swaption, exercise price EUR 0.85 | CIB | 0.85% | iTraxx Europe Series 37 | January 18, 2023 | 22,100,000 | (50,933) | (173) | |||
Credit Default Put Swaption, exercise price EUR 0.90 | CIB | iTraxx Europe Series 37 | 0.90% | February 15, 2023 | 21,700,000 | (93,060) | (938) | |||
Credit Default Call Swaption, exercise price EUR 0.90 | CIB | 0.90% | iTraxx Europe Series 37 | February 15, 2023 | 21,700,000 | (73,092) | (612) | |||
$(390,163) | $(3,247) |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
At December 31, 2022, the Fund held the following OTC purchased swaptions: | ||||||||||
Description | Counterparty | Rate Received by the Fund | Rate Paid by the Fund | Expiration Date | Notional Amount | Premium (Received)/Paid | Fair Value | |||
Credit Default Call Swaption, exercise price $0.80 | CIB | 0.80% | CDX.NA.IG.39 | January 18, 2023 | 24,000,000 | $60,000 | $510 | |||
Credit Default Call Swaption, exercise price EUR 0.93 | CIB | 0.93% | iTraxx Europe Series 37 | January 18, 2023 | 21,600,000 | 55,987 | 418 | |||
$115,987 | $928 |
Abbreviations: | ||
AZB | Australia New Zealand Bank | |
BA | Bank of America Corp | |
BB | Barclays Bank PLC | |
BBH | Brown Brothers Harriman | |
BNP | BNP Paribas Securities Corp | |
BR4CDI | Brazil Cetip Interbank Deposit | |
CA | Credit Agricole | |
CGM | Citigroup Global Markets | |
CIB | Citibank | |
CNRR | China Fixing Repo Rate | |
EURIBOR | Euro Interbank Offered Rate is the interest rate published by European Money Markets Institute, that banks offer to lend interest rate published by European Money Markets Institute, that banks offer to lend unsecured funds to other banks. | |
GS | Goldman Sachs | |
HSB | HSBC Bank USA | |
JPM | JP Morgan Chase & Co | |
KRW-CD-KSDA | South Korea Interbank Offered Rate | |
MXTIIE | Mexico Interest Rate is the 28 Day InterBank Interest Rate. | |
MS | Morgan Stanley & Co LLC | |
PLN-WIBOR-WIBO | Warsaw Interbank Offered Rate is the rate for a Reset Date for deposits in the Polish Zloty for a period of the Designated Maturity. | |
RBS | Royal Bank of Scotland | |
SAH | Standard Chartered Bank | |
SEB | Skandinaviska Enskilda Banken AB | |
SG | Societe General SA | |
SSB | State Street Bank | |
TD | Toronto Dominion Bank | |
TELBOR | Bank of Israel Interest Rate Fixings is the interest rate on inter-bank loans | |
UBS | UBS AG | |
Currency Abbreviations | ||
AUD | Australian Dollar | |
BRL | Brazilian Real | |
CAD | Canadian Dollar | |
CHF | Swiss Franc | |
CLP | Chilean Peso | |
CNY | Chinese Yuan | |
COP | Colombian Peso | |
CSK | Czechoslovak koruna |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Schedule of Investments
As of December 31, 2022
DKK | Danish Krone |
EUR | Euro Dollar |
GBP | British Pound |
HUF | Hungarian Forint |
IDR | Indonesian Rupiah |
ILS | Israeli New Shekel |
INR | Indian Rupee |
JPY | Japanese Yen |
KRW | Korean Won |
MXN | Mexican Peso |
MYR | Malaysian Ringgit |
NOK | Norwegian Krone |
NZD | New Zealand Dollar |
PEN | Peruvian Nuevo Sol |
PLN | Polish Zloty |
RON | Romanian Leu |
SEK | Swedish Krona |
SGD | Singapore Dollar |
THB | Thai Baht |
TWD | Taiwan Dollar |
USD | U.S. Dollar |
ZAR | South African Rand |
Summary of Investments by Country as of December 31, 2022.
Country | Fair Value | Percentage of Fund Investments | |
United States | $203,131,013 | 44.71% | |
Japan | 54,330,703 | 11.96 | |
Mexico | 32,983,408 | 7.26 | |
Germany | 18,659,696 | 4.11 | |
France | 15,305,075 | 3.37 | |
United Kingdom | 14,771,112 | 3.25 | |
Canada | 11,496,178 | 2.53 | |
Netherlands | 9,852,174 | 2.17 | |
Romania | 9,809,650 | 2.16 | |
Italy | 9,541,940 | 2.10 | |
Spain | 7,741,550 | 1.70 | |
Belgium | 7,301,740 | 1.61 | |
South Africa | 7,086,508 | 1.56 | |
Switzerland | 6,856,329 | 1.51 | |
China | 6,324,855 | 1.39 | |
Ireland | 5,711,040 | 1.26 | |
Cayman Islands | 3,714,352 | 0.82 | |
Egypt | 3,303,280 | 0.73 | |
South Korea | 3,129,296 | 0.69 | |
Togo | 2,957,583 | 0.65 | |
Austria | 2,210,271 | 0.48 | |
New Zealand | 2,031,473 | 0.45 | |
Indonesia | 1,903,843 | 0.42 | |
Luxembourg | 1,826,616 | 0.40 | |
Iceland | 1,678,772 | 0.37 | |
Australia | 1,359,016 | 0.30 | |
Sweden | 1,329,590 | 0.29 | |
Norway | 925,919 | 0.20 | |
Malaysia | 802,725 | 0.18 | |
Bermuda | 770,496 | 0.17 | |
Brazil | 761,062 | 0.17 | |
Philippines | 746,240 | 0.16 | |
Finland | 720,216 | 0.16 | |
Nigeria | 692,147 | 0.15 | |
Singapore | 586,352 | 0.13 | |
Thailand | 503,639 | 0.11 | |
Poland | 484,051 | 0.10 | |
Portugal | 455,323 | 0.10 | |
Denmark | 278,068 | 0.06 | |
Slovenia | 276,900 | 0.06 | |
Total | $454,350,201 | 100.00% |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
Statement of Assets and Liabilities
As of December 31, 2022
Empower Global Bond Fund | |
ASSETS: | |
Investments in securities, fair value (including $14,901,127 of securities on loan)(a) | $438,624,516 |
Repurchase agreements, fair value(b) | 15,725,685 |
Cash | 5,288,298 |
Cash denominated in foreign currencies, fair value(c) | 2,890,873 |
Cash pledged on futures contracts | 3,966,824 |
Cash pledged on forward foreign currency contracts | 6,340,000 |
Cash pledged on centrally cleared swaps | 7,002,405 |
Interest receivable | 4,096,220 |
Subscriptions receivable | 196,125 |
Variation margin on futures contracts | 425,456 |
Purchased swaptions, fair value (premiums paid $115,987) | 928 |
Unrealized appreciation on forward foreign currency contracts | 6,219,742 |
Total Assets | 490,777,072 |
LIABILITIES: | |
Payable for TBA investments purchased | 24,073,973 |
Payable for director fees | 8,131 |
Payable for other accrued fees | 148,311 |
Payable for shareholder services fees | 6,225 |
Payable to investment adviser | 201,417 |
Payable upon return of securities loaned | 15,725,685 |
Redemptions payable | 609,279 |
Unrealized depreciation on forward foreign currency contracts | 7,618,226 |
Variation margin on centrally cleared swaps | 92,044 |
Written swaptions, fair value (premiums received $(390,163) | 3,247 |
Total Liabilities | 48,486,538 |
NET ASSETS | $442,290,534 |
NET ASSETS REPRESENTED BY: | |
Capital stock, $0.10 par value | $6,011,736 |
Paid-in capital in excess of par | 529,114,444 |
Undistributed/accumulated deficit | (92,835,646) |
NET ASSETS | $442,290,534 |
NET ASSETS BY CLASS | |
Investor Class | $20,801,239 |
Institutional Class | $421,489,295 |
CAPITAL STOCK: | |
Authorized | |
Investor Class | 35,000,000 |
Institutional Class | 280,000,000 |
Issued and Outstanding | |
Investor Class | 3,131,451 |
Institutional Class | 56,985,912 |
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE: | |
Investor Class | $6.64 |
Institutional Class | $7.40 |
(a) Cost of investments | $502,656,991 |
(b) Cost of repurchase agreements | $15,725,685 |
(c) Cost of cash denominated in foreign currencies | $2,928,368 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
Statement of Operations
For the fiscal year ended December 31, 2022
Empower Global Bond Fund | |
INVESTMENT INCOME: | |
Interest | $11,854,436 |
Income from securities lending | 5,957 |
Foreign withholding tax | (55,790) |
Total Income | 11,804,603 |
EXPENSES: | |
Management fees | 2,711,662 |
Shareholder services fees – Investor Class | 78,592 |
Audit and tax fees | 76,554 |
Custodian fees | 180,653 |
Directors fees | 34,044 |
Legal fees | 10,169 |
Pricing fees | 56,735 |
Registration fees | 35,234 |
Shareholder report fees | 25 |
Transfer agent fees | 8,419 |
Other fees | 19,225 |
Total Expenses | 3,211,312 |
Less amount waived by investment adviser | 44,245 |
Net Expenses | 3,167,067 |
NET INVESTMENT INCOME | 8,637,536 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized loss on investments and foreign currency transactions | (55,488,633) |
Net realized gain on credit default swaps | 2,875,708 |
Net realized gain on interest rate swaps | 5,009,046 |
Net realized gain on futures contracts | 10,207,428 |
Net realized loss on purchased options | (723,831) |
Net realized loss on purchased swaptions | (182,850) |
Net realized gain on written options | 1,145,436 |
Net realized gain on written swaptions | 392,310 |
Net realized gain on forward foreign currency contracts | 703,129 |
Net Realized Loss | (36,062,257) |
Net change in unrealized depreciation on investments and foreign currency translations | (51,738,399) |
Net change in unrealized appreciation on credit default swaps | 41,750 |
Net change in unrealized appreciation on interest rate swaps | 166,988 |
Net change in unrealized appreciation on futures contracts | 3,220,105 |
Net change in unrealized depreciation on forward foreign currency contracts | (2,374,719) |
Net change in unrealized depreciation on purchased swaptions | (115,059) |
Net change in unrealized depreciation on written swaptions | 386,916 |
Net Change in Unrealized Depreciation | (50,412,418) |
Net Realized and Unrealized Loss | (86,474,675) |
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $(77,837,139) |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
Statement of Changes in Net Assets
For the fiscal years ended December 31, 2022 and December 31, 2021
Empower Global Bond Fund | 2022 | 2021 | |
OPERATIONS: | |||
Net investment income | $8,637,536 | $3,735,231 | |
Net realized loss | (36,062,257) | (4,746,004) | |
Net change in unrealized depreciation | (50,412,418) | (30,836,183) | |
Net Decrease in Net Assets Resulting from Operations | (77,837,139) | (31,846,956) | |
DISTRIBUTIONS TO SHAREHOLDERS: | |||
From return of capital | |||
Investor Class | (99,757) | - | |
Institutional Class | (2,013,739) | - | |
From return of capital | (2,113,496) | 0 | |
From net investment income and net realized gains | |||
Investor Class | (177,731) | (19,573) | |
Institutional Class | (3,454,108) | (961,735) | |
From net investment income and net realized gains | (3,631,839) | (981,308) | |
Total Distributions | (5,745,335) | (981,308) | |
CAPITAL SHARE TRANSACTIONS: | |||
Shares sold | |||
Investor Class | 4,550,233 | 8,491,161 | |
Institutional Class | 60,924,888 | 140,818,162 | |
Shares issued in reinvestment of distributions | |||
Investor Class | 277,488 | 19,573 | |
Institutional Class | 5,467,847 | 961,735 | |
Shares redeemed | |||
Investor Class | (5,725,673) | (10,212,157) | |
Institutional Class | (79,185,203) | (57,066,053) | |
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (13,690,420) | 83,012,421 | |
Total Increase (Decrease) in Net Assets | (97,272,894) | 50,184,157 | |
NET ASSETS: | |||
Beginning of year | 539,563,428 | 489,379,271 | |
End of year | $442,290,534 | $539,563,428 | |
CAPITAL SHARE TRANSACTIONS - SHARES: | |||
Shares sold | |||
Investor Class | 648,293 | 1,045,029 | |
Institutional Class | 7,807,240 | 15,719,487 | |
Shares issued in reinvestment of distributions | |||
Investor Class | 41,880 | 2,425 | |
Institutional Class | 742,137 | 107,697 | |
Shares redeemed | |||
Investor Class | (828,111) | (1,258,211) | |
Institutional Class | (10,303,401) | (6,398,504) | |
Net Increase (Decrease) | (1,891,962) | 9,217,923 |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Financial Highlights
Selected data for a share of capital stock of the Fund throughout the periods indicated.
Income (Loss) from Investment Operations: | Less Distributions: | ||||||||||
Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From return of capital | From net investment income | From net realized gains | Total Distributions | Net asset value, end of year | Total Return (b)(c) | ||
Investor Class | |||||||||||
12/31/2022 | $7.88 | 0.10 | (1.26) | (1.16) | (0.03) | (0.02) | (0.03) | (0.08) | $6.64 | (14.65%) | |
12/31/2021 | $8.43 | 0.03 | (0.57) | (0.54) | - | (0.01) | - | (0.01) | $7.88 | (6.46%) | |
12/31/2020 | $8.09 | 0.10 | 0.33 | 0.43 | (0.02) | (0.07) | - | (0.09) | $8.43 | 5.33% | |
12/31/2019 | $8.07 | 0.20 | 0.13 | 0.33 | - | (0.31) | - | (0.31) | $8.09 | 4.07% | |
12/31/2018 | $8.34 | 0.30 | (0.32) | (0.02) | - | (0.22) | (0.03) | (0.25) | $8.07 | (0.27%) | |
Institutional Class | |||||||||||
12/31/2022 | $8.75 | 0.14 | (1.40) | (1.26) | (0.03) | (0.03) | (0.03) | (0.09) | $7.40 | (14.35%) | |
12/31/2021 | $9.33 | 0.07 | (0.63) | (0.56) | - | (0.02) | - | (0.02) | $8.75 | (6.03%) | |
12/31/2020 | $8.95 | 0.16 | 0.35 | 0.51 | (0.02) | (0.11) | - | (0.13) | $9.33 | 5.72% | |
12/31/2019 | $8.91 | 0.25 | 0.14 | 0.39 | - | (0.35) | - | (0.35) | $8.95 | 4.39% | |
12/31/2018 | $9.20 | 0.35 | (0.35) | 0.00 | - | (0.26) | (0.03) | (0.29) | $8.91 | 0.06% |
Net assets, end of year (000) | Ratio of expenses to average net assets (before reimbursement and/or waiver, if applicable) | Ratio of expenses to average net assets (after reimbursement and/or waiver, if applicable) | Ratio of net investment income to average net assets (after reimbursement and/or waiver, if applicable) | Portfolio turnover rate(d)(e) | ||
Supplemental Data and Ratios | ||||||
Investor Class | ||||||
12/31/2022 | $ 20,801 | 1.13% | 1.00% | 1.48% | 176% | |
12/31/2021 | $ 25,775 | 1.09% | 1.01% | 0.32% | 184% | |
12/31/2020 | $ 29,333 | 1.10% | 1.01% | 1.25% | 104% | |
12/31/2019 | $ 38,388 | 1.07% | 1.01% | 2.46% | 73% | |
12/31/2018 | $ 41,754 | 1.12% | 1.01% | 3.60% | 123% | |
Institutional Class | ||||||
12/31/2022 | $421,489 | 0.65% | 0.65% | 1.83% | 176% | |
12/31/2021 | $513,789 | 0.64% | 0.64% | 0.74% | 184% | |
12/31/2020 | $460,046 | 0.66% | 0.66% | 1.76% | 104% | |
12/31/2019 | $470,867 | 0.65% | 0.65% | 2.79% | 73% | |
12/31/2018 | $409,355 | 0.70% | 0.66% | 3.80% | 123% |
(a) | Per share amounts are based upon average shares outstanding. |
(b) | Total return does not include any fees or expenses of variable insurance contracts, if applicable. If such fees or expenses were included, the return shown would have been lower. |
(c) | Total return shown net of expenses reimbursed and/or waived, if applicable. Without the expense reimbursement and/or waiver, the return shown would have been lower. |
(d) | Portfolio turnover is calculated at the Fund level. |
(e) | Portfolio turnover includes purchases and sales from mortgage dollar roll transactions which occurred during the period, if any. Excluding these transactions, the portfolio turnover would have been 96% and 138% for the years ended December 31, 2022 and December 31, 2021, respectively. |
See Notes to Financial Statements.
Annual Report - December 31, 2022
EMPOWER FUNDS, INC.
EMPOWER GLOBAL BOND FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Empower Funds, Inc. (Empower Funds), a Maryland corporation, was organized on December 7, 1981 and is registered under the Investment Company Act of 1940 (the 1940 Act) as an open-end management investment company. Empower Funds presently consists of forty-five funds. Interests in the Empower Global Bond Fund (the Fund) are included herein. The investment objective of the Fund is to seek current income with capital appreciation and growth of income. The Fund is non-diversified as defined in the 1940 Act. The Fund is available as an investment option to insurance company separate accounts for certain variable annuity contracts and variable life insurance policies, to individual retirement account custodians or trustees, to plan sponsors of qualified retirement plans, to college savings programs, and to asset allocation funds that are a series of Empower Funds.
The Fund offers two share classes, referred to as Investor Class and Institutional Class shares. All shares of the Fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, expenses (other than those attributable to a specific class) and realized and unrealized gains and losses are allocated daily to each class of shares based on the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against operations of that class. Expenses incurred by Empower Funds, which are not Fund specific, are allocated based on relative net assets or other appropriate allocation methods.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Fund is also an investment company and accordingly follows 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 is a summary of the significant accounting policies of the Fund.
Security Valuation
The Board of Directors of the Fund has adopted policies and procedures for the valuation of the Fund’s securities and assets, and has appointed the Fair Value Pricing Committee of the investment adviser, Empower Capital Management, LLC (ECM or the Adviser), to complete valuation determinations under those policies and procedures. Effective September 8, 2022, pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors approved the Adviser as the Fund’s valuation designee to make all fair value determinations with respect to the Fund’s investments, subject to oversight by the Board of Directors.
The Fund generally values its securities based on market prices determined at the close of regular trading on the New York Stock Exchange (NYSE) on each day the NYSE is open for trading. The net asset value (NAV) of each class of the Fund's shares is determined by dividing the net assets attributable to each class of shares of the Fund by the number of issued and outstanding shares of each class of the Fund on each valuation date.
Short term securities purchased with less than 60 days remaining until maturity and all U.S. Treasury Bills are valued on the basis of amortized cost, which has been determined to approximate fair value. Short term securities purchased with more than 60 days remaining until maturity are valued using pricing services, or in the event a price is not available from a pricing service, may be priced using other methodologies approved by the Board of Directors, including model pricing or pricing on the basis of quotations from brokers or dealers, and will continue to be priced until final maturity.
Fixed income investments are valued using evaluated bid prices from approved pricing services when available and appropriate based on the conditions of the market. If a price cannot be located from either the primary or secondary sources, or if the market is determined to be illiquid or inactive, other appropriate sources, which may include the use of an internally developed valuation model, another external pricing vendor or sourcing a price from a broker, may be used.
Annual Report - December 31, 2022
Foreign exchange rates are determined at a time that corresponds to the closing of the NYSE.
For derivatives that are traded on an exchange, the last sale price as of the close of business of the exchange will be used. For derivatives traded over-the-counter (OTC), independent pricing services will be utilized when possible. If a price cannot be located from the primary source, other appropriate sources, which may include the use of an internally developed valuation model, another external pricing vendor or sourcing a price from a broker, may be used.
Independent pricing services are approved by the Board of Directors and are utilized for all investment types when available. In some instances valuations from independent pricing services are not available or do not reflect events in the market between the time the market closed and the valuation time and therefore fair valuation procedures are implemented. The fair value for some securities may be obtained from pricing services or other pricing sources. The inputs used by the pricing services are reviewed quarterly or when the pricing vendor issues updates to its pricing methodologies. Broker quotes are analyzed through an internal review process, which includes a review of known market conditions and other relevant data. Developments that might trigger fair value pricing could be natural disasters, government actions or fluctuations in domestic and foreign markets.
The following table provides examples of the inputs that are commonly used for valuing particular classes of securities. These classifications are not exclusive, and any inputs may be used to value any other security class.
Class | Inputs |
Asset-Backed Securities | Benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. Inputs may also include new issue data, collateral performance, and monthly payment information. |
Corporate Bonds and Notes | Benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. Inputs also may include observations of equity and credit default swap curves related to issuer. |
Foreign Government Bonds and Notes | Benchmark yields, executed trades, broker/dealer quotes, credit information, collateral attributes, issuer spreads, benchmark securities, treasury/swap maturity curves, issuer spread curves, evaluated bids, market corroborated inputs, offers and reference data including market research publications. |
Mortgage-Backed Securities | Benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. Inputs may also include new issue data, collateral performance, TBA prices, monthly payment information and third party real estate analysis. |
U.S. Treasury Bonds and Notes | Benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. |
Purchased and Written Swaptions | Cash rates, futures and swap rates, FX spot and forward curve, FX volatilities, interest rates, net present value of cash flows. |
Short Term Investments | Maturity date, credit quality and interest rates. |
Futures Contracts | Exchange traded close price. |
Forward Foreign Currency Contracts | Foreign currency spot and forward rates. |
Credit Default Swaps | Reported trades, credit spreads and curves, recovery rates, restructuring types and net present value of cashflows. |
Interest Rate Swaps | Interest rate curves, LIBOR curves, reported trades and swap curves. |
The Fund classifies its valuations into three levels based upon the observability of inputs to the valuation of the Fund’s investments. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. Classification is based on the lowest level of input significant to the fair value measurement. The three levels are defined as follows:
Level 1 – Unadjusted quoted prices for identical securities in active markets.
Annual Report - December 31, 2022
Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly. These may include quoted prices for similar assets in active markets.
Level 3 – Unobservable inputs to the extent observable inputs are not available and may include prices obtained from single broker quotes. Unobservable inputs reflect the Fund’s own assumptions and would be based on the best information available under the circumstances.
As of December 31, 2022, all of the Fund’s investments are valued using Level 2 inputs, except for Futures Contracts, which are valued using Level 1 inputs. More information regarding the sector classifications, as applicable, are included in the Schedule of Investments.
Repurchase Agreements
The Fund may engage in repurchase agreement transactions with institutions that the Fund’s investment adviser has determined are creditworthy. The Fund will purchase securities at a specified price with an agreement to sell the securities to the same counterparty at a specified time, price and interest rate. The Fund’s custodian and/or securities lending agent receives delivery of the underlying securities collateralizing a repurchase agreement. Collateral is at least equal to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon a Fund’s ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights.
To Be Announced Transactions
The Fund may invest in securities known as To Be Announced (TBA) securities. TBAs are Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or Government National Mortgage Association issued mortgage backed securities for forward settlement, in which the buyer and seller decide on trade parameters, but the exact pools are unknown until two days before settlement date. The transactions arise when securities are purchased or sold with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield at the time of entering into the transaction. TBA transactions generally settle monthly on a specified date. TBAs are included in Investments in securities, fair value on the Statement of Assets and Liabilities.
Dollar Rolls
The Fund may sell TBA mortgage-backed securities and simultaneously contract to repurchase TBA mortgage-backed securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and realize gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.
Foreign Currency Translations and Transactions
The accounting records of the Fund are maintained in U.S. dollars. Investment securities, and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the current exchange rate. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the exchange rate on the dates of the transactions.
The Fund does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded by the Fund and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. These gains and losses are included in net realized gain or loss and change in net unrealized appreciation or depreciation on the Statement of Operations.
Annual Report - December 31, 2022
Security Transactions
Security transactions are accounted for on the date the security is purchased or sold (trade date). Realized gains and losses from investments sold are determined on a specific lot selection. Interest income, including amortization of discounts and premiums, is recorded daily.
Federal Income Taxes and Distributions to Shareholders
The Fund intends to comply with provisions under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Fund’s tax return filings generally remains open for the three preceding fiscal reporting period ends. State tax returns may remain open for an additional fiscal year.
Distributions to shareholders from net investment income of the Fund, if any, are declared and paid semi-annually. Capital gain distributions of the Fund, if any, are declared and paid at least annually. Distributions are reinvested in additional shares of the Fund at net asset value and are declared separately for each class. Distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles.
The tax character of distributions paid during the years ended December 31, 2022 and 2021 were as follows:
2022 | 2021 | ||
Ordinary income | $1,581,668 | $- | |
Long-term capital gain | 2,050,171 | 981,308 | |
Return of capital | 2,113,496 | - | |
$5,745,335 | $981,308 |
Net investment income (loss) and net realized gain (loss) for federal income tax purposes may differ from those reported on the financial statements because of temporary and permanent book-tax basis differences. Book-tax differences may include but are not limited to the following: wash sales, distribution adjustments, market discount adjustments, and foreign currency reclassifications.
Capital accounts within the financial statements are adjusted for permanent book-tax differences, and are not adjusted for temporary book-tax differences which will reverse in a subsequent period. Accordingly, the Fund has reclassified $2,113,496 from Paid-in capital to Undistributed/accumulated earnings for December 31, 2022. Net assets of the Fund were unaffected by the reclassifications.
The tax components of capital shown in the following table represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation for federal income tax purposes. At December 31, 2022, the components of distributable earnings on a tax basis were as follows:
Undistributed net investment income | $— |
Undistributed long-term capital gains | — |
Capital loss carryforwards | (28,795,458) |
Post-October losses | — |
Net unrealized depreciation | (64,040,188) |
Tax composition of capital | $(92,835,646) |
At December 31, 2022, the Fund had capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. Capital loss carryforwards with no expiration, if any, must be utilized prior to those with expiration dates. During the year ended December 31, 2022, the Fund did not utilize any capital loss carryforwards. Details of the capital loss carryforwards as of December 31, 2022, were as follows:
No Expiration | $(28,795,458) |
Total | (28,795,458) |
Annual Report - December 31, 2022
The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation for federal income tax purposes as of December 31, 2022 were as follows:
Federal tax cost of investments | $521,135,914 |
Gross unrealized appreciation on investments | 16,006,885 |
Gross unrealized depreciation on investments | (80,047,073) |
Net unrealized depreciation on investments | $(64,040,188) |
2. DERIVATIVE FINANCIAL INSTRUMENTS
The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including credit default swaps, interest rate swaps, futures contracts, forward foreign currency contracts, purchased options, written options, purchased swaptions and written swaptions. Derivatives are investments whose value is primarily derived from underlying assets, indices or reference rates.
In pursuit of the Fund's investment objectives, the Fund may seek to use derivatives to increase or decrease its exposure to the following market risks:
Credit Risk - The risk that an issuer may default on its obligations to pay principal and/or interest. A security’s value may be affected by changes in its credit quality rating or its issuer’s financial conditions.
Foreign Exchange Risk - The risk that adverse fluctuations in exchange rates between the U.S. Dollar and other currencies may cause the Fund to lose money on investments denominated in foreign currencies.
Interest Rate Risk - The risk that market value of a fixed income security is affected significantly by changes in interest rates. When interest rates rise, the security’s market value declines and when interest rates decline, market values rise. The longer a security’s maturity, the greater the risk and the higher its yield. Conversely, the shorter a security’s maturity, the lower the risk and the lower its yield.
The Fund is also exposed to additional risks from investing in derivatives, such as liquidity and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to sell or close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligations to the Fund. Investing in derivatives may also involve greater risks than investing directly in the underlying assets, such as losses in excess of any initial investment and collateral received. In addition, there may be the risk that the change in value of the derivative contract does not correspond to the change in value of the underlying instrument.
The Fund is subject to enforceable master netting agreements, or netting arrangements, with certain counterparties. These agreements govern the terms of certain transactions, and reduce the counterparty risk associated with relevant transactions by specifying offsetting mechanisms and collateral posting arrangements, if any, at pre-arranged exposure levels. Collateral or margin requirements, if any, are set by the broker or exchange clearing house for exchanged traded derivatives while collateral terms are contract specific for OTC traded derivatives.
Derivative counterparty credit risk is managed through an evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives excluding swaptions, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, if any, events of default, or early termination. OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
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 Fund and the counterparty.
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately in the Statement of Assets and Liabilities as cash pledged on and cash received on, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on
Annual Report - December 31, 2022
the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.
Options and Swaptions
The Fund may buy and sell put and call options, or write put and call options to increase, decrease, or change the level or types of exposure to market risk factors. When an option is purchased, the Fund is entitled to buy and sell a specified number of shares or units of a particular security, currency, or index at a specified price at a specified date or within a specified period of time. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option. A purchased call or written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price. A purchased put or written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price. Options can be an over-the-counter transaction or maybe executed on a registered exchange and cleared through a clearing-house associated with the exchange. The use of options may involve risks such as the Fund paying a premium without the option being exercised, or that the clearinghouse will fail to perform its obligations. The risk in writing a call option is the market price of the underlying security increasing above the strike price and the option being exercised. The risk in writing a put option is the market price of the underlying security decreasing below the strike price and the option being exercised. When writing options, the Fund has the additional risk that there may be an illiquid market where the Fund is unable to close the contact. The risk in buying an option is that the Fund pays a premium for the option, and the option may be worth less than the premium paid or expire worthless.
Purchased options, if any, are reported in the Schedule of Investments. Written options, if any, are disclosed in a table following the Schedule of Investments. Upon purchasing a put or call option for a premium, the premium paid is recorded as an investment and its value is marked-to-market daily. When the Fund writes an option, the premium received is recorded as a liability and is subsequently adjusted to the current market value of the option written. When options expire, exercised or closed, the realized gain or loss is included on the Statement of Operations. The Fund held an average market value of $9,633,698 and $(9,992,249) in purchased options and written options, respectively, for the reporting period.
Purchased and written swaptions, if any, are disclosed in a table following the Schedule of Investments. Upon purchasing a put or call swaption for a premium, the premium paid is recorded as an investment and its value is marked-to-market daily. When the Fund writes an swaption, the premium received is recorded as a liability and is subsequently adjusted to the current market value of the option written. When swaptions expire, exercised or closed, the realized gain or loss is included on the Statement of Operations. The Fund held an average market value of $11,530,769 and $(56,538,462) in purchased swaptions and written swaptions, respectively, for the reporting period.
Futures Contracts
The Fund uses futures contracts to capitalize on expected changes in the shape of the yield curve and to control overall interest rate exposure. A futures contract is an agreement between two parties to buy or sell a specified underlying investment for a fixed price at a specified future date. Futures contracts are generally entered into on a regulated futures exchange and cleared through a clearinghouse associated with the exchange.The use of futures contracts may involve risks such as the possibility of illiquid markets or imperfect correlation between the value of the contracts and the underlying securities that comprise the index, or that the clearinghouse will fail to perform its obligations.
Futures contracts are reported in a table following the Schedule of Investments. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Receipts or payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. This is recorded as variation margin on futures contracts on the Statement of Assets and Liabilities. When the Fund enters into a closing transaction, it will realize, for book
Annual Report - December 31, 2022
purposes, a gain or loss equal to the difference between the value of the futures contract at the time it was opened or purchased and its value at the time it was closed, and is reflected in net realized gain or loss on the Statement of Operations. The Fund held an average of 408 long futures contracts and an average of 751 short futures contracts for the reporting period.
Forward Foreign Currency Contracts
The Fund enters into OTC forward foreign currency contracts (forward contracts) primarily to capture potential returns from changes in currency exchange rates or to reduce the risk of undesired currency exposure. A forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate.
Forward contracts are reported in a table following the Schedule of Investments. The unrealized appreciation or depreciation is reported on the Statement of Assets and Liabilities and on the Statement of Operations within the net change in unrealized appreciation or depreciation. Upon the closing of such contract the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars is recorded as net realized gain or loss on the Statement of Operations. The Fund held an average foreign currency contracts notional amount of $296,108,140 in forward contracts for the reporting period.
Credit Default Swaps
The Fund enters into credit default swap contracts to gain exposure on individual names and/or baskets of securities. A credit default swap is an agreement between the Fund and a counterparty that enables the Fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a protection buyer, makes periodic payments to the other party, a protection seller, in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the number of defaults event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed on a registered exchange (centrally cleared credit default swaps).
Credit default swaps, if any, are reported in a table following the Schedule of Investments. For centrally cleared credit default swaps, required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the centrally cleared credit default swaps. Such variation margin is accounted for as a payable or receivable on the Statement of Assets and Liabilities and settled daily until the contract is closed, at which time the gains or losses are realized. Any upfront premiums paid or received upon entering into a swap are capitalized and amortized to income ratably over the term of the swap. Upfront premiums are disclosed as upfront premiums paid/received in a table following the Schedule of Investments. The Fund accrues for the interim payments on swap contracts on a daily basis, with the net amount recorded within variation margin on the Statement of Assets and Liabilities. Upon the termination of swap contracts, the net gain or loss is recorded as net realized gain or loss on credit default swaps on the Statement of Operations.
Credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. The Fund held an average notional amount of $100,991,869 in credit default swaps for the reporting period.
Interest Rate Swaps
The Fund enters into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between two parties to exchange interest rate payment obligations. Typically, one is based on an interest rate fixed to maturity while the other is based on an interest rate that changes in accordance with changes in a designated benchmark (for example, the London Interbank Offered Rate (LIBOR), prime rate, commercial paper rate, or other benchmarks). Each party’s payment obligation under an interest rate swap is determined by reference to a specified notional amount of money. Therefore, interest rate swaps generally do not involve the delivery of securities, other underlying instruments, or principal amounts; rather they entail the exchange of cash payments based on the application of the designated interest rates to the notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps).
Annual Report - December 31, 2022
For centrally cleared interest rate swaps, required initial margin deposits of cash or securities are pledged by the Fund. Subsequent payments, known as variation margin, are made or received by the Fund, depending on fluctuations in the value of the centrally cleared interest rate swaps. Such variation margin is accounted for as a payable or receivable on the Statement of Assets and Liabilities and settled daily until the contract is closed, at which time the gains or losses are realized. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as realized gain or loss on the Statement of Operations.
The Fund has entered into interest rate swaps in which it either pays or receives a fixed interest rate and pays or receives a floating interest rate. Barring swap counterparty default, the risk of loss in an interest rate swap is limited to the net amount of interest payments that the Fund is obligated to make or receive (as applicable), as well as any early termination payment payable by or to the Fund upon early termination of the swap. The Fund held an average notional amount of $10,259,839,578 in interest rate swaps for the reporting period. Interest rate swaps are reported on a table following the Schedule of Investments.
Derivative Financial Instruments Categorized by Risk Exposure
Valuation of derivative investments as of December 31, 2022 is as follows:
Asset Derivatives | Liability Derivatives | |||||||
Risk Exposure | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||
Credit contracts (swaps) | Net unrealized appreciation on credit default swaps | $ 13,451(a) | Net unrealized depreciation on credit default swaps | $(55,481)(a) | ||||
Interest rate contracts (swaps) | Net unrealized appreciation on interest rate swaps | $ 660,076(a) | Net unrealized depreciation on interest rate swaps | $(626,012)(a) | ||||
Interest rate contracts (futures contracts) | Net unrealized appreciation on futures contracts | $4,544,035 (a) | Net unrealized depreciation on futures contracts | $(634,126)(a) | ||||
Foreign exchange contracts (forwards) | Unrealized appreciation on forward foreign currency contracts | $ 6,219,742 | Unrealized depreciation on forward foreign currency contracts | $(7,618,226) | ||||
Credit contracts (purchased swaptions) | Purchased swaptions at fair value | $ 928 | ||||||
Credit contracts (written swaptions) | Written swaptions at fair value | $ (3,247) |
(a)Includes cumulative appreciation (depreciation) of credit contracts and interest rate contracts as reported in the Fund’s Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
Annual Report - December 31, 2022
The effect of derivative investments for the year ended December 31, 2022 is as follows:
Realized Gain or (Loss) | Change in Unrealized Appreciation or (Depreciation) | |||||
Risk Exposure | Statement of Operations Location | Statement of Operations Location | ||||
Interest rate contracts (futures contracts) | Net realized gain on futures contracts | $ 10,207,428 | Net change in unrealized appreciation on futures contracts | $ 3,220,105 | ||
Credit contracts (swaps) | Net realized gain on credit default swaps | $ 2,875,708 | Net change in unrealized appreciation on credit default swaps | $41,750 | ||
Interest rate contracts (swaps) | Net realized gain on interest rate swaps | $ 5,009,046 | Net change in unrealized appreciation on interest rate swaps | $166,988 | ||
Foreign exchange contracts (forwards) | Net realized gain on forward foreign currency contracts | $ 703,129 | Net change in unrealized depreciation on forward foreign currency contracts | $(2,374,719) | ||
Foreign exchange contracts (purchased options) | Net realized loss on foreign currency purchased options | $ (187,671) | ||||
Foreign exchange contracts (written options) | Net realized gain on foreign currency written options | $ 170,484 | ||||
Interest rate contracts (purchased options) | Net realized loss on purchased options | $ (536,160) | ||||
Interest rate contracts (written options) | Net realized gain on written options | $ 974,952 | ||||
Credit contracts (written swaptions) | Net realized loss on written swaptions | $ (97,621) | Net change in unrealized appreciation on written swaptions | $386,916 | ||
Credit contracts (purchased swaptions) | Net realized loss on purchased swaptions | $ (182,850) | Net change in unrealized depreciation on purchased swaptions | $ (115,059) |
Concentration Risk
The Fund may have elements of risk due to concentrated investments in foreign issuers located in a specific country. Such concentrations may subject the Fund to additional risks resulting from future political or economic conditions and/or possible impositions of adverse foreign governmental laws or currency exchange restrictions. Investments in securities of non-U.S. issuers have unique risks not present in securities of U.S. issuers, such as greater price volatility and less liquidity.
3. OFFSETTING ASSETS AND LIABILITIES
The Fund enters into derivative transactions with several approved counterparties. Certain transactions are effected under agreements which include master netting arrangements which provide for the netting of payment obligations and/or netting in situations of counterparty default. The following table summarizes the Fund's financial investments that are subject to an enforceable master netting arrangement at December 31, 2022.
Investments: | Gross Amount Presented in the Statement of Assets and Liabilities(a) | Financial Instruments Available for Offset | Financial Instruments Collateral Received | Cash Collateral Pledged (Received)(b) | Net Amount |
Derivative Assets (forward contracts) | $ 6,219,742 | $(3,560,397) | $— | $90,000 | $ 2,749,345 |
Derivative Liabilities (forward contracts) | $(7,618,226) | $ 3,560,397 | $— | $ — | $(4,057,829) |
(a) OTC derivatives are reported gross on the Statement of Assets and Liabilities. Variation margin related to futures contracts and centrally cleared swaps are excluded from these reported amounts. | |||||
(b) Reported collateral within this table is limited to the net outstanding amount due from an individual counterparty. The collateral received/(pledged) by the Fund may exceed these reported amounts. | |||||
Annual Report - December 31, 2022
4. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Empower Funds entered into an investment advisory agreement with Empower Capital Management, LLC (ECM) (the Adviser), a wholly-owned subsidiary of Empower Annuity Insurance Company of America (Empower of America). As compensation for its services to Empower Funds, the Adviser receives monthly compensation at the annual rate of 0.57% of the Fund’s average daily net assets up to $1 billion dollars, 0.52% of the Fund’s average daily net assets over $1 billion dollars and 0.47% of the Fund’s average daily net assets over $2 billion dollars. Certain administration and accounting services fees for the Fund are included in the investment advisory agreement.
The Adviser contractually agreed to waive fees or reimburse expenses that exceed an annual rate of 0.65% of the Fund's average daily net assets attributable to each Class, including management fees and expenses paid directly by the Fund, excluding shareholder service fees and certain extraordinary expenses (the "Expense Limit"). The agreement's current term ends on April 30, 2023 and automatically renews for one-year unless terminated upon written notice within 90 days of the end of the current term or upon termination of the investment advisory agreement. The amount waived or reimbursed, if any, is reflected in the Statement of Operations.
The Adviser is permitted upon approval by the Board of Directors to recoup amounts waived or reimbursed by the Fund in future periods, not exceeding three years following the particular waiver/reimbursement, provided the total annual operating expenses of each Class of the Fund plus such recoupment do not exceed the lesser of the Expense Limit that was in place at the time of the waiver/reimbursement or the Expense Limit in place at the time of recoupment. At December 31, 2022, the amounts subject to recoupment were as follows:
Expires December 31, 2023 | Expires December 31, 2024 | Expires December 31, 2025 | Recoupment of Past Reimbursed Fees by the Adviser | ||||
$29,302 | $23,309 | $44,245 | $0 |
The Adviser and Empower Funds entered into a sub-advisory agreement with BlueBay Asset Management LLP and Insight North America LLC. The Adviser is responsible for compensating the Sub-Advisers for their services.
Empower Funds entered into a shareholder services agreement with Empower Retirement, LLC (Empower), an affiliate of ECM and subsidiary of Empower of America. Pursuant to the shareholder services agreement, Empower provides various recordkeeping, administrative and shareholder services to shareholders and receives from the Investor Class shares of the Fund a fee equal to 0.35% of the average daily net asset value of the share class.
Empower Financial Services, Inc. (the Distributor), is a wholly-owned subsidiary of Empower of America and the principal underwriter to distribute and market the Fund.
Certain officers of Empower Funds are also directors and/or officers of Empower of America or its subsidiaries. No officer or interested director of Empower Funds receives any compensation directly from Empower Funds. The total compensation paid to the independent directors with respect to all forty-five funds for which they serve as directors was $1,258,500 for the fiscal year ended December 31, 2022.
5. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 2022, the aggregate cost of purchases and proceeds from sales of investments (excluding all U.S. Government securities and short-term securities) were $288,100,039 and $314,274,594, respectively. For the same period, the aggregate cost of purchases and proceeds from sales of long-term U.S. Government securities were $569,540,457and $516,155,302, respectively.
6. SECURITIES LOANED
The Fund has entered into a securities lending agreement with its custodian as securities lending agent. Under the terms of the agreement the Fund receives income after deductions of other amounts payable to the securities lending agent or to the borrower from lending transactions. In exchange for such fees, the securities lending agent is authorized to loan securities on behalf of the Fund against receipt of cash collateral at least equal in value at all times to the value of the securities loaned plus accrued interest. The fair value of the loaned securities is determined daily at the close of business of the Fund and necessary collateral adjustments are made between the Fund and its counterparties on the next business day through the delivery or receipt of additional collateral. The Fund also continues to receive interest or dividends on the securities loaned. Cash collateral is invested in securities approved by the Board of Directors. The Fund bears the risk of any deficiency in the
Annual Report - December 31, 2022
amount of collateral available for return to a borrower due to a loss in an approved investment. As of December 31, 2022, the Fund had securities on loan valued at $14,901,127 and received collateral as reported on the Statement of Assets and Liabilities of $15,725,685 for such loan which was invested in Repurchase Agreements collateralized by U.S. Government or U.S. Government Agency securities. The Repurchase Agreements can be jointly purchased with other lending agent clients and in the event of a default by the counterparty, all lending agent clients would share ratably in the collateral.
Under the securities lending agreement, the collateral pledged is, by definition, the securities loaned against the cash borrowed. The following table summarizes the cash collateral liability under the securities lending agreement by class of securities loaned as of December 31, 2022. Additional information regarding the Fund's securities on loan is included in the Schedule of Investments.
Security lending transactions | Total (a) |
Corporate Bonds and Notes | $556,400 |
Foreign Government Bonds and Notes | 12,817,535 |
U.S. Treasury Bonds and Notes | 2,351,750 |
Total secured borrowings | $15,725,685 |
(a) | The remaining contractual maturity of all of the securities lending transactions is overnight and continuous. |
7. INDEMNIFICATIONS
The Fund’s organizational documents provide current and former officers and directors with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
8. SUBSEQUENT EVENTS
Management has reviewed all events subsequent to December 31, 2022, including the estimates inherent in the process of preparing these financial statements through the date the financial statements were issued. No subsequent events requiring adjustments or disclosures have occurred.
Annual Report - December 31, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Empower Funds, Inc.
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Empower Global Bond Fund (the “Fund”), one of the funds of Empower Funds, Inc., as of December 31, 2022, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2022, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights 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 Fund 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 and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its 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 Fund’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 and financial highlights, 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 and financial highlights. 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 and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 23, 2023
We have served as the auditor of one or more Empower investment companies since 1982.
TAX INFORMATION (unaudited)
The Fund intends to pass through foreign tax credits of $55,790 and has derived gross income from sources within foreign countries amounting to $7,909,858.
Dividends paid by the Fund from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Of the ordinary income distributions declared for the year ended December 31, 2022, 0% qualifies for the dividend received deduction available to the Fund’s corporate shareholders.
Fund Directors and Officers
Empower Funds is organized under Maryland law, and is governed by the Board of Directors. The following table provides information about each of the Directors and executive officers of Empower Funds.
Independent Directors* | |||||
Name, Address, and Age | Positions(s) Held with Empower Funds | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Director | Other Directorships Held by Director |
Gail H. Klapper 8515 East Orchard Road, Greenwood Village, CO 80111 79 | Chair & Independent Director | Since 2016 (as Chair) Since 2007 (as Independent Director) | Managing Attorney, Klapper Law Firm; Member/Director, The Colorado Forum; Director, Gold, Inc; Member, Colorado State Fair Board Authority; Manager, 6K Ranch, LLC; and former Director, Guaranty Bancorp | 45 | N/A |
James A. Hillary*** 8515 East Orchard Road, Greenwood Village, CO 80111 59 | Independent Director | Since 2017 | Principal and Founding Partner, Fios Capital, LLC; Member, Fios Partners LLC, Fios Holdings LLC; Sole Member, Fios Companies LLC, Resolute Capital Asset Partners LLC; Manager, Applejack Holdings, LLC; and Manager and Member, Prestige Land Holdings, LLC | 45 | N/A |
R. Timothy Hudner**** 8515 East Orchard Road, Greenwood Village, CO 80111 63 | Independent Director | Since 2017 | Director, Colorado State Housing Board; and former Director, Grand Junction Housing Authority; Counseling and Education Center | 45 | N/A |
Steven A. Lake 8515 East Orchard Road, Greenwood Village, CO 80111 68 | Independent Director | Since 2017 | Managing Member, Lake Advisors, LLC; Member, Gart Capital Partners, LLC; and Executive Member, Sage Enterprise Holdings, LLC | 45 | N/A |
Independent Directors* | |||||
Name, Address, and Age | Positions(s) Held with Empower Funds | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Director | Other Directorships Held by Director |
Stephen G. McConahey 8515 East Orchard Road, Greenwood Village, CO 80111 79 | Independent Director & Audit Committee Chair | Since 2011 (as Independent Director) Since 2015 (as Audit Committee Chair) | Chairman, SGM Capital, LLC; Partner, Iron Gate Capital, LLC; Director, The IMA Financial Group, Inc.; and former Director, Guaranty Bancorp | 45 | N/A |
Interested Director***** | |||||
Name, Address, and Age | Positions(s) Held with Empower Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Director | Other Directorships Held by Director |
Jonathan D. Kreider 8515 East Orchard Road, Greenwood Village, CO 80111 39 | Director, President & Chief Executive Officer | Since 2020 | Senior Vice President & Head of Empower Investments, Empower, Empower of America and Empower Life & Annuity Insurance Company of New York (“Empower of NY”); President, Chief Executive Officer & Manager, ECM; formerly, Vice President, Empower Funds Investment Products and Empower Advisory Group, LLC (“EAG”) | 45 | N/A |
Officers | |||||
Name, Address, and Age | Positions(s) Held with Empower Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Fund in Fund Complex Overseen by Director | Other Directorships Held by Director |
Jonathan D. Kreider 8515 East Orchard Road, Greenwood Village, CO 80111 39 | Director, President & Chief Executive Officer | Since 2020 | Senior Vice President & Head of Empower Investments, Empower, Empower of America and Empower of NY; President, Chief Executive Officer & Manager, ECM; formerly, Vice President, Empower Funds Investment Products and Empower Advisory Group, LLC (“EAG”) | 45 | N/A |
Katherine Stoner 8515 East Orchard Road, Greenwood Village, CO 80111 66 | Chief Compliance Officer | Since 2016 | Head of Compliance, Empower Investments, Empower; Chief Compliance Officer, ECM and EAG | N/A | N/A |
Officers | |||||
Name, Address, and Age | Positions(s) Held with Empower Funds | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Fund in Fund Complex Overseen by Director | Other Directorships Held by Director |
Ryan L. Logsdon 8515 East Orchard Road, Greenwood Village, CO 80111 48 | Chief Legal Officer & Secretary | Since 2010 (as Secretary) Since 2021 (as Chief Legal Officer) | Deputy General Counsel, Empower; Vice President and Counsel, ECM; Secretary, Empower of America; Corporate Secretary, Empower of NY; formerly, Vice President & Counsel, Empower Funds; Vice President, Counsel & Secretary, EAG & EFSI | N/A | N/A |
Kelly B. New 8515 East Orchard Road, Greenwood Village, CO 80111 47 | Treasurer | Since 2016 (Assistant Treasurer) Since 2021 (as Treasurer) | Vice President, Fund Administration, Empower; Treasurer, ECM; Vice President & Treasurer, Empower Trust Company, LLC (“ETC”); formerly, Assistant Treasurer Empower Funds & ETC | N/A | N/A |
John A. Clouthier 8515 East Orchard Road, Greenwood Village, CO 80111 55 | Assistant Treasurer | Since 2007 | Assistant Vice President, Investment Administration, Empower; Assistant Treasurer, ECM; Assistant Vice President and Assistant Treasurer, ETC | N/A | N/A |
Abhijit Dande 8515 East Orchard Road, Greenwood Village, CO 80111 42 | Derivatives Risk Manager | Since 2022 | Assistant Vice President, Financial Risk Management, Empower; Derivatives Risk Manager, ECM | N/A | N/A |
* A Director who is not an “interested person” of Empower Funds (as defined in Section 2(a)(19) of the 1940 Act, as amended) is referred to as an “Independent Director.”
** Each Director serves until the next shareholders’ meeting (and until the election and qualification of a successor), or until death, resignation, removal or retirement which takes effect no later than May 1 following his or her 75th birthday unless otherwise determined by the remaining directors. The remaining Independent Directors determined that Ms. Klapper and Mr. McConahey should continue on the Board until at least May 1, 2024. Officers are elected by the Board on an annual basis to serve until their successors have been elected and qualified.
*** Mr. Hillary is the sole member of Resolute Capital Asset Partners LLC, which is the general partner for Resolute Capital Asset Partners Fund I LP. Goldman Sachs & Co. LLC, the clearing agent and custodian for Resolute Capital Asset Partners Fund I LP, is the parent company of Goldman Sachs Asset Management, LP, the Sub-Adviser of the Empower Core Strategies: Inflation-Protected
Securities, Empower Inflation-Protected Securities and Empower Mid Cap Value Funds; and a Sub-Adviser of the Empower Core Bond Fund. Mr. Hillary has personal banking accounts with an affiliate of J.P. Morgan Investment Management Inc., a Sub-Adviser of the Empower Core Strategies: U.S. Equity, Empower International Growth and Empower Large Cap Growth Funds. Mr. Hillary receives no special treatment due to the relationship.
**** Mr. Hudner’s daughter is employed by JP Morgan Chase, N.A., an affiliate of J.P. Morgan Investment Management Inc., a Sub-Adviser of the Empower Core Strategies: U.S. Equity, Empower International Growth and Empower Large Cap Growth Funds. Mr. Hudner has personal investments in the following: (1) a mutual fund advised by Massachusetts Financial Services Company, a Sub-Adviser of the Empower International Value Fund, (2) a mutual fund advised by Virtus Investment Advisers, Inc., an affiliate of Virtus Fixed Income Advisers, LLC, a Sub-Adviser of the Empower Multi-Sector Bond Fund, and (3) a mutual fund advised by Lazard Asset Management LLC, a Sub-Adviser of the Empower Emerging Markets Equity Fund. Mr. Hudner receives no special treatment due to his ownership of such mutual funds.
***** An “Interested Director” refers to a Director who is an “interested person” of Empower Funds (as defined in Section 2(a)(19) of the 1940 Act, as amended) by virtue of their affiliation with ECM.
There are no arrangements or understandings between any Director or officer and any other person(s) pursuant to which s/he was elected as Director or officer.
Additional information about Empower Funds and its Directors is available in the Empower Funds’ Statement of Additional Information (“SAI”), which can be obtained free of charge upon request to: Secretary, Empower Funds, Inc., 8525 East Orchard Road, Greenwood Village, Colorado 80111; (866) 831-7129. The SAI is also available on the Fund’s web site at https://www.greatwestinvestments.com.
Availability of Quarterly Portfolio Schedule
Empower Funds files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit on Form N-PORT. Empower Funds’ Forms N-PORT are available on the Commission’s website at http://www.sec.gov.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that Empower Funds uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (866) 831-7129, and of the Securities and Exchange Commission’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information regarding how Empower 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 (866) 831-7129, and on the Securities and Exchange Commission’s website at http://www.sec.gov.
Funds' Liquidity Risk Management Program
The Funds have adopted and implemented a written liquidity risk management program as required by Rule 22e-4 under the Investment Company Act. The program is designed to assess and manage each Fund’s liquidity risk, taking into consideration the Fund’s investment strategy and the liquidity of its
portfolio investments during normal and reasonably foreseeable stressed conditions, its short and long-term cash flow projections, and its cash holdings and access to other funding sources. The Funds’ Board of Directors approved the designation of the ECM Liquidity Risk Management Committee as the administrator of the liquidity risk management program. The Liquidity Risk Management Committee includes representatives from the Adviser’s Risk, Trading, Investment Valuation, and Regulatory Compliance departments and is responsible for the program’s administration and oversight and for reporting to the Board on at least an annual basis regarding, among other things, the program’s operation, adequacy and effectiveness. The Liquidity Risk Management Committee reassessed each Fund’s liquidity risk profile, considering additional data gathered through March 31, 2022 and the adequacy and effectiveness of the liquidity risk management program’s operations since March 31, 2021 (the “covered period”) in order to prepare a written report to the Board of Directors for review at its meeting held on June 16, 2022. The report stated that:
(i) the program performed well during the covered period and meets the needs and profile of the Funds,
(ii) the Funds benefit from the stability of their shareholder base,
(iii) the selection of two vendors to supply liquidity measurement products has proven to be extremely helpful,
(iv) no changes were proposed to the program as of the date of the report, and
(v) no Fund approached the internal triggers set by the Liquidity Risk Management Committee or the regulatory percentage limitation (15%) on holdings in illiquid investments.
The report also stated that it continues to be appropriate to not set a “highly liquid investment minimum” for any Funds because the Funds primarily hold “highly liquid investments” and reviewed the changes to the program since inception.
ITEM 2. CODE OF ETHICS.
(a) As of the end of the period covered by this report, the registrant has adopted a Code of Ethics (the “Code of Ethics”) that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b) For purposes of this Item, "code of ethics" means written standards that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) During the period covered by this report, there have been no amendments to the registrant’s Code of Ethics.
(d) During the period covered by this report, the registrant has not granted any express or implicit waivers from the provisions of the Code of Ethics.
(e) Registrant’s Code of Ethics is attached hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Mr. Stephen A. Lake is the audit committee financial expert and is "independent," pursuant to general instructions on Form N-CSR, Item 3.
An “audit committee financial expert” is not an “expert” for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an “audit committee financial expert.” Further, the designation of a person as an “audit committee financial expert” does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the “audit committee financial expert” designation. Similarly, the designation of a person as an “audit committee financial expert” does not affect the duties, obligations, or liability of any other member of the Audit Committee or Board of Directors.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were: $996,300 for fiscal year 2021 and $1,031,500 for fiscal year 2022.
(b) Audit-Related Fees. The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant 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 were: $40,000 for fiscal year 2021 and $42,000 for fiscal year 2022. The nature of the services comprising the fees disclosed under this category involved performance of 17f-2 (self-custody) audits and administrative services related to the audit.
(c) Tax Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were: $0 for fiscal year 2021 and $0 for fiscal year 2022.
(d) All Other Fees. There were no fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs ((a) through (c) of this Item).
(e) (1) Audit Committee’s Pre-Approval Policies and Procedures.
Pre-Approval of Audit Services. The Audit Committee must approve prior to retention all audit, review or attest engagements required under the securities laws that are provided to Empower Funds by its independent auditors. The Audit Committee will not grant such approval to any auditors that are proposed to perform an audit for Empower Funds if a chief executive officer, controller, chief financial officer, chief accounting officer or any person serving in an equivalent position for Empower Funds that is responsible for the financial reporting or operations of Empower Funds was employed by those auditors and participated in any capacity in an audit of Empower Funds during the year period (or such other period proscribed under SEC rules) preceding the date of initiation of such audit.
Pre-Approval of Non-Audit Services. The Audit Committee must pre-approve any non-audit services, including tax services, to be provided to Empower Funds by its independent auditors (except those within applicable de minimis statutory or regulatory exceptions)1 provided that Empower Funds’ auditors will not provide the following non-audit services to Empower Funds: (a) bookkeeping or other services related to the accounting records or financial statements of Empower Funds; (b) financial information systems design and implementation; (c) appraisal or valuation services, fairness opinions, or contribution-in-kind reports; (d) actuarial services; (e) internal audit outsourcing services; (f) management functions or human resources; (g) broker-dealer, investment adviser, or investment banking services; (h) legal services; (i) expert services unrelated to the audit; and (j) any other service that the
1No pre-approval is required as to non-audit services provided to Empower Funds if: (a) the aggregate amount of all non-audit services provided to Empower Funds constitute not more than 5% of the total amount of revenues paid by Empower Funds to the independent auditors during the fiscal year in which the services are provided; (b) these services were not recognized by Empower Funds at the time of the engagement to be non-audit services; and (c) the services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.
Public Company Accounting Oversight Board determines, by regulation, is impermissible. 2
Pre-approval with respect to Non-Empower Funds Entities. The Audit Committee must pre-approve any non-audit services that relate directly to the operations and financial reporting of Empower Funds (except those within applicable de minimis statutory or regulatory exceptions)3 to be provided by Empower Funds’ auditors to (a) Empower Funds’ investment adviser; and (b) any entity controlling, controlled by, or under common control with the investment adviser if that entity provides ongoing services to Empower Funds.4 The Audit Committee may approve audit and non-audit services on a case-by-case basis or adopt pre-approval policies and procedures that are detailed as to a particular service, provided that the Audit Committee is informed promptly of each service, or use a combination of these approaches.
Delegation. The Audit Committee may delegate pre-approval authority to one or more of the Audit Committee's members. Any member or members to whom such pre-approval authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
(f) (2) 100% of the services described pursuant to paragraphs (b) through (d) of this Item 4 of Form N-CSR were approved by the Audit Committee, and no such services were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(g) Not Applicable.
(h) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered 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 adviser that provides ongoing services to the registrant for fiscal year 2021 equaled $2,255,405 and for fiscal year 2022 equaled $1,022,840.
(i) The registrant’s Audit Committee of the Board of Directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by
2With respect to the prohibitions on (a) bookkeeping; (b) financial information systems design and implementation; (c) appraisal, valuation, fairness opinions, or contribution-in-kind reports; (d) actuarial; and (e) internal audit outsourcing, such services are permitted to be provided if it is reasonable to conclude that the results of these services will not be subject to audit procedures during an audit of the audit client's financial statements.
3For non-audit services provided to the adviser and entities in a control relationship with the adviser, no pre-approval is required if: (a) the aggregate amount of all non-audit services provided constitute not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the services are provided to Empower Funds, Empower Funds’ investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser if that entity provides ongoing services to Empower Funds; (b) these services were not recognized by Empower Funds at the time of the engagement to be non-audit services; and (c) the services are promptly brought to the attention of the Audit Committee and approved by the Audit Committee prior to the completion of the audit.
4No pre-approval is required by the Audit Committee as to non-audit services provided to any Empower Funds sub-adviser that primarily provides portfolio management services and is under the direction of another investment adviser and is not affiliated with Empower Funds’ primary investment adviser.
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 pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) The schedule is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not applicable.
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. PURCHASE 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.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors that were implemented after the registrant last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer have concluded, based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures provide reasonable assurance that material information required to be disclosed by the registrant in the report it files or submits on Form N-CSR is recorded, processed, summarized and reported, within the time periods specified in the commission's rules and forms and that such material information is accumulated and communicated to the registrant's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions regarding required disclosure.
(b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF LENDING ACTIVITES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
ITEM 13. EXHIBITS.
(3) Not applicable.
(4) Not applicable.
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.
EMPOWER FUNDS, INC.
By: | /s/ Jonathan D. Kreider |
Jonathan D. Kreider
President & Chief Executive Officer
President & Chief Executive Officer
Date:February 23, 2023
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: | /s/ Jonathan D. Kreider |
Jonathan D. Kreider
President & Chief Executive Officer
President & Chief Executive Officer
Date:February 23, 2023
By: | /s/ Kelly B. New |
Kelly B. New
Treasurer
Treasurer
Date:February 23, 2023