UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811- 22309
Transparent Value Trust
(Exact name of registrant as specified in charter)
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Address of principal executive offices) (Zip code)
Amy J. Lee
Transparent Value Trust
702 King Farm Boulevard, Suite 200
Rockville, Maryland 20850
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-301-296-5100
Date of fiscal year end: September 30
Date of reporting period: October 1, 2020 - September 30, 2021
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.
Item 1. | Reports to Stockholders. |
The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
9.30.2021
Guggenheim Funds Annual Report
Transparent Value Trust | ||
Guggenheim Directional Allocation Fund | ||
Guggenheim RBP® Dividend Fund | ||
Guggenheim RBP® Large-Cap Defensive Fund | ||
Guggenheim RBP® Large-Cap Market Fund | ||
Guggenheim RBP® Large-Cap Value Fund |
GuggenheimInvestments.com | RBP-ANN-0921x0922 |
TABLE OF CONTENTS |
DEAR SHAREHOLDER | 2 |
ECONOMIC AND MARKET OVERVIEW | 4 |
ABOUT SHAREHOLDERS’ FUND EXPENSES | 6 |
DIRECTIONAL ALLOCATION FUND | 9 |
RBP® DIVIDEND FUND | 19 |
RBP® LARGE-CAP DEFENSIVE FUND | 30 |
RBP® LARGE-CAP MARKET FUND | 40 |
RBP® LARGE-CAP VALUE FUND | 50 |
NOTES TO FINANCIAL STATEMENTS | 60 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 68 |
OTHER INFORMATION | 69 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS | 75 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE | 80 |
LIQUIDITY RISK MANAGEMENT PROGRAM | 83 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 1 |
| September 30, 2021 |
Dear Shareholder:
Guggenheim Partners Investment Management, LLC (“GPIM” or the “Investment Adviser”), is pleased to present the shareholder report for Guggenheim RBP® Funds (the “Funds”). This report covers the annual fiscal year ended September 30, 2021.
The Investment Adviser is part of Guggenheim Investments, which represents the investment management businesses of Guggenheim Partners, LLC, (“Guggenheim”) a global, diversified financial services firm.
Guggenheim Funds Distributors, LLC is the distributor of the Funds. Guggenheim Funds Distributors, LLC is affiliated with Guggenheim and the Investment Adviser.
We encourage you to read the Economic and Market Overview section of the report, which follows this letter, and then the Managers’ Commentary for each Fund.
We are committed to providing innovative investment solutions and appreciate the trust you place in us.
Sincerely,
Guggenheim Partners Investment Management, LLC
October 31, 2021
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at guggenheiminvestments.com or call 800.820.0888.
This material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
COVID-19. The outbreak of COVID-19 and the current recovery underway has caused disruption to consumer demand, economic output, and supply chains. There are still travel restrictions, quarantines, and disparate global vaccine distributions. As with other serious economic disruptions, governmental authorities and regulators are responding to this crisis with significant fiscal and monetary policy changes. These include providing direct capital infusions into companies, introducing new monetary programs, and considerably lowering interest rates. In some cases, these responses resulted in negative interest rates and higher inflation. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets, reduce market liquidity, continue to cause higher inflation, heighten investor uncertainty, and adversely affect the value of the Funds’ investments and the performance of the Funds. The duration and extent of COVID-19 over the long term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
Directional Allocation Fund may not be suitable for all investors. ● Investing in the Fund involves risk, including loss of principal. ●Since the Fund invest in securities comprising an index created by a proprietary model the Fund may have a lower return than if the Fund was managed using a fundamental or index-based strategy that did not incorporate quantitative analysis. The Fund’s return may not match or achieve a high degree of correlation with the return of the index. ●The large capitalization companies in which the Fund invests may underperform other segments of the equity market, or the equity market as a whole. ●The Fund’s assets will only be concentrated in an industry or group of industries to the extent that the index concentrates in a particular industry or group of industries. By concentrating its assets in a single industry or group of industries, the Fund is subject to the risk that economic, political, or other conditions that have a negative effect on that industry or group of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of industries. ●The Fund is subject to risks
2 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
| September 30, 2021 |
related to investments in REITs, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, lack of diversification, heavy cash flow dependency, self-liquidation, and potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. ●The Fund may also invest in derivative instruments, investments whose values depend on the performance of an underlying security, asset, interest rate, index, or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. ● The Fund may invest in fixed income securities that change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
RBP Dividend Fund may not be suitable for all investors. ● The Fund seeks to track a quantitative strategy index and as a result may have lower returns than other types of index-based strategies. ● An investment in the Fund involves risk, including loss of principal. Since the Fund invests in securities comprising an index created by a proprietary model, the Fund may have a lower return than if the Fund were managed using a fundamental or index-based strategy that did not incorporate quantitative analysis. ● The Fund’s return may not match or achieve a high degree of correlation with the return of the index. ● The large capitalization companies in which the Fund invests may underperform other segments of the equity market or the equity market as a whole. ● The Fund’s assets will only be concentrated in an industry or group of industries to the extent that the index concentrates in a particular industry or group of industries. By concentrating its assets in a single industry or group of industries, the Fund is subject to the risk that economic, political, or other conditions that have a negative effect on that industry or group of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of industries. ● The Fund is subject to risks related to investments in REITs, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, lack of diversification, heavy cash flow dependency, self-liquidation, and potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. ● The Fund may also invest in derivative instruments, investments whose values depend on the performance of an underlying security, asset, interest rate, index, or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. ● The Fund may invest in fixed income securities that change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
RBP Large-Cap Defensive Fund may not be suitable for all investors. ● The Fund seeks to track a quantitative strategy index and as a result may have lower returns than other types of index-based strategies. ● An investment in the Fund involves risk, including loss of principal. Since the Fund invests in securities comprising an index created by a proprietary model, the Fund may have a lower return than if the Fund were managed using a fundamental or index-based strategy that did not incorporate quantitative analysis. ● The Fund’s return may not match or achieve a high degree of correlation with the return of the index. ● The large capitalization companies in which the Fund invests may underperform other segments of the equity market or the equity market as a whole. ● The Fund’s assets will only be concentrated in an industry or group of industries to the extent that the index concentrates in a particular industry or group of industries. By concentrating its assets in a single industry or group of industries, the Fund is subject to the risk that economic, political, or other conditions that have a negative effect on that industry or group of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of industries. ● The Fund is subject to risks related to investments in REITs, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, lack of diversification, heavy cash flow dependency, self-liquidation, and potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. ● The Fund may also invest in derivative instruments, investments whose values depend on the performance of an underlying security, asset, interest rate, index, or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. ● The Fund may invest in fixed income securities that change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
RBP Large-Cap Market Fund may not be suitable for all investors. ● The Fund seeks to track a quantitative strategy index and as a result may have lower returns than other types of index-based strategies. ● An investment in the Fund involves risk, including loss of principal. Since the Fund invests in securities comprising an index created by a proprietary model, the Fund may have a lower return than if the Fund were managed using a fundamental or index-based strategy that did not incorporate quantitative analysis. ● The Fund’s return may not match or achieve a high degree of correlation with the return of the index. ● The large capitalization companies in which the Fund invests may underperform other segments of the equity market or the equity market as a whole. ● The Fund’s assets will only be concentrated in an industry or group of industries to the extent that the index concentrates in a particular industry or group of industries. By concentrating its assets in a single industry or group of industries, the Fund is subject to the risk that economic, political, or other conditions that have a negative effect on that industry or group of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of industries. ● The Fund is subject to risks related to investments in REITs, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, lack of diversification, heavy cash flow dependency, self-liquidation, and potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. ● The Fund may also invest in derivative instruments, investments whose values depend on the performance of an underlying security, asset, interest rate, index, or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. ● The Fund may invest in fixed income securities that change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
RBP Large-Cap Value Fund may not be suitable for all investors. ● The Fund seeks to track a quantitative strategy index and as a result may have lower returns than other types of index-based strategies. ● An investment in the Fund involves risk, including loss of principal. Since the Fund invests in securities comprising an index created by a proprietary model, the Fund may have a lower return than if the Fund were managed using a fundamental or index-based strategy that did not incorporate quantitative analysis. ● The Fund’s return may not match or achieve a high degree of correlation with the return of the index. ● The large capitalization companies in which the Fund invests may underperform other segments of the equity market or the equity market as a whole. ● The Fund’s assets will only be concentrated in an industry or group of industries to the extent that the index concentrates in a particular industry or group of industries. By concentrating its assets in a single industry or group of industries, the Fund is subject to the risk that economic, political, or other conditions that have a negative effect on that industry or group of industries will negatively impact the Fund to a greater extent than if the Fund’s assets were invested in a wider variety of industries. ● The Fund is subject to risks related to investments in REITs, including fluctuations in the value of underlying properties, defaults by borrowers or tenants, lack of diversification, heavy cash flow dependency, self-liquidation, and potential failure to qualify for tax-free pass through of income and exemption from registration as an investment company. ● The Fund may also invest in derivative instruments, investments whose values depend on the performance of an underlying security, asset, interest rate, index, or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments. ● The Fund may invest in fixed income securities that change in value based on changes in interest rates. If rates increase, the value of these investments generally declines. ● It is important to note that the Fund is not guaranteed by the U.S. government. ● Please read the prospectus for more detailed information regarding these and other risks.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 3 |
ECONOMIC AND MARKET OVERVIEW (Unaudited) | September 30, 2021 |
In the 12 months ending September 30, 2021, the equity market experienced a relatively steady upward climb that reversed amid seasonal pressures, inflation worry, and market uncertainty about the economic damage brought about by the potential emergence of new COVID variants.
The ten-year Treasury climbed 83 basis points to 1.52% from 0.69% over the period. Treasury yields posted their biggest rise in months following the Federal Open Market Committee (“FOMC”) meeting in September, at which Chair Powell noted that inflation would be higher and last longer than previously expected. Treasury yields continued to rise toward the end of the month.
Reports circulating in September about the inability of Evergrande, China’s second largest real estate development company, to repay an installment on its approximately $300 billion in debt sparked panic in credit markets in Asia. There was chatter about an Evergrande bankruptcy, a la Lehman Brothers, that would ignite a conflagration that could ravage China’s debt-reliant economy and spread across the world, triggering another global financial crisis. Others saw echoes of the collapse of Long-Term Capital Management, the highly leveraged hedge fund that collapsed in 1998 and required a bailout and debt rewind managed by the Federal Reserve (the “Fed”) to quell fears of a global financial meltdown.
As the month of September progressed and the Chinese government stepped in with liquidity and behind-the-scenes pressure on state-owned and state-backed enterprises to purchase Evergrande assets, tensions eased, but the question remains as to what ultimately will become of Evergrande. The most likely outcome is a “controlled fire” approach in which the government attempts to limit the contagion of Evergrande’s woes by propping up the company until its debts are restructured and reshuffled, its projects completed by others, and its properties sold off.
As Evergrande troubles captured the world’s attention, the September FOMC meeting made it clear that the Fed was not overly worried, at least not enough to push back its forecasted rate hikes. In fact, the tone of the meeting was somewhat hawkish, with the month’s Summary of Economic Projections revealing that half the committee members penciled in a rate hike for 2022. That would give them a policy option should elevated inflation turn out to be less temporary than expected. It also implies that a tapering of asset purchases would be completed sooner rather than later—a timetable corroborated when Chair Powell gave the strongest indication yet that tapering may start in November and for the first time suggested that asset purchases could conclude by mid-2022.
Markets reacted favorably to the Fed’s relatively sanguine view of the Evergrande situation, perhaps breathing a sigh of relief that it considers the problem insufficiently dangerous either to warrant action or to delay the normalization of rates in the United States. Interestingly, in place of several instances of the word “transitory” in the four previous FOMC press conference transcripts, the September transcript included no mention of the word, which may help explain the hawkish tilt to the meeting. Regarding the path for rates, half of FOMC members now see at least one hike in 2022, up from 39 percent in June. The median FOMC participant now sees in excess of six cumulative hikes through 2024, signaling an acknowledgement of intensifying supply side pressures and a labor market that could be at full employment within the next year.
For the 12-month period ended September 30, 2021, the S&P 500® Index* returned 30.00%. The MSCI Europe-Australasia-Far East (“EAFE”) Index* returned 25.73%. The return of the MSCI Emerging Markets Index* was 18.20%.
In the bond market, the Bloomberg U.S. Aggregate Bond Index* posted a -0.90% return for the 12-month period, while the Bloomberg U.S. Corporate High Yield Index* returned 11.28%. The return of the ICE Bank of America (“BofA”) Merrill Lynch 3-Month U.S. Treasury Bill Index* was 0.07% for the 12-month period.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
4 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ECONOMIC AND MARKET OVERVIEW (Unaudited)(concluded) | September 30, 2021 |
*Index Definitions:
The following indices are referenced throughout this report. Indices are unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees, or expenses.
Bloomberg U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or “MBS” (agency fixed-rate and hybrid adjustable-rate mortgage, or “ARM”, pass-throughs), asset-backed securities (“ABS”), and commercial mortgage-backed securities (“CMBS”) (agency and non-agency).
Bloomberg U.S. Corporate High Yield Index measures the U.S. dollar-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB +/BB + or below.
Bloomberg 1-3 Month U.S. Treasury Bill Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed rate and nonconvertible. The 1-3 Month U.S. Treasury Bill Index is market capitalization weighted and the securities in the index are updated on the last business day of each month.
Dow Jones U.S. Large-Cap Total Stock Market IndexSM is a subset of the Dow Jones U.S. Total Stock Market IndexSM, which measures all U.S. equity securities with readily available prices. It includes stocks among the largest 750.
Dow Jones U.S. Large-Cap Value Total Stock Market IndexSM is a subset of the Dow Jones U.S. Large-Cap Total Stock Market IndexSM which in turn comprises the largest 750 constituents of the Dow Jones U.S. Total Stock Market IndexSM, which measures all U.S. equity securities with readily available prices.
Dow Jones U.S. Mid-Cap Total Stock Market IndexSM is a float-adjusted market capitalization weighted index that reflects the shares of securities of the mid-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace. The Mid-Cap Index includes the components ranked 501-1000 by full market
ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index is an unmanaged market Index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income.
MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. & Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global emerging markets.
S&P 500® is a broad-based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity, and industry group representation.
S&P 500 Value Index is a market-capitalization-weighted index developed by Standard and Poor’s consisting of those stocks within S&P 500 Index that exhibit strong value characteristics.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 5 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited) |
|
All mutual funds have operating expenses, and it is important for our shareholders to understand the impact of costs on their investments. Shareholders of a fund incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, other distributions, and exchange fees, and (ii) ongoing costs, including management fees, administrative services, and shareholder reports, among others. These ongoing costs, or operating expenses, are deducted from a fund’s gross income and reduce the investment return of the fund.
A fund’s expenses are expressed as a percentage of its average net assets, which is known as the expense ratio. The following examples are intended to help investors understand the ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 made at the beginning of the period and held for the entire six-month period beginning March 31, 2021 and ending September 30, 2021.
The following tables illustrate the Funds’ costs in two ways:
Table 1. Based on actual Fund return: This section helps investors estimate the actual expenses paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fifth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. Investors may use the information here, together with the amount invested, to estimate the expenses paid over the period. Simply divide the Fund’s account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number provided under the heading “Expenses Paid During Period.”
Table 2. Based on hypothetical 5% return: This section is intended to help investors compare a fund’s cost with those of other mutual funds. The table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses paid during the period. The example is useful in making comparisons because the U.S. Securities and Exchange Commission (the “SEC”) requires all mutual funds to calculate expenses based on the 5% return. Investors can assess a fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.
The calculations illustrated above assume no shares were bought or sold during the period. Actual costs may have been higher or lower, depending on the amount of investment and the timing of any purchases or redemptions.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) on purchase payments, and contingent deferred sales charges (“CDSC”) on redemptions, if any. Therefore, the second table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
More information about the Funds’ expenses, including annual expense ratios for periods up to five years (subject to the Fund’s inception date), can be found in the Financial Highlights section of this report. For additional information on operating expenses and other shareholder costs, please refer to the appropriate Fund prospectus.
6 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(continued) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 1. Based on actual Fund return3 | |||||
Directional Allocation Fund | |||||
A-Class | 1.42% | 7.73% | $ 1,000.00 | $ 1,077.30 | $ 7.39 |
C-Class | 2.09% | 7.39% | 1,000.00 | 1,073.90 | 10.87 |
P-Class | 1.34% | 7.73% | 1,000.00 | 1,077.30 | 6.98 |
Institutional Class | 1.09% | 7.89% | 1,000.00 | 1,078.90 | 5.68 |
RBP® Dividend Fund | |||||
A-Class | 1.20% | 1.60% | 1,000.00 | 1,016.00 | 6.06 |
C-Class | 1.95% | 1.18% | 1,000.00 | 1,011.80 | 9.83 |
P-Class | 1.20% | 1.62% | 1,000.00 | 1,016.20 | 6.07 |
Institutional Class | 0.95% | 1.75% | 1,000.00 | 1,017.50 | 4.80 |
RBP® Large-Cap Defensive Fund | |||||
A-Class | 1.20% | 4.29% | 1,000.00 | 1,042.90 | 6.20 |
C-Class | 1.95% | 3.86% | 1,000.00 | 1,038.60 | 10.02 |
P-Class | 1.20% | 4.31% | 1,000.00 | 1,043.10 | 6.20 |
Institutional Class | 0.95% | 4.36% | 1,000.00 | 1,043.60 | 4.92 |
RBP® Large-Cap Market Fund | |||||
A-Class | 1.20% | 6.49% | 1,000.00 | 1,064.90 | 6.21 |
C-Class | 1.95% | 6.07% | 1,000.00 | 1,060.70 | 10.07 |
P-Class | 1.20% | 6.41% | 1,000.00 | 1,064.10 | 6.21 |
Institutional Class | 0.95% | 6.61% | 1,000.00 | 1,066.10 | 4.92 |
RBP® Large-Cap Value Fund | |||||
A-Class | 1.20% | 4.28% | 1,000.00 | 1,042.80 | 6.15 |
C-Class | 1.95% | 3.97% | 1,000.00 | 1,039.70 | 9.97 |
P-Class | 1.20% | 4.23% | 1,000.00 | 1,042.30 | 6.14 |
Institutional Class | 0.95% | 4.40% | 1,000.00 | 1,044.00 | 4.87 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 7 |
ABOUT SHAREHOLDERS’ FUND EXPENSES (Unaudited)(concluded) |
|
| Expense | Fund | Beginning | Ending | Expenses |
Table 2. Based on hypothetical 5% return (before expenses) | |||||
Directional Allocation Fund | |||||
A-Class | 1.42% | 5.00% | $ 1,000.00 | $ 1,017.95 | $ 7.18 |
C-Class | 2.09% | 5.00% | 1,000.00 | 1,014.59 | 10.56 |
P-Class | 1.34% | 5.00% | 1,000.00 | 1,018.35 | 6.78 |
Institutional Class | 1.09% | 5.00% | 1,000.00 | 1,019.60 | 5.52 |
RBP® Dividend Fund | |||||
A-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
C-Class | 1.95% | 5.00% | 1,000.00 | 1,015.29 | 9.85 |
P-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
Institutional Class | 0.95% | 5.00% | 1,000.00 | 1,020.31 | 4.81 |
RBP® Large-Cap Defensive Fund | |||||
A-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.12 |
C-Class | 1.95% | 5.00% | 1,000.00 | 1,015.29 | 9.90 |
P-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.12 |
Institutional Class | 0.95% | 5.00% | 1,000.00 | 1,020.31 | 4.86 |
RBP® Large-Cap Market Fund | |||||
A-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
C-Class | 1.95% | 5.00% | 1,000.00 | 1,015.29 | 9.85 |
P-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
Institutional Class | 0.95% | 5.00% | 1,000.00 | 1,020.31 | 4.81 |
RBP® Large-Cap Value Fund | |||||
A-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
C-Class | 1.95% | 5.00% | 1,000.00 | 1,015.29 | 9.85 |
P-Class | 1.20% | 5.00% | 1,000.00 | 1,019.05 | 6.07 |
Institutional Class | 0.95% | 5.00% | 1,000.00 | 1,020.31 | 4.81 |
1 | Annualized and excludes expenses of the underlying funds in which the Funds invest, if any. |
2 | Expenses are equal to the Fund’s annualized expense ratio, net of any applicable fee waivers, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
3 | Actual cumulative return at net asset value for the period March 31, 2021 to September 30, 2021. |
8 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
MANAGERS’ COMMENTARY (Unaudited) | September 30, 2021 |
To Our Shareholders
Guggenheim Directional Allocation Fund (the “Fund”) is managed by a team of seasoned professionals led by Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Burak Hurmeydan, Ph.D., Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. The following paragraphs discuss the Fund for the fiscal year ended September 30, 2021.
For the one-year period ended September 30, 2021, Guggenheim Directional Allocation Fund returned 29.42%1 compared with the 30.73% return of its benchmark, the Dow Jones U.S. Large-Cap Total Stock Market Index. In addition, the Guggenheim Directional Allocation IndexSM (the “Index”) returned 31.26%.
Strategy Overview
The Fund invests in U.S. large-capitalization companies believed to have a high Required Business Performance® (RBP®) Probability. The Fund uses a passive investment strategy designed to track the total return performance (before fees and expenses) of the Index, which consists of common stocks of companies and units of beneficial ownership in real estate investment trusts from the Dow Jones U.S. Large-Cap Total Stock Market Index that were selected for inclusion in the Index by applying RBP® methodology.
The Index aims to allocate its holdings among the stocks in the three Guggenheim Directional Series Indexes—the Guggenheim RBP® Large-Cap Market IndexSM (with components that have betas close to one), the Guggenheim RBP® Large-Cap Aggressive IndexSM (with components that have betas higher than one), and the Guggenheim RBP® Large-Cap Defensive IndexSM (with components that have betas lower than one) and can allocate up to 100% to cash. The allocations are based on a moving average crossover system of analysis. The moving average crossover system used in the Index’s methodology uses three primary signals: economic condition, consumer sentiment, and market momentum.
RBP® methodology quantifies the probability of whether a stock can perform according to market expectations by measuring the likelihood that the company’s management can achieve the RBP® to support its current valuation or if investors’ systematic behavioral biases might have caused misalignment between the stock price and management’s ability to deliver. RBP® cannot guarantee nor does it predict profit, performance, or future stock prices.
Performance Review
The Fund delivered strong results for the year, yet slightly underperformed the benchmark, mostly due a shortcoming in security selection, offset by strong sector allocation. The allocation model was less active compared to the prior year as the volatility of economic and market activity subsided from the shocks caused by the COVID pandemic. The allocation model entered the year with a full market exposure, becoming more bullish with a market/aggressive allocation change at the June rebalance. The higher beta portfolio proved to be a positive boost to returns from that rebalance.
The biggest positive sector contributors were Information Technology and Consumer Discretionary. Information Technology benefited from being both overweight relative to the benchmark, with strong selection, led by Zebra Technology and Jabil. The Consumer Discretionary sector in the Fund was the largest overweight relative to the benchmark, and outperformed the benchmark primarily by selection. The position in Amazon was significantly underweight relative to the benchmark, and provided the biggest single contributor to returns as the company’s performance materially underperformed. Overweight positions in Williams Sonoma and Target Corp were large contributors to the sector’s outperformance.
Sectors detracting from performance included Communication Services and Health Care. The Fund’s Communications Services underperformance was driven by selection, led by an underweight holding in Alphabet, which had strong performance, and overweights to underperformers Cable One and Charter Communications. The Fund’s Health Care underperformance was most negatively impacted from its holdings in Vertex Pharmaceutical.
At the end of the period, the portfolio allocation was market/aggressive, resulting in higher beta exposure to the market. As a result, the portfolio has higher relative exposure to growth, although this is offset with higher exposure to profitability, which should help to avoid names with extreme valuations. Overall, the strategy sector weights are largely in line to the benchmark. However, there is an overweight exposure to Energy, Industrials and Consumer Discretionary. The Fund’s largest sector underweights are in Health Care, Financials and Communication Services.
Performance displayed represents past performance which is no guarantee of future results.
1 | Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fund performance will lag that of the Directional Allocation Index due to fund expenses. |
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 9 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | September 30, 2021 |
DIRECTIONAL ALLOCATION FUND
OBJECTIVE: Seeks to provide investment results that, before fees and expenses, correspond generally to the performance of the Guggenheim Directional Allocation IndexSM (the “Directional Allocation Index” or “Index”).
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: | |
A-Class | June 18, 2012 |
C-Class | June 18, 2012 |
P-Class | June 18, 2012 |
Institutional Class | June 18, 2012 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 6.7% |
Microsoft Corp. | 5.0% |
Amazon.com, Inc. | 4.8% |
Tesla, Inc. | 3.0% |
Alphabet, Inc. — Class C | 2.7% |
JPMorgan Chase & Co. | 2.6% |
Facebook, Inc. — Class A | 2.2% |
PayPal Holdings, Inc. | 2.0% |
salesforce.com, Inc. | 2.0% |
Netflix, Inc. | 2.0% |
Top Ten Total | 33.0% |
“Ten Largest Holdings” excludes any temporary cash investments. |
10 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | September 30, 2021 |
Average Annual Returns*
Periods Ended September 30, 2021
| 1 Year | 5 Year | Since |
A-Class Shares | 29.42% | 12.99% | 11.84% |
A-Class Shares with sales charge‡ | 23.26% | 11.89% | 11.13% |
C-Class Shares | 28.52% | 12.19% | 11.08% |
C-Class Shares with CDSC§ | 27.52% | 12.19% | 11.08% |
P-Class Shares** | 29.45% | 13.02% | 11.92% |
Institutional Class Shares | 29.81% | 13.32% | 12.19% |
Guggenheim Directional Allocation IndexSM | 31.26% | 14.52% | 13.50% |
Dow Jones U.S. Large-Cap Total Stock Market Index | 30.73% | 17.24% | 15.79% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Guggenheim Directional Allocation IndexSM and Dow Jones U.S. Large- Cap Total Stock Market Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The first graph is based on A-Class shares only. The second graph is based on Institutional shares only, Performance for C-Class shares and P-Class shares will vary due to differences in fee structure. |
** | F-1 Class shares redesignated as P-Class shares effective May 9, 2016. |
‡ | Effective May 9, 2016, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the Average Annual Return since inception based on subscriptions made prior to May 9, 2016, and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after May 9, 2016. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 11 |
SCHEDULE OF INVESTMENTS | September 30, 2021 |
DIRECTIONAL ALLOCATION FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 99.0% | ||||||||
Technology - 23.3% | ||||||||
Apple, Inc. | 169,876 | $ | 24,037,454 | |||||
Microsoft Corp. | 63,598 | 17,929,548 | ||||||
salesforce.com, Inc.* | 26,199 | 7,105,693 | ||||||
NVIDIA Corp. | 25,832 | 5,351,357 | ||||||
NXP Semiconductor N.V. | 23,789 | 4,659,551 | ||||||
Zebra Technologies Corp. — Class A* | 8,269 | 4,262,008 | ||||||
Advanced Micro Devices, Inc.* | 40,295 | 4,146,355 | ||||||
Adobe, Inc.* | 6,711 | 3,863,657 | ||||||
Qorvo, Inc.* | 21,777 | 3,640,897 | ||||||
Lam Research Corp. | 5,047 | 2,872,500 | ||||||
KLA Corp. | 7,365 | 2,463,666 | ||||||
QUALCOMM, Inc. | 12,049 | 1,554,080 | ||||||
Skyworks Solutions, Inc. | 9,420 | 1,552,228 | ||||||
Total Technology | 83,438,994 | |||||||
Consumer, Non-cyclical - 17.4% | ||||||||
PayPal Holdings, Inc.* | 27,374 | 7,122,989 | ||||||
Eli Lilly & Co. | 25,014 | 5,779,485 | ||||||
HCA Healthcare, Inc. | 17,566 | 4,263,620 | ||||||
Catalent, Inc.* | 30,674 | 4,081,789 | ||||||
Corteva, Inc. | 85,955 | 3,616,986 | ||||||
Charles River Laboratories International, Inc.* | 8,472 | 3,496,140 | ||||||
Procter & Gamble Co. | 21,901 | 3,061,760 | ||||||
Sysco Corp. | 37,550 | 2,947,675 | ||||||
Thermo Fisher Scientific, Inc. | 4,904 | 2,801,802 | ||||||
Pfizer, Inc. | 64,464 | 2,772,597 | ||||||
Abbott Laboratories | 21,892 | 2,586,102 | ||||||
Quanta Services, Inc. | 22,720 | 2,585,990 | ||||||
S&P Global, Inc. | 5,018 | 2,132,098 | ||||||
West Pharmaceutical Services, Inc. | 4,280 | 1,817,031 | ||||||
PerkinElmer, Inc. | 10,229 | 1,772,584 | ||||||
Laboratory Corporation of America Holdings* | 6,197 | 1,744,084 | ||||||
Horizon Therapeutics plc* | 15,722 | 1,722,188 | ||||||
McKesson Corp. | 8,635 | 1,721,646 | ||||||
Equifax, Inc. | 5,963 | 1,511,143 | ||||||
Philip Morris International, Inc. | 15,703 | 1,488,487 | ||||||
Estee Lauder Companies, Inc. — Class A | 4,827 | 1,447,762 | ||||||
Constellation Brands, Inc. — Class A | 5,277 | 1,111,811 | ||||||
Dexcom, Inc.* | 1,198 | 655,138 | ||||||
Johnson & Johnson | 591 | 95,447 | ||||||
Total Consumer, Non-cyclical | 62,336,354 | |||||||
Communications - 15.5% | ||||||||
Amazon.com, Inc.* | 5,204 | 17,095,348 | ||||||
Alphabet, Inc. — Class C* | 3,660 | 9,755,035 | ||||||
Facebook, Inc. — Class A* | 22,988 | 7,801,897 | ||||||
Netflix, Inc.* | 11,475 | 7,003,651 | ||||||
Twitter, Inc.* | 67,721 | 4,089,671 | ||||||
CDW Corp. | 19,990 | 3,638,580 | ||||||
Palo Alto Networks, Inc.* | 4,570 | 2,189,030 | ||||||
T-Mobile US, Inc.* | 16,491 | 2,106,890 | ||||||
Etsy, Inc.* | 9,583 | 1,992,881 | ||||||
Total Communications | 55,672,983 | |||||||
Financial - 13.4% | ||||||||
JPMorgan Chase & Co. | 56,963 | 9,324,274 | ||||||
Mastercard, Inc. — Class A | 14,589 | 5,072,304 | ||||||
American International Group, Inc. | 91,141 | 5,002,729 | ||||||
Visa, Inc. — Class A | 21,949 | 4,889,140 | ||||||
First Republic Bank | 22,524 | 4,344,429 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 18,669 | 3,567,086 | ||||||
Equitable Holdings, Inc. | 111,613 | 3,308,209 | ||||||
Duke Realty Corp. REIT | 66,916 | 3,203,269 | ||||||
Goldman Sachs Group, Inc. | 7,973 | 3,014,033 | ||||||
Synchrony Financial | 40,991 | 2,003,640 | ||||||
Prologis, Inc. REIT | 14,811 | 1,857,743 | ||||||
Ameriprise Financial, Inc. | 5,829 | 1,539,555 | ||||||
Fidelity National Financial, Inc. | 13,340 | 604,836 | ||||||
Berkshire Hathaway, Inc. — Class B* | 1,536 | 419,236 | ||||||
Total Financial | 48,150,483 | |||||||
Consumer, Cyclical - 10.4% | ||||||||
Tesla, Inc.* | 13,672 | 10,602,363 | ||||||
Walmart, Inc. | 43,710 | 6,092,300 | ||||||
Home Depot, Inc. | 18,314 | 6,011,754 | ||||||
Dollar Tree, Inc.* | 46,380 | 4,439,493 | ||||||
Bath & Body Works, Inc. | 44,099 | 2,779,560 | ||||||
Target Corp. | 9,611 | 2,198,708 | ||||||
Best Buy Company, Inc. | 19,594 | 2,071,282 | ||||||
Advance Auto Parts, Inc. | 8,175 | 1,707,676 | ||||||
Burlington Stores, Inc.* | 4,449 | 1,261,603 | ||||||
Total Consumer, Cyclical | 37,164,739 | |||||||
Industrial - 10.1% | ||||||||
United Parcel Service, Inc. — Class B | 29,933 | 5,450,799 | ||||||
Northrop Grumman Corp. | 14,178 | 5,106,207 | ||||||
L3Harris Technologies, Inc. | 21,419 | 4,717,320 | ||||||
FedEx Corp. | 19,834 | 4,349,398 | ||||||
3M Co. | 19,247 | 3,376,309 | ||||||
Caterpillar, Inc. | 15,722 | 3,018,152 | ||||||
Trex Company, Inc.* | 28,122 | 2,866,476 | ||||||
AGCO Corp. | 22,565 | 2,764,890 | ||||||
Garmin Ltd. | 11,220 | 1,744,261 | ||||||
Generac Holdings, Inc.* | 3,801 | 1,553,355 | ||||||
Republic Services, Inc. — Class A | 7,455 | 895,047 | ||||||
Johnson Controls International plc | 6,741 | 458,927 | ||||||
Total Industrial | 36,301,141 | |||||||
Energy - 5.5% | ||||||||
Cheniere Energy, Inc. | 47,442 | 4,633,660 | ||||||
Chevron Corp. | 45,554 | 4,621,453 | ||||||
ConocoPhillips | 54,889 | 3,719,828 | ||||||
Devon Energy Corp. | 100,111 | 3,554,942 | ||||||
Hess Corp. | 41,529 | 3,243,830 | ||||||
Total Energy | 19,773,713 | |||||||
12 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | September 30, 2021 |
DIRECTIONAL ALLOCATION FUND |
| Shares | Value | ||||||
Basic Materials - 2.1% | ||||||||
International Flavors & Fragrances, Inc. | 23,010 | $ | 3,076,897 | |||||
DuPont de Nemours, Inc. | 34,158 | 2,322,402 | ||||||
FMC Corp. | 24,933 | 2,282,866 | ||||||
Total Basic Materials | 7,682,165 | |||||||
Utilities - 1.3% | ||||||||
Exelon Corp. | 40,776 | 1,971,112 | ||||||
Vistra Corp. | 100,911 | 1,725,578 | ||||||
Sempra Energy | 7,889 | 997,959 | ||||||
Total Utilities | 4,694,649 | |||||||
Total Common Stocks | ||||||||
(Cost $328,976,127) | 355,215,221 | |||||||
EXCHANGE-TRADED FUNDS† - 0.8% | ||||||||
SPDR S&P 500 ETF Trust | 3,542 | 1,520,014 | ||||||
Vanguard S&P 500 ETF | 3,853 | 1,519,623 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $3,158,637) | 3,039,637 | |||||||
Total Investments - 99.8% | ||||||||
(Cost $332,134,764) | $ | 358,254,858 | ||||||
Other Assets & Liabilities, net - 0.2% | 710,599 | |||||||
Total Net Assets - 100.0% | $ | 358,965,457 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at September 30, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 355,215,221 | $ | — | $ | — | $ | 355,215,221 | ||||||||
Exchange-Traded Funds | 3,039,637 | — | — | 3,039,637 | ||||||||||||
Total Assets | $ | 358,254,858 | $ | — | $ | — | $ | 358,254,858 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 13 |
DIRECTIONAL ALLOCATION FUND |
STATEMENT OF ASSETS AND LIABILITIES |
September 30, 2021 |
Assets: | ||||
Investments, at value (cost $332,134,764) | $ | 358,254,858 | ||
Cash | 1,245,957 | |||
Prepaid expenses | 36,520 | |||
Receivables: | ||||
Securities sold | 329,083 | |||
Dividends | 257,478 | |||
Fund shares sold | 983 | |||
Total assets | 360,124,879 | |||
Liabilities: | ||||
Payable for: | ||||
Fund shares redeemed | 417,154 | |||
Management fees | 275,808 | |||
Securities purchased | 255,581 | |||
Distribution and service fees | 99,057 | |||
Fund accounting/administration fees | 23,580 | |||
Transfer agent/maintenance fees | 22,565 | |||
Trustees’ fees* | 1,351 | |||
Due to Investment Adviser | 13 | |||
Miscellaneous | 64,313 | |||
Total liabilities | 1,159,422 | |||
Net assets | $ | 358,965,457 | ||
Net assets consist of: | ||||
Paid in capital | $ | 283,047,806 | ||
Total distributable earnings (loss) | 75,917,651 | |||
Net assets | $ | 358,965,457 | ||
A-Class: | ||||
Net assets | $ | 152,597,809 | ||
Capital shares outstanding | 8,426,302 | |||
Net asset value per share | $ | 18.11 | ||
Maximum offering price per share (Net asset value divided by 95.25%) | $ | 19.01 | ||
C-Class: | ||||
Net assets | $ | 60,152,567 | ||
Capital shares outstanding | 3,598,436 | |||
Net asset value per share | $ | 16.72 | ||
P-Class: | ||||
Net assets | $ | 8,532,677 | ||
Capital shares outstanding | 467,471 | |||
Net asset value per share | $ | 18.25 | ||
Institutional Class: | ||||
Net assets | $ | 137,682,404 | ||
Capital shares outstanding | 7,345,782 | |||
Net asset value per share | $ | 18.74 |
STATEMENT OF OPERATIONS |
Year Ended September 30, 2021 |
Investment Income: | ||||
Dividends | $ | 3,864,544 | ||
Total investment income | 3,864,544 | |||
Expenses: | ||||
Management fees | 3,498,852 | |||
Distribution and service fees: | ||||
A-Class | 420,635 | |||
C-Class | 832,936 | |||
P-Class | 22,884 | |||
Transfer agent/maintenance fees: | ||||
A-Class | 9,461 | |||
C-Class | 34,182 | |||
P-Class | 1,791 | |||
Institutional Class | 57,435 | |||
Fund accounting/administration fees | 253,891 | |||
Professional fees | 199,458 | |||
Trustees’ fees* | 18,414 | |||
Line of credit fees | 17,428 | |||
Custodian fees | 13,256 | |||
Miscellaneous | 96,203 | |||
Total expenses | 5,476,826 | |||
Less: | ||||
Expenses reimbursed by Adviser: | ||||
A Class | (713 | ) | ||
C Class | (34,555 | ) | ||
P Class | (1,759 | ) | ||
Institutional Class | (56,523 | ) | ||
Expenses waived by Adviser | (83,804 | ) | ||
Total waived/reimbursed expenses | (177,354 | ) | ||
Net expenses | 5,299,472 | |||
Net investment loss | (1,434,928 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 89,523,005 | |||
Net realized gain | 89,523,005 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 6,590,642 | |||
Net change in unrealized appreciation (depreciation) | 6,590,642 | |||
Net realized and unrealized gain | 96,113,647 | |||
Net increase in net assets resulting from operations | $ | 94,678,719 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
14 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DIRECTIONAL ALLOCATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income (loss) | $ | (1,434,928 | ) | $ | 464,967 | |||
Net realized gain (loss) on investments | 89,523,005 | (19,418,452 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 6,590,642 | 2,419,958 | ||||||
Net increase (decrease) in net assets resulting from operations | 94,678,719 | (16,533,527 | ) | |||||
Distributions to shareholders: | ||||||||
A-Class | (57,305 | ) | (16,774,266 | ) | ||||
C-Class | — | (27,803,854 | ) | |||||
P-Class | (1,106 | ) | (2,230,072 | ) | ||||
Institutional Class | (446,175 | ) | (39,458,901 | ) | ||||
Total distributions to shareholders | (504,586 | ) | (86,267,093 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
A-Class | 47,300,220 | 41,078,209 | ||||||
C-Class | 2,902,705 | 5,329,385 | ||||||
P-Class | 245,454 | 515,266 | ||||||
Institutional Class | 10,727,390 | 28,248,428 | ||||||
Distributions reinvested | ||||||||
A-Class | 48,747 | 15,523,220 | ||||||
C-Class | — | 24,601,736 | ||||||
P-Class | 1,098 | 2,205,778 | ||||||
Institutional Class | 434,225 | 38,639,740 | ||||||
Cost of shares redeemed | ||||||||
A-Class | (32,444,272 | ) | (36,384,453 | ) | ||||
C-Class | (64,474,041 | ) | (76,455,880 | ) | ||||
P-Class | (3,270,086 | ) | (6,073,100 | ) | ||||
Institutional Class | (63,111,080 | ) | (131,147,297 | ) | ||||
Net decrease from capital share transactions | (101,639,640 | ) | (93,918,968 | ) | ||||
Net decrease in net assets | (7,465,507 | ) | (196,719,588 | ) | ||||
Net assets: | ||||||||
Beginning of year | 366,430,964 | 563,150,552 | ||||||
End of year | $ | 358,965,457 | $ | 366,430,964 | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
A-Class | 2,788,122 | 2,911,274 | ||||||
C-Class | 190,686 | 381,139 | ||||||
P-Class | 15,699 | 35,135 | ||||||
Institutional Class | 611,375 | 1,942,436 | ||||||
Shares issued from reinvestment of distributions | ||||||||
A-Class | 3,143 | 1,045,335 | ||||||
C-Class | — | 1,773,737 | ||||||
P-Class | 70 | 147,642 | ||||||
Institutional Class | 27,122 | 2,522,176 | ||||||
Shares redeemed | ||||||||
A-Class | (1,974,694 | ) | (2,703,756 | ) | ||||
C-Class | (4,178,167 | ) | (5,919,862 | ) | ||||
P-Class | (196,823 | ) | (441,899 | ) | ||||
Institutional Class | (3,794,497 | ) | (9,683,320 | ) | ||||
Net decrease in shares | (6,507,964 | ) | (7,989,963 | ) |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 15 |
DIRECTIONAL ALLOCATION FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.00 | $ | 16.50 | $ | 18.59 | $ | 15.83 | $ | 13.16 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.06 | ) | .02 | .03 | (.03 | ) | (.04 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.18 | .07 | i | (.12 | ) | 2.79 | 2.71 | |||||||||||||
Total from investment operations | 4.12 | .09 | (.09 | ) | 2.76 | 2.67 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.01 | )b | — | — | — | — | ||||||||||||||
Net realized gains | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Total distributions | (.01 | ) | (2.59 | ) | (2.00 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 18.11 | $ | 14.00 | $ | 16.50 | $ | 18.59 | $ | 15.83 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 29.42 | % | (0.38 | %) | 1.13 | % | 17.44 | % | 20.29 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 152,598 | $ | 106,549 | $ | 104,877 | $ | 117,786 | $ | 131,554 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.38 | %) | 0.16 | % | 0.18 | % | (0.20 | %) | (0.27 | %) | ||||||||||
Total expensesd | 1.44 | % | 1.43 | % | 1.40 | % | 1.35 | % | 1.42 | % | ||||||||||
Net expensese,f,g | 1.42 | % | 1.40 | % | 1.39 | % | 1.34 | % | 1.42 | % | ||||||||||
Portfolio turnover rate | 131 | % | 313 | % | 203 | % | 92 | % | 89 | % |
C-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 13.01 | $ | 15.59 | $ | 17.81 | $ | 15.29 | $ | 12.80 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.16 | ) | (.07 | ) | (.08 | ) | (.16 | ) | (.13 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.87 | .08 | i | (.14 | ) | 2.68 | 2.62 | |||||||||||||
Total from investment operations | 3.71 | .01 | (.22 | ) | 2.52 | 2.49 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Total distributions | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 16.72 | $ | 13.01 | $ | 15.59 | $ | 17.81 | $ | 15.29 | ||||||||||
| ||||||||||||||||||||
Total Returnc | 28.52 | % | (0.99 | %) | 0.38 | % | 16.48 | % | 19.45 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 60,153 | $ | 98,656 | $ | 176,994 | $ | 239,516 | $ | 240,268 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (1.02 | %) | (0.53 | %) | (0.53 | %) | (0.96 | %) | (0.95 | %) | ||||||||||
Total expensesd | 2.15 | % | 2.15 | % | 2.13 | % | 2.11 | % | 2.15 | % | ||||||||||
Net expensese,f,g | 2.09 | % | 2.10 | % | 2.11 | % | 2.11 | % | 2.11 | % | ||||||||||
Portfolio turnover rate | 131 | % | 313 | % | 203 | % | 92 | % | 89 | % |
16 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
DIRECTIONAL ALLOCATION FUND |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.10 | $ | 16.59 | $ | 18.67 | $ | 15.90 | $ | 13.22 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.05 | ) | .03 | .04 | (.04 | ) | (.03 | ) | ||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.20 | .07 | i | (.12 | ) | 2.81 | 2.71 | |||||||||||||
Total from investment operations | 4.15 | .10 | (.08 | ) | 2.77 | 2.68 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | b | — | — | — | — | ||||||||||||||
Net realized gains | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Total distributions | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 18.25 | $ | 14.10 | $ | 16.59 | $ | 18.67 | $ | 15.90 | ||||||||||
| ||||||||||||||||||||
Total Return | 29.45 | % | (0.30 | %) | 1.19 | % | 17.42 | % | 20.27 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 8,533 | $ | 9,143 | $ | 15,056 | $ | 20,892 | $ | 33,936 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.28 | %) | 0.22 | % | 0.24 | % | (0.22 | %) | (0.20 | %) | ||||||||||
Total expensesd | 1.38 | % | 1.40 | % | 1.40 | % | 1.37 | % | 1.40 | % | ||||||||||
Net expensese,f,g | 1.34 | % | 1.35 | % | 1.36 | % | 1.36 | % | 1.36 | % | ||||||||||
Portfolio turnover rate | 131 | % | 313 | % | 203 | % | 92 | % | 89 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 17 |
DIRECTIONAL ALLOCATION FUND |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 14.48 | $ | 16.93 | $ | 18.97 | $ | 16.12 | $ | 13.37 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.01 | ) | .07 | .08 | .01 | .01 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.32 | .07 | i | (.12 | ) | 2.84 | 2.74 | |||||||||||||
Total from investment operations | 4.31 | .14 | (.04 | ) | 2.85 | 2.75 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.05 | ) | — | — | — | — | ||||||||||||||
Net realized gains | — | (2.59 | ) | (2.00 | ) | — | — | |||||||||||||
Total distributions | (.05 | ) | (2.59 | ) | (2.00 | ) | — | — | ||||||||||||
Net asset value, end of period | $ | 18.74 | $ | 14.48 | $ | 16.93 | $ | 18.97 | $ | 16.12 | ||||||||||
| ||||||||||||||||||||
Total Return | 29.81 | % | (0.03 | %) | 1.39 | % | 17.68 | % | 20.66 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 137,682 | $ | 152,083 | $ | 266,223 | $ | 345,423 | $ | 278,127 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.04 | %) | 0.47 | % | 0.48 | % | 0.04 | % | 0.06 | % | ||||||||||
Total expensesd | 1.15 | % | 1.15 | % | 1.13 | % | 1.12 | % | 1.15 | % | ||||||||||
Net expensese,f,g | 1.09 | % | 1.10 | % | 1.11 | % | 1.11 | % | 1.11 | % | ||||||||||
Portfolio turnover rate | 131 | % | 313 | % | 203 | % | 92 | % | 89 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Distributions from net investment income are less than $0.01 per share. |
c | Total return does not reflect the impact of any applicable sales charges. |
d | Does not include expenses of the underlying funds in which the Fund invests. |
e | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
f | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | |
A-Class | — | — | 0.01% | — | |
C-Class | — | 0.01% | 0.01% | 0.02% | |
P-Class | — | 0.00%h | 0.00%h | 0.01% | |
Institutional Class | — | 0.01% | 0.01% | 0.02% |
h | Less than 0.01% |
g | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | 1.41% | 1.40% | 1.39% | 1.34% | 1.41% | |
C-Class | 2.08% | 2.10% | 2.10% | 2.10% | 2.10% | |
P-Class | 1.34% | 1.35% | 1.35% | 1.35% | 1.35% | |
Institutional Class | 1.09% | 1.10% | 1.10% | 1.10% | 1.10% |
i | The amount shown for a share outstanding throughout the period does not accord with the aggregate net gains on investments for the period because of sales and repurchases of fund shares in relation to fluctuating market value of the investments of the Fund. |
18 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
MANAGERS’ COMMENTARY (Unaudited) | September 30, 2021 |
To Our Shareholders
Guggenheim RBP® Dividend Fund (the “Fund”) is managed by a team of seasoned professionals led by Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Burak Hurmeydan, Ph.D., Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. The following paragraphs discuss the Fund for the fiscal year ended September 30, 2021.
For the one-year period ended September 30, 2021, Guggenheim RBP® Dividend Fund returned 39.75%1, compared with the 30.73% return of its benchmark, the Dow Jones U.S. Large-Cap Total Stock Market Index. In addition, the Guggenheim RBP® Dividend IndexSM (the “Index”) returned 41.86%.
Strategy Overview
The Fund invests in U.S. large- and mid-capitalization companies believed to have a high dividend yield and high Required Business Performance® (“RBP® ”) Probability, while avoiding companies believed to have the most behavioral risk. The Fund uses a passive management strategy designed to track the total return performance (before fees and expenses) of the Index, which consists of common stocks of companies and units of beneficial ownership in real estate investment trusts from the Dow Jones U.S. Large-Cap Total Stock Market IndexSM and the Dow Jones U.S. Mid-Cap Total Stock Market IndexSM. The selection and weighting of the components of the Guggenheim RBP® Dividend Index starts from the set of eligible securities and uses optimization combined with a proprietary risk model that includes eight fundamental style factors as well as custom industries. The benchmark against which constraints are imposed is the Dow Jones U.S. Large-Cap Total Stock Market Index. The objective is to maximize expected return. Optimization constraints are employed in terms of tracking error to the Universe, turnover, active exposures to fundamental factors and industries, and individual constituents’ weights. Active exposures are defined as the difference between the exposures in the Index and in the benchmark to factors and industries as defined in the risk model. Estimates of transaction costs are included to account for liquidity considerations. The Index is constrained to have a dividend yield which is targeted at 75 basis points more than the benchmark’s dividend yield.
The Fund will generally invest in all of the securities comprising the Index in proportion to the weightings in the Index. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of borrowings for investment purposes, in securities that comprise the Index. The Fund also may invest up to 20% of its net assets in common stocks and REITS not included in the Index, but which the Investment Manager believes will help the Fund track the Index, as well as in ETFs, futures, put and call options, interest rate, index and total return swap contracts, cash and cash equivalents.
RBP® methodology quantifies the probability of whether a stock can perform according to market expectations by measuring the likelihood that the company’s management can achieve the RBP® to support its current valuation or if investors’ systematic behavioral biases might have caused misalignment between the stock price and management’s ability to deliver. RBP® cannot guarantee nor does it predict profit, performance, or future stock prices.
Performance Review
The Fund delivered exceptionally strong results for the year, significantly outpacing the benchmark, a result of both strong sector allocation and security selection. The Fund benefited most from positive sector contributors Energy and Financials, a result from positive excess exposure to these sectors that performed very well. The holding in energy name Antero Midstream was the biggest single driver of outperformance, while a position in Janus Henderson helped in Financials.
The sectors detracting the most from performance, albeit only slightly, included Consumer Staples and Communication Services. An overweight exposure to the Consumer Staples sector was a drag as the sector underperformed the market, while being underweight the Communications Services sector, which performed strongly, was a detractor. The largest single security drag on performance relative to the benchmark and not within either of these sectors was underweight position in Microsoft, which performed strongly over the period.
At the end of the period the portfolio sector weightings were not drastically different than the benchmark. The portfolio had overweight exposure to Energy and Consumer Staples and underweight exposure to Information Technology and Consumer Discretionary. Relative to the benchmark, the portfolio has a larger exposure to higher-dividend-yielding names and a bias toward value.
Performance displayed represents past performance which is no guarantee of future results.
1 | Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fund performance will lag that of the RBP Index due to fund expenses. |
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 19 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | September 30, 2021 |
RBP® DIVIDEND FUND
OBJECTIVE: Seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Guggenheim RBP® Dividend IndexSM (the “Dividend Index” or “Index”).
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: | |
A-Class | April 18, 2011 |
C-Class | April 18, 2011 |
P-Class | April 18, 2011 |
Institutional Class | February 10, 2011 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 6.4% |
Microsoft Corp. | 6.2% |
JPMorgan Chase & Co. | 2.3% |
NVIDIA Corp. | 2.2% |
Visa, Inc. — Class A | 1.9% |
Home Depot, Inc. | 1.9% |
Procter & Gamble Co. | 1.8% |
Mastercard, Inc. — Class A | 1.8% |
Walt Disney Co. | 1.7% |
Comcast Corp. — Class A | 1.6% |
Top Ten Total | 27.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
20 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | September 30, 2021 |
Average Annual Returns*
Periods Ended September 30, 2021
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 39.75% | 12.29% | 13.20% |
A-Class Shares with sales charge‡ | 33.07% | 11.19% | 12.53% |
C-Class Shares | 38.60% | 11.42% | 12.43% |
C-Class Shares with CDSC§ | 37.60% | 11.42% | 12.43% |
P-Class Shares** | 39.72% | 12.28% | 13.29% |
Institutional Class Shares | 40.06% | 12.56% | 13.57% |
Guggenheim RBP Dividend IndexSM | 41.86% | 13.90% | 15.04% |
Dow Jones U.S. Large-Cap Total Stock Market Index | 30.73% | 17.24% | 16.76% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones U.S. Large-Cap Total Stock Market Index and Guggenheim RBP Dividend IndexSM are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The first graph is based on A-Class shares only. The second graph is based on Institutional shares only. Performance for C-Class shares and P-Class shares will vary due to differences in fee structure. |
** | F-1 Class shares redesignated as P-Class shares effective May 9, 2016. |
‡ | Effective May 9, 2016, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the Average Annual Return since inception based on subscriptions made prior to May 9, 2016, and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after May 9, 2016. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 21 |
SCHEDULE OF INVESTMENTS | September 30, 2021 |
RBP® DIVIDEND FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.8% | ||||||||
Technology - 22.2% | ||||||||
Apple, Inc. | 11,450 | $ | 1,620,175 | |||||
Microsoft Corp. | 5,522 | 1,556,762 | ||||||
NVIDIA Corp. | 2,682 | 555,603 | ||||||
QUALCOMM, Inc. | 2,499 | 322,321 | ||||||
KLA Corp. | 828 | 276,974 | ||||||
Monolithic Power Systems, Inc. | 547 | 265,120 | ||||||
Broadridge Financial Solutions, Inc. | 1,585 | 264,125 | ||||||
Skyworks Solutions, Inc. | 1,552 | 255,739 | ||||||
Lam Research Corp. | 436 | 248,149 | ||||||
Electronic Arts, Inc. | 1,527 | 217,216 | ||||||
Total Technology | 5,582,184 | |||||||
Financial - 21.3% | ||||||||
JPMorgan Chase & Co. | 3,479 | 569,477 | ||||||
Visa, Inc. — Class A | 2,185 | 486,709 | ||||||
Mastercard, Inc. — Class A | 1,278 | 444,335 | ||||||
BlackRock, Inc. — Class A | 368 | 308,627 | ||||||
Prologis, Inc. REIT | 2,381 | 298,649 | ||||||
American International Group, Inc. | 5,254 | 288,392 | ||||||
Ameriprise Financial, Inc. | 1,034 | 273,100 | ||||||
Huntington Bancshares, Inc. | 17,328 | 267,891 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 1,374 | 262,530 | ||||||
Annaly Capital Management, Inc. REIT | 31,091 | 261,786 | ||||||
Santander Consumer USA Holdings, Inc. | 6,252 | 260,708 | ||||||
Equitable Holdings, Inc. | 8,749 | 259,321 | ||||||
Fidelity National Financial, Inc. | 5,712 | 258,982 | ||||||
Duke Realty Corp. REIT | 5,201 | 248,972 | ||||||
Equity LifeStyle Properties, Inc. REIT | 3,167 | 247,343 | ||||||
STAG Industrial, Inc. REIT | 6,061 | 237,894 | ||||||
First American Financial Corp. | 3,245 | 217,577 | ||||||
Blackstone Mortgage Trust, Inc. — Class A REIT | 4,998 | 151,540 | ||||||
Highwoods Properties, Inc. REIT | 620 | 27,193 | ||||||
Total Financial | 5,371,026 | |||||||
Consumer, Non-cyclical - 16.8% | ||||||||
Procter & Gamble Co. | 3,283 | 458,964 | ||||||
Thermo Fisher Scientific, Inc. | 692 | 395,360 | ||||||
Pfizer, Inc. | 9,103 | 391,520 | ||||||
Merck & Company, Inc. | 5,065 | 380,432 | ||||||
Abbott Laboratories | 3,091 | 365,140 | ||||||
Eli Lilly & Co. | 1,564 | 361,362 | ||||||
Philip Morris International, Inc. | 3,446 | 326,646 | ||||||
S&P Global, Inc. | 709 | 301,247 | ||||||
Sysco Corp. | 3,676 | 288,566 | ||||||
HCA Healthcare, Inc. | 1,154 | 280,099 | ||||||
West Pharmaceutical Services, Inc. | 605 | 256,847 | ||||||
Estee Lauder Companies, Inc. — Class A | 813 | 243,843 | ||||||
Medtronic plc | 995 | 124,723 | ||||||
McKesson Corp. | 266 | 53,035 | ||||||
Johnson & Johnson | 52 | 8,398 | ||||||
Total Consumer, Non-cyclical | 4,236,182 | |||||||
Consumer, Cyclical - 10.6% | ||||||||
Home Depot, Inc. | 1,431 | 469,740 | ||||||
Walmart, Inc. | 2,645 | 368,660 | ||||||
Target Corp. | 1,357 | 310,441 | ||||||
Walgreens Boots Alliance, Inc. | 5,601 | 263,527 | ||||||
Best Buy Company, Inc. | 2,449 | 258,884 | ||||||
Dollar General Corp. | 1,208 | 256,265 | ||||||
Leggett & Platt, Inc. | 4,484 | 201,063 | ||||||
Thor Industries, Inc. | 1,627 | 199,731 | ||||||
Gentex Corp. | 5,125 | 169,022 | ||||||
Watsco, Inc. | 633 | 167,504 | ||||||
Total Consumer, Cyclical | 2,664,837 | |||||||
Communications - 9.7% | ||||||||
Walt Disney Co.* | 2,518 | 425,970 | ||||||
Comcast Corp. — Class A | 7,165 | 400,739 | ||||||
AT&T, Inc. | 13,873 | 374,710 | ||||||
Fox Corp. — Class A | 7,358 | 295,129 | ||||||
Fox Corp. — Class B | 7,818 | 290,204 | ||||||
eBay, Inc. | 3,947 | 274,987 | ||||||
ViacomCBS, Inc. — Class B | 6,863 | 271,157 | ||||||
CDW Corp. | 553 | 100,657 | ||||||
Total Communications | 2,433,553 | |||||||
Industrial - 7.8% | ||||||||
United Parcel Service, Inc. — Class B | 1,780 | 324,138 | ||||||
3M Co. | 1,751 | 307,160 | ||||||
Caterpillar, Inc. | 1,592 | 305,616 | ||||||
Waste Management, Inc. | 1,904 | 284,382 | ||||||
Republic Services, Inc. — Class A | 2,200 | 264,132 | ||||||
Garmin Ltd. | 1,584 | 246,249 | ||||||
CH Robinson Worldwide, Inc. | 2,178 | 189,486 | ||||||
Johnson Controls International plc | 586 | 39,895 | ||||||
Total Industrial | 1,961,058 | |||||||
Energy - 5.4% | ||||||||
Chevron Corp. | 3,871 | 392,713 | ||||||
ConocoPhillips | 5,443 | 368,872 | ||||||
Marathon Petroleum Corp. | 4,918 | 303,982 | ||||||
Phillips 66 | 4,111 | 287,893 | ||||||
Total Energy | 1,353,460 | |||||||
Utilities - 4.0% | ||||||||
Exelon Corp. | 5,758 | 278,342 | ||||||
Sempra Energy | 2,138 | 270,457 | ||||||
Evergy, Inc. | 3,919 | 243,762 | ||||||
Vistra Corp. | 13,270 | 226,917 | ||||||
Total Utilities | 1,019,478 | |||||||
Basic Materials - 1.0% | ||||||||
International Flavors & Fragrances, Inc. | 1,896 | 253,533 | ||||||
Total Common Stocks | ||||||||
(Cost $24,523,365) | 24,875,311 | |||||||
22 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
SCHEDULE OF INVESTMENTS (concluded) | September 30, 2021 |
RBP® DIVIDEND FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 0.6% | ||||||||
iShares Select Dividend ETF | 744 | $ | 85,352 | |||||
Vanguard Dividend Appreciation ETF | 546 | 83,865 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $170,925) | 169,217 | |||||||
Total Investments - 99.4% | ||||||||
(Cost $24,694,290) | $ | 25,044,528 | ||||||
Other Assets & Liabilities, net - 0.6% | 139,032 | |||||||
Total Net Assets - 100.0% | $ | 25,183,560 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at September 30, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 24,875,311 | $ | — | $ | — | $ | 24,875,311 | ||||||||
Exchange-Traded Funds | 169,217 | — | — | 169,217 | ||||||||||||
Total Assets | $ | 25,044,528 | $ | — | $ | — | $ | 25,044,528 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 23 |
RBP® DIVIDEND FUND |
STATEMENT OF ASSETS AND LIABILITIES |
September 30, 2021 |
Assets: | ||||
Investments, at value (cost $24,694,290) | $ | 25,044,528 | ||
Cash | 107,499 | |||
Prepaid expenses | 25,751 | |||
Receivables: | ||||
Dividends | 67,406 | |||
Total assets | 25,245,184 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 20,380 | |||
Fund shares redeemed | 16,410 | |||
Distribution and service fees | 6,696 | |||
Fund accounting/administration fees | 5,793 | |||
Management fees | 4,637 | |||
Transfer agent/maintenance fees | 2,418 | |||
Trustees’ fees* | 1,993 | |||
Distributions to shareholders | 1,090 | |||
Due to Investment Adviser | 13 | |||
Miscellaneous | 2,194 | |||
Total liabilities | 61,624 | |||
Net assets | $ | 25,183,560 | ||
Net assets consist of: | ||||
Paid in capital | $ | 21,087,646 | ||
Total distributable earnings (loss) | 4,095,914 | |||
Net assets | $ | 25,183,560 | ||
A-Class: | ||||
Net assets | $ | 11,274,309 | ||
Capital shares outstanding | 772,854 | |||
Net asset value per share | $ | 14.59 | ||
Maximum offering price per share (Net asset value divided by 95.25%) | $ | 15.32 | ||
C-Class: | ||||
Net assets | $ | 2,281,192 | ||
Capital shares outstanding | 154,518 | |||
Net asset value per share | $ | 14.76 | ||
P-Class: | ||||
Net assets | $ | 1,526,664 | ||
Capital shares outstanding | 103,576 | |||
Net asset value per share | $ | 14.74 | ||
Institutional Class: | ||||
Net assets | $ | 10,101,395 | ||
Capital shares outstanding | 714,391 | |||
Net asset value per share | $ | 14.14 |
STATEMENT OF OPERATIONS |
Year Ended September 30, 2021 |
Investment Income: | ||||
Dividends (net of foreign withholding tax of $992) | $ | 721,649 | ||
Total investment income | 721,649 | |||
Expenses: | ||||
Management fees | 171,243 | |||
Distribution and service fees: | ||||
A-Class | 28,810 | |||
C-Class | 32,277 | |||
P-Class | 3,787 | |||
Transfer agent/maintenance fees: | ||||
A-Class | 9,442 | |||
C-Class | 5,289 | |||
P-Class | 2,972 | |||
Institutional Class | 10,676 | |||
Registration fees | 64,535 | |||
Professional fees | 38,357 | |||
Fund accounting/administration fees | 33,699 | |||
Trustees’ fees* | 18,362 | |||
Custodian fees | 6,896 | |||
Line of credit fees | 889 | |||
Miscellaneous | 7,856 | |||
Total expenses | 435,090 | |||
Less: | ||||
Expenses reimbursed by Adviser: | ||||
A Class | (16,595 | ) | ||
C Class | (5,758 | ) | ||
P Class | (3,124 | ) | ||
Institutional Class | (11,616 | ) | ||
Expenses waived by Adviser | (121,812 | ) | ||
Total waived/reimbursed expenses | (158,905 | ) | ||
Net expenses | 276,185 | |||
Net investment income | 445,464 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 5,408,290 | |||
Net realized gain | 5,408,290 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 516,532 | |||
Net change in unrealized appreciation (depreciation) | 516,532 | |||
Net realized and unrealized gain | 5,924,822 | |||
Net increase in net assets resulting from operations | $ | 6,370,286 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
24 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® DIVIDEND FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 445,464 | $ | 522,627 | ||||
Net realized gain (loss) on investments | 5,408,290 | (1,122,117 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 516,532 | (1,236,966 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 6,370,286 | (1,836,456 | ) | |||||
Distributions to shareholders: | ||||||||
A-Class | (274,525 | ) | (262,822 | ) | ||||
C-Class | (54,789 | ) | (154,986 | ) | ||||
P-Class | (43,644 | ) | (76,200 | ) | ||||
Institutional Class | (323,698 | ) | (427,916 | ) | ||||
Return of Capital | ||||||||
A-Class | — | (55,364 | ) | |||||
C-Class | — | (43,184 | ) | |||||
P-Class | — | (14,544 | ) | |||||
Institutional Class | — | (78,710 | ) | |||||
Total distributions to shareholders | (696,656 | ) | (1,113,726 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
A-Class | 5,081,734 | 1,887,541 | ||||||
C-Class | 237,326 | 455,764 | ||||||
P-Class | 1,475,973 | 1,089,069 | ||||||
Institutional Class | 2,445,143 | 2,562,981 | ||||||
Distributions reinvested | ||||||||
A-Class | 272,584 | 315,472 | ||||||
C-Class | 54,514 | 195,278 | ||||||
P-Class | 42,814 | 89,619 | ||||||
Institutional Class | 322,048 | 477,629 | ||||||
Cost of shares redeemed | ||||||||
A-Class | (1,209,248 | ) | (1,839,472 | ) | ||||
C-Class | (2,907,298 | ) | (1,685,060 | ) | ||||
P-Class | (1,419,233 | ) | (1,228,051 | ) | ||||
Institutional Class | (1,867,827 | ) | (3,894,923 | ) | ||||
Net increase (decrease) from capital share transactions | 2,528,530 | (1,574,153 | ) | |||||
Net increase (decrease) in net assets | 8,202,160 | (4,524,335 | ) | |||||
Net assets: | ||||||||
Beginning of year | 16,981,400 | 21,505,735 | ||||||
End of year | $ | 25,183,560 | $ | 16,981,400 | ||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 25 |
RBP® DIVIDEND FUND |
STATEMENTS OF CHANGES IN NET ASSETS (concluded) |
| Year Ended | Year Ended | ||||||
Capital share activity: | ||||||||
Shares sold | ||||||||
A-Class | 340,211 | 166,000 | ||||||
C-Class | 16,404 | 37,589 | ||||||
P-Class | 99,128 | 90,893 | ||||||
Institutional Class | 173,608 | 240,518 | ||||||
Shares issued from reinvestment of distributions | ||||||||
A-Class | 19,166 | 28,402 | ||||||
C-Class | 3,710 | 17,322 | ||||||
P-Class | 2,972 | 7,925 | ||||||
Institutional Class | 23,601 | 44,081 | ||||||
Shares redeemed | ||||||||
A-Class | (84,169 | ) | (185,161 | ) | ||||
C-Class | (201,743 | ) | (151,924 | ) | ||||
P-Class | (99,278 | ) | (117,051 | ) | ||||
Institutional Class | (140,564 | ) | (394,182 | ) | ||||
Net increase (decrease) in shares | 153,046 | (215,588 | ) |
26 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® DIVIDEND FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.76 | $ | 12.00 | $ | 12.55 | $ | 12.82 | $ | 11.55 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .27 | .30 | .29 | .23 | .15 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.99 | (.91 | ) | .05 | 1.37 | 1.52 | ||||||||||||||
Total from investment operations | 4.26 | (.61 | ) | .34 | 1.60 | 1.67 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.43 | ) | (.31 | ) | (.32 | ) | (.34 | ) | (.18 | ) | ||||||||||
Net realized gains | — | (.21 | ) | (.57 | ) | (1.53 | ) | (.22 | ) | |||||||||||
Return of capital | — | (.11 | ) | — | — | — | ||||||||||||||
Total distributions | (.43 | ) | (.63 | ) | (.89 | ) | (1.87 | ) | (.40 | ) | ||||||||||
Net asset value, end of period | $ | 14.59 | $ | 10.76 | $ | 12.00 | $ | 12.55 | $ | 12.82 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 39.75 | % | (5.16 | %) | 3.41 | % | 13.40 | % | 14.87 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,274 | $ | 5,357 | $ | 5,860 | $ | 5,775 | $ | 5,822 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.89 | % | 2.73 | % | 2.49 | % | 1.84 | % | 1.26 | % | ||||||||||
Total expensesc | 1.91 | % | 2.04 | % | 1.95 | % | 2.08 | % | 1.84 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.22 | % | ||||||||||
Portfolio turnover rate | 157 | % | 114 | % | 110 | % | 97 | % | 251 | % |
C-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.86 | $ | 12.06 | $ | 12.53 | $ | 12.74 | $ | 11.48 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .20 | .22 | .20 | .14 | .06 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.99 | (.92 | ) | .07 | 1.35 | 1.51 | ||||||||||||||
Total from investment operations | 4.19 | (.70 | ) | .27 | 1.49 | 1.57 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.29 | ) | (.18 | ) | (.17 | ) | (.17 | ) | (.09 | ) | ||||||||||
Net realized gains | — | (.21 | ) | (.57 | ) | (1.53 | ) | (.22 | ) | |||||||||||
Return of capital | — | (.11 | ) | — | — | — | ||||||||||||||
Total distributions | (.29 | ) | (.50 | ) | (.74 | ) | (1.70 | ) | (.31 | ) | ||||||||||
Net asset value, end of period | $ | 14.76 | $ | 10.86 | $ | 12.06 | $ | 12.53 | $ | 12.74 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 38.60 | % | (5.84 | %) | 2.66 | % | 12.49 | % | 13.96 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,281 | $ | 3,651 | $ | 5,223 | $ | 5,976 | $ | 6,231 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.42 | % | 1.92 | % | 1.75 | % | 1.10 | % | 0.51 | % | ||||||||||
Total expensesc | 2.70 | % | 2.80 | % | 2.64 | % | 2.77 | % | 2.54 | % | ||||||||||
Net expensesd,e,f | 1.95 | % | 1.96 | % | 1.97 | % | 1.96 | % | 1.97 | % | ||||||||||
Portfolio turnover rate | 157 | % | 114 | % | 110 | % | 97 | % | 251 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 27 |
RBP® DIVIDEND FUND |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.84 | $ | 12.13 | $ | 12.67 | $ | 12.88 | $ | 11.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .27 | .30 | .29 | .23 | .16 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 4.02 | (.92 | ) | .06 | 1.37 | 1.52 | ||||||||||||||
Total from investment operations | 4.29 | (.62 | ) | .35 | 1.60 | 1.68 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.39 | ) | (.35 | ) | (.32 | ) | (.28 | ) | (.19 | ) | ||||||||||
Net realized gains | — | (.21 | ) | (.57 | ) | (1.53 | ) | (.22 | ) | |||||||||||
Return of capital | — | (.11 | ) | — | — | — | ||||||||||||||
Total distributions | (.39 | ) | (.67 | ) | (.89 | ) | (1.81 | ) | (.41 | ) | ||||||||||
Net asset value, end of period | $ | 14.74 | $ | 10.84 | $ | 12.13 | $ | 12.67 | $ | 12.88 | ||||||||||
| ||||||||||||||||||||
Total Return | 39.72 | % | (5.13 | %) | 3.43 | % | 13.35 | % | 14.81 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,527 | $ | 1,093 | $ | 1,444 | $ | 1,829 | $ | 2,217 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.87 | % | 2.60 | % | 2.50 | % | 1.84 | % | 1.28 | % | ||||||||||
Total expensesc | 1.93 | % | 2.06 | % | 2.06 | % | 2.04 | % | 1.76 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.22 | % | ||||||||||
Portfolio turnover rate | 157 | % | 114 | % | 110 | % | 97 | % | 251 | % |
28 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® DIVIDEND FUND |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.46 | $ | 11.70 | $ | 12.28 | $ | 12.59 | $ | 11.38 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .30 | .32 | .31 | .25 | .18 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.86 | (.88 | ) | .05 | 1.35 | 1.49 | ||||||||||||||
Total from investment operations | 4.16 | (.56 | ) | .36 | 1.60 | 1.67 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.48 | ) | (.36 | ) | (.37 | ) | (.38 | ) | (.24 | ) | ||||||||||
Net realized gains | — | (.21 | ) | (.57 | ) | (1.53 | ) | (.22 | ) | |||||||||||
Return of capital | — | (.11 | ) | — | — | — | ||||||||||||||
Total distributions | (.48 | ) | (.68 | ) | (.94 | ) | (1.91 | ) | (.46 | ) | ||||||||||
Net asset value, end of period | $ | 14.14 | $ | 10.46 | $ | 11.70 | $ | 12.28 | $ | 12.59 | ||||||||||
| ||||||||||||||||||||
Total Return | 40.06 | % | (4.88 | %) | 3.66 | % | 13.71 | % | 15.04 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,101 | $ | 6,882 | $ | 8,979 | $ | 5,203 | $ | 4,344 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 2.22 | % | 2.94 | % | 2.76 | % | 2.08 | % | 1.51 | % | ||||||||||
Total expensesc | 1.62 | % | 1.80 | % | 1.62 | % | 1.78 | % | 1.54 | % | ||||||||||
Net expensesd,e,f | 0.95 | % | 0.96 | % | 0.97 | % | 0.96 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 157 | % | 114 | % | 110 | % | 97 | % | 251 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | |
A-Class | — | 0.00%g | — | — | |
C-Class | — | 0.00%g | — | — | |
P-Class | — | — | — | — | |
Institutional Class | — | — | — | — |
g | Less than 0.01% |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | 1.20% | 1.20% | 1.21% | 1.20% | 1.20% | |
C-Class | 1.95% | 1.96% | 1.96% | 1.95% | 1.95% | |
P-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
Institutional Class | 0.95% | 0.95% | 0.96% | 0.95% | 0.95% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 29 |
MANAGERS’ COMMENTARY (Unaudited) | September 30, 2021 |
To Our Shareholders
Guggenheim RBP® Large-Cap Defensive Fund (the “Fund”) is managed by a team of seasoned professionals led by Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Burak Hurmeydan, Ph.D., Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. The following paragraphs discuss the Fund for the fiscal year ended September 30, 2021.
For the one-year period ended September 30, 2021, Guggenheim RBP® Large-Cap Defensive Fund returned 18.97%1, compared with the 30.73% return of its benchmark, the Dow Jones U.S. Large-Cap Total Stock Market Index. In addition, the Guggenheim RBP® Large-Cap Defensive IndexSM (the “Index”), returned 23.47%.
Strategy Overview
The Fund invests in U.S. large-capitalization companies believed to have a high Required Business Performance® (“RBP® ”) Probability, while avoiding companies believed to have the most behavioral risk. The Fund uses a passive management strategy designed to track the total return performance (before fees and expenses) of the Index, which consists of common stocks of companies and units of beneficial ownership in real estate investment trusts from the Dow Jones U.S. Large-Cap Total Stock Market IndexSM. The selection and weighting of the components of the Guggenheim RBP® Large-Cap Defensive Index starts from the set of eligible securities and uses optimization combined with a proprietary risk model that includes eight fundamental style factors as well as custom industries. The objective is to maximize expected return. Optimization constraints are employed in terms of tracking error to the Universe, turnover, active exposures to fundamental factors and industries, and individual constituents’ weights and imposes an upper bound on Beta that targets less than 1.00 to the Market.
The Fund will generally invest in all of the securities comprising the Index in proportion to the weightings in the Index. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of borrowings for investment purposes, in securities that comprise the Index. The Fund also may invest up to 20% of its net assets in common stocks and REITS not included in the Index, but which the Investment Manager believes will help the Fund track the Index, as well as in ETFs, futures, put and call options, interest rate, index and total return swap contracts, cash and cash equivalents.
RBP® methodology quantifies the probability of whether a stock can perform according to market expectations by measuring the likelihood that the company’s management can achieve the RBP® to support its current valuation or if investors’ systematic behavioral biases might have caused misalignment between the stock price and management’s ability to deliver. RBP® cannot guarantee nor does it predict profit, performance, or future stock prices.
Performance Review
The Fund results lagged the strong returns of the benchmark, but the performance was consistent with the strategy’s investment objective, which seeks to own lower-beta companies to provide lower-than-market risk. In periods of strong market performance such as was experienced over this period, performance of lower beta companies lags significantly.
The Fund’s leading positive sector contributors were Information Technology and Health Care. The Information Technology sector was underweight relative to the benchmark, but provided both strong allocation and selection contributions, led by holdings in Palo Alto Networks and Fortinet Inc. The Health Care sector outperformed the benchmark primarily by selection, led by investments in West Pharmaceuticals and Eli Lily.
The sectors detracting the most from performance included Financials and Communication Services, mostly as a result of selection. The Fund’s Financials underperformance was most negatively impacted by holdings in Marketaxess and Progressive Corp. The Communications Services sector underperformance was led by an underweight exposure to Alphabet and overweight to Take-Two Interactive Software.
At the end of the period the portfolio sector weightings exceeded the benchmark in Consumer Staples and Utilities. The largest portfolio sector underweights were in Financials and Energy. The portfolio has high quality characteristics compared to the benchmark, with higher exposures to more profitable, less leveraged and volatile companies.
Performance displayed represents past performance which is no guarantee of future results.
1 | Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fund performance will lag that of the RBP Index due to fund expenses. |
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
30 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | September 30, 2021 |
RBP® LARGE-CAP DEFENSIVE FUND
OBJECTIVE: Seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Guggenheim RBP® Large-Cap Defensive IndexSM (the “Defensive Index” or “Index”).
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: | |
A-Class | April 27, 2010 |
C-Class | April 18, 2011 |
P-Class | April 27, 2010 |
Institutional Class | February 15, 2011 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 7.0% |
Microsoft Corp. | 6.8% |
Alphabet, Inc. — Class C | 5.3% |
Amazon.com, Inc. | 5.0% |
Facebook, Inc. — Class A | 3.4% |
NVIDIA Corp. | 2.7% |
Visa, Inc. — Class A | 2.5% |
Home Depot, Inc. | 2.4% |
Procter & Gamble Co. | 2.4% |
Mastercard, Inc. — Class A | 2.3% |
Top Ten Total | 39.8% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 31 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | September 30, 2021 |
Average Annual Returns*
Periods Ended September 30, 2021
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 18.97% | 12.26% | 12.49% |
A-Class Shares with sales charge‡ | 13.33% | 11.17% | 11.83% |
C-Class Shares | 18.03% | 11.41% | 11.73% |
C-Class Shares with CDSC§ | 17.03% | 11.41% | 11.73% |
P-Class Shares** | 18.98% | 12.25% | 12.57% |
Institutional Class Shares | 19.23% | 12.52% | 12.85% |
Guggenheim RBP Large-Cap Defensive IndexSM | 23.47% | 14.30% | 14.42% |
Dow Jones U.S. Large-Cap Total Stock Market Index | 30.73% | 17.24% | 16.76% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Guggenheim RBP Large-Cap Defensive IndexSM and Dow Jones U.S. Large-Cap Total Stock Market Index are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The first graph is based on A-Class shares only. The second graph is based on P-Class shares only. Performance for C-Class shares and Institutional Class shares will vary due to differences in fee structure. |
** | F-1 Class shares redesignated as P-Class shares effective May 9, 2016. |
‡ | Effective May 9, 2016, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the Average Annual Return since inception based on subscriptions made prior to May 9, 2016, and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after May 9, 2016. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
32 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | September 30, 2021 |
RBP® LARGE-CAP DEFENSIVE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.7% | ||||||||
Consumer, Non-cyclical - 23.1% | ||||||||
Procter & Gamble Co. | 1,865 | $ | 260,727 | |||||
Abbott Laboratories | 1,827 | 215,824 | ||||||
Philip Morris International, Inc. | 2,094 | 198,490 | ||||||
S&P Global, Inc. | 449 | 190,776 | ||||||
Thermo Fisher Scientific, Inc. | 310 | 177,112 | ||||||
Verisk Analytics, Inc. — Class A | 883 | 176,838 | ||||||
Hershey Co. | 1,024 | 173,312 | ||||||
Estee Lauder Companies, Inc. — Class A | 577 | 173,060 | ||||||
Laboratory Corporation of America Holdings* | 599 | 168,582 | ||||||
West Pharmaceutical Services, Inc. | 395 | 167,693 | ||||||
Eli Lilly & Co. | 680 | 157,114 | ||||||
Pfizer, Inc. | 3,563 | 153,245 | ||||||
Equifax, Inc. | 429 | 108,717 | ||||||
Tyson Foods, Inc. — Class A | 1,193 | 94,175 | ||||||
Church & Dwight Company, Inc. | 874 | 72,166 | ||||||
Constellation Brands, Inc. — Class A | 269 | 56,676 | ||||||
Total Consumer, Non-cyclical | 2,544,507 | |||||||
Technology - 22.3% | ||||||||
Apple, Inc. | 5,486 | 776,269 | ||||||
Microsoft Corp. | 2,654 | 748,216 | ||||||
NVIDIA Corp. | 1,453 | 301,004 | ||||||
Adobe, Inc.* | 392 | 225,682 | ||||||
Veeva Systems, Inc. — Class A* | 607 | 174,919 | ||||||
Advanced Micro Devices, Inc.* | 1,198 | 123,274 | ||||||
Broadridge Financial Solutions, Inc. | 686 | 114,315 | ||||||
Total Technology | 2,463,679 | |||||||
Communications - 18.3% | ||||||||
Alphabet, Inc. — Class C* | 220 | 586,368 | ||||||
Amazon.com, Inc.* | 169 | 555,172 | ||||||
Facebook, Inc. — Class A* | 1,112 | 377,402 | ||||||
T-Mobile US, Inc.* | 1,479 | 188,957 | ||||||
Arista Networks, Inc.* | 506 | 173,882 | ||||||
eBay, Inc. | 1,993 | 138,852 | ||||||
Total Communications | 2,020,633 | |||||||
Financial - 15.0% | ||||||||
Visa, Inc. — Class A | 1,231 | 274,205 | ||||||
Mastercard, Inc. — Class A | 736 | 255,892 | ||||||
Goldman Sachs Group, Inc. | 520 | 196,576 | ||||||
BlackRock, Inc. — Class A | 227 | 190,376 | ||||||
Prologis, Inc. REIT | 1,493 | 187,267 | ||||||
Duke Realty Corp. REIT | 3,501 | 167,593 | ||||||
Equity LifeStyle Properties, Inc. REIT | 2,098 | 163,854 | ||||||
American Homes 4 Rent — Class A REIT | 2,917 | 111,196 | ||||||
Everest Re Group Ltd. | 418 | 104,826 | ||||||
Total Financial | 1,651,785 | |||||||
Consumer, Cyclical - 7.8% | ||||||||
Home Depot, Inc. | 812 | 266,547 | ||||||
Target Corp. | 841 | 192,396 | ||||||
Dollar General Corp. | 492 | 104,373 | ||||||
Domino’s Pizza, Inc. | 214 | 102,069 | ||||||
O’Reilly Automotive, Inc.* | 164 | 100,214 | ||||||
Gentex Corp. | 1,902 | 62,728 | ||||||
Advance Auto Parts, Inc. | 165 | 34,467 | ||||||
Total Consumer, Cyclical | 862,794 | |||||||
Industrial - 6.1% | ||||||||
3M Co. | 1,093 | 191,734 | ||||||
Garmin Ltd. | 1,040 | 161,678 | ||||||
United Parcel Service, Inc. — Class B | 696 | 126,742 | ||||||
Northrop Grumman Corp. | 335 | 120,650 | ||||||
Snap-on, Inc. | 359 | 75,013 | ||||||
Total Industrial | 675,817 | |||||||
Utilities - 6.1% | ||||||||
Sempra Energy | 1,389 | 175,708 | ||||||
UGI Corp. | 3,903 | 166,346 | ||||||
American Water Works Company, Inc. | 982 | 165,997 | ||||||
Evergy, Inc. | 2,648 | 164,706 | ||||||
Total Utilities | 672,757 | |||||||
Total Common Stocks | ||||||||
(Cost $10,388,361) | 10,891,972 | |||||||
EXCHANGE-TRADED FUNDS† - 0.7% | ||||||||
SPDR S&P 500 ETF Trust | 90 | 38,623 | ||||||
Vanguard S&P 500 ETF | 95 | 37,468 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $77,654) | 76,091 | |||||||
Total Investments - 99.4% | ||||||||
(Cost $10,466,014) | $ | 10,968,063 | ||||||
Other Assets & Liabilities, net - 0.6% | 68,659 | |||||||
Total Net Assets - 100.0% | $ | 11,036,722 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 33 |
SCHEDULE OF INVESTMENTS (concluded) | September 30, 2021 |
RBP® LARGE-CAP DEFENSIVE FUND |
The following table summarizes the inputs used to value the Fund’s investments at September 30, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 10,891,972 | $ | — | $ | — | $ | 10,891,972 | ||||||||
Exchange-Traded Funds | 76,091 | — | — | 76,091 | ||||||||||||
Total Assets | $ | 10,968,063 | $ | — | $ | — | $ | 10,968,063 |
34 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP DEFENSIVE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
September 30, 2021 |
Assets: | ||||
Investments, at value (cost $10,466,014) | $ | 10,968,063 | ||
Cash | 64,322 | |||
Prepaid expenses | 31,096 | |||
Receivables: | ||||
Dividends | 8,835 | |||
Investment Adviser | 6,233 | |||
Fund shares sold | 18 | |||
Total assets | 11,078,567 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 26,260 | |||
Fund accounting/administration fees | 5,793 | |||
Distribution and service fees | 3,515 | |||
Transfer agent/maintenance fees | 2,670 | |||
Trustees’ fees* | 2,006 | |||
Due to Investment Adviser | 13 | |||
Miscellaneous | 1,588 | |||
Total liabilities | 41,845 | |||
Net assets | $ | 11,036,722 | ||
Net assets consist of: | ||||
Paid in capital | $ | 7,951,558 | ||
Total distributable earnings (loss) | 3,085,164 | |||
Net assets | $ | 11,036,722 | ||
A-Class: | ||||
Net assets | $ | 4,494,376 | ||
Capital shares outstanding | 369,864 | |||
Net asset value per share | $ | 12.15 | ||
Maximum offering price per share (Net asset value divided by 95.25%) | $ | 12.76 | ||
C-Class: | ||||
Net assets | $ | 1,539,210 | ||
Capital shares outstanding | 132,931 | |||
Net asset value per share | $ | 11.58 | ||
P-Class: | ||||
Net assets | $ | 327,321 | ||
Capital shares outstanding | 26,027 | |||
Net asset value per share | $ | 12.58 | ||
Institutional Class: | ||||
Net assets | $ | 4,675,815 | ||
Capital shares outstanding | 368,386 | |||
Net asset value per share | $ | 12.69 |
STATEMENT OF OPERATIONS |
Year Ended September 30, 2021 |
Investment Income: | ||||
Dividends | $ | 139,203 | ||
Total investment income | 139,203 | |||
Expenses: | ||||
Management fees | 85,498 | |||
Distribution and service fees: | ||||
A-Class | 12,732 | |||
C-Class | 21,775 | |||
P-Class | 837 | |||
Transfer agent/maintenance fees: | ||||
A-Class | 9,183 | |||
C-Class | 5,043 | |||
P-Class | 1,136 | |||
Institutional Class | 11,200 | |||
Registration fees | 64,147 | |||
Professional fees | 35,375 | |||
Fund accounting/administration fees | 33,708 | |||
Trustees’ fees* | 18,168 | |||
Custodian fees | 4,480 | |||
Line of credit fees | 568 | |||
Miscellaneous | 5,056 | |||
Total expenses | 308,906 | |||
Less: | ||||
Expenses reimbursed by Adviser: | ||||
A Class | (30,426 | ) | ||
C Class | (15,419 | ) | ||
P Class | (2,706 | ) | ||
Institutional Class | (33,288 | ) | ||
Expenses waived by Adviser | (85,473 | ) | ||
Total waived/reimbursed expenses | (167,312 | ) | ||
Net expenses | 141,594 | |||
Net investment loss | (2,391 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 2,894,235 | |||
Net realized gain | 2,894,235 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (933,202 | ) | ||
Net change in unrealized appreciation (depreciation) | (933,202 | ) | ||
Net realized and unrealized gain | 1,961,033 | |||
Net increase in net assets resulting from operations | $ | 1,958,642 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 35 |
RBP® LARGE-CAP DEFENSIVE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (2,391 | ) | $ | 65,148 | |||
Net realized gain on investments | 2,894,235 | 272,307 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (933,202 | ) | (319,133 | ) | ||||
Net increase in net assets resulting from operations | 1,958,642 | 18,322 | ||||||
Distributions to shareholders: | ||||||||
A-Class | (94,997 | ) | (326,313 | ) | ||||
C-Class | (57,734 | ) | (246,703 | ) | ||||
P-Class | (7,242 | ) | (32,263 | ) | ||||
Institutional Class | (111,051 | ) | (430,105 | ) | ||||
Total distributions to shareholders | (271,024 | ) | (1,035,384 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
A-Class | 1,657,186 | 782,860 | ||||||
C-Class | 230,320 | 52,886 | ||||||
P-Class | 38,598 | 65,658 | ||||||
Institutional Class | 725,013 | 25,975 | ||||||
Distributions reinvested | ||||||||
A-Class | 89,656 | 303,287 | ||||||
C-Class | 56,578 | 238,865 | ||||||
P-Class | 7,242 | 32,263 | ||||||
Institutional Class | 109,985 | 426,829 | ||||||
Cost of shares redeemed | ||||||||
A-Class | (1,632,275 | ) | (1,680,480 | ) | ||||
C-Class | (1,709,438 | ) | (1,299,675 | ) | ||||
P-Class | (86,918 | ) | (175,145 | ) | ||||
Institutional Class | (2,339,934 | ) | (861,107 | ) | ||||
Net decrease from capital share transactions | (2,853,987 | ) | (2,087,784 | ) | ||||
Net decrease in net assets | (1,166,369 | ) | (3,104,846 | ) | ||||
Net assets: | ||||||||
Beginning of year | 12,203,091 | 15,307,937 | ||||||
End of year | $ | 11,036,722 | $ | 12,203,091 | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
A-Class | 138,102 | 76,322 | ||||||
C-Class | 19,806 | 5,021 | ||||||
P-Class | 3,075 | 5,822 | ||||||
Institutional Class | 61,053 | 2,288 | ||||||
Shares issued from reinvestment of distributions | ||||||||
A-Class | 8,113 | 28,318 | ||||||
C-Class | 5,337 | 23,123 | ||||||
P-Class | 633 | 2,912 | ||||||
Institutional Class | 9,547 | 38,212 | ||||||
Shares redeemed | ||||||||
A-Class | (141,601 | ) | (164,317 | ) | ||||
C-Class | (151,051 | ) | (133,639 | ) | ||||
P-Class | (7,098 | ) | (18,099 | ) | ||||
Institutional Class | (202,465 | ) | (85,905 | ) | ||||
Net decrease in shares | (256,549 | ) | (219,942 | ) |
36 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP DEFENSIVE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.46 | $ | 11.06 | $ | 12.09 | $ | 11.77 | $ | 10.43 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | .06 | .06 | .04 | .07 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.96 | .11 | .65 | 1.64 | 1.76 | |||||||||||||||
Total from investment operations | 1.96 | .17 | .71 | 1.68 | 1.83 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.03 | ) | (.05 | ) | (.03 | ) | (.04 | ) | (.02 | ) | ||||||||||
Net realized gains | (.24 | ) | (.72 | ) | (1.71 | ) | (1.32 | ) | (.47 | ) | ||||||||||
Total distributions | (.27 | ) | (.77 | ) | (1.74 | ) | (1.36 | ) | (.49 | ) | ||||||||||
Net asset value, end of period | $ | 12.15 | $ | 10.46 | $ | 11.06 | $ | 12.09 | $ | 11.77 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 18.97 | % | 1.40 | % | 8.35 | % | 15.27 | % | 18.34 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,494 | $ | 3,821 | $ | 4,698 | $ | 4,200 | $ | 3,968 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | % | 0.56 | % | 0.54 | % | 0.37 | % | 0.61 | % | ||||||||||
Total expensesc | 2.70 | % | 2.48 | % | 2.26 | % | 2.06 | % | 1.86 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 123 | % | 100 | % | 96 | % | 117 | % | 107 | % |
C-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.03 | $ | 10.65 | $ | 11.76 | $ | 11.52 | $ | 10.28 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.08 | ) | (.02 | ) | (.02 | ) | (.04 | ) | (.02 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 1.87 | .12 | .62 | 1.60 | 1.73 | |||||||||||||||
Total from investment operations | 1.79 | .10 | .60 | 1.56 | 1.71 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.24 | ) | (.72 | ) | (1.71 | ) | (1.32 | ) | (.47 | ) | ||||||||||
Total distributions | (.24 | ) | (.72 | ) | (1.71 | ) | (1.32 | ) | (.47 | ) | ||||||||||
Net asset value, end of period | $ | 11.58 | $ | 10.03 | $ | 10.65 | $ | 11.76 | $ | 11.52 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 18.03 | % | 0.74 | % | 7.44 | % | 14.48 | % | 17.35 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,539 | $ | 2,595 | $ | 3,882 | $ | 5,142 | $ | 5,881 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.70 | %) | (0.19 | %) | (0.20 | %) | (0.36 | %) | (0.17 | %) | ||||||||||
Total expensesc | 3.41 | % | 3.22 | % | 2.94 | % | 2.73 | % | 2.54 | % | ||||||||||
Net expensesd,e,f | 1.95 | % | 1.96 | % | 1.97 | % | 1.95 | % | 1.96 | % | ||||||||||
Portfolio turnover rate | 123 | % | 100 | % | 96 | % | 117 | % | 107 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 37 |
RBP® LARGE-CAP DEFENSIVE FUND |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.82 | $ | 11.41 | $ | 12.41 | $ | 12.05 | $ | 10.65 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | .06 | .06 | .04 | .06 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.03 | .12 | .67 | 1.69 | 1.81 | |||||||||||||||
Total from investment operations | 2.03 | .18 | .73 | 1.73 | 1.87 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.03 | ) | (.05 | ) | (.02 | ) | (.05 | ) | — | |||||||||||
Net realized gains | (.24 | ) | (.72 | ) | (1.71 | ) | (1.32 | ) | (.47 | ) | ||||||||||
Total distributions | (.27 | ) | (.77 | ) | (1.73 | ) | (1.37 | ) | (.47 | ) | ||||||||||
Net asset value, end of period | $ | 12.58 | $ | 10.82 | $ | 11.41 | $ | 12.41 | $ | 12.05 | ||||||||||
| ||||||||||||||||||||
Total Return | 18.98 | % | 1.44 | % | 8.26 | % | 15.33 | % | 18.28 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 327 | $ | 318 | $ | 443 | $ | 585 | $ | 896 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.01 | % | 0.56 | % | 0.53 | % | 0.36 | % | 0.56 | % | ||||||||||
Total expensesc | 2.76 | % | 2.54 | % | 2.30 | % | 1.98 | % | 1.80 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.20 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 123 | % | 100 | % | 96 | % | 117 | % | 107 | % |
38 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP DEFENSIVE FUND |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.93 | $ | 11.52 | $ | 12.52 | $ | 12.16 | $ | 10.78 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .03 | .09 | .09 | .08 | .09 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.04 | .12 | .68 | 1.68 | 1.83 | |||||||||||||||
Total from investment operations | 2.07 | .21 | .77 | 1.76 | 1.92 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.07 | ) | (.08 | ) | (.06 | ) | (.08 | ) | (.07 | ) | ||||||||||
Net realized gains | (.24 | ) | (.72 | ) | (1.71 | ) | (1.32 | ) | (.47 | ) | ||||||||||
Total distributions | (.31 | ) | (.80 | ) | (1.77 | ) | (1.40 | ) | (.54 | ) | ||||||||||
Net asset value, end of period | $ | 12.69 | $ | 10.93 | $ | 11.52 | $ | 12.52 | $ | 12.16 | ||||||||||
| ||||||||||||||||||||
Total Return | 19.23 | % | 1.69 | % | 8.62 | % | 15.52 | % | 18.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,676 | $ | 5,468 | $ | 6,286 | $ | 8,590 | $ | 10,563 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.26 | % | 0.81 | % | 0.80 | % | 0.64 | % | 0.82 | % | ||||||||||
Total expensesc | 2.40 | % | 2.23 | % | 1.97 | % | 1.70 | % | 1.54 | % | ||||||||||
Net expensesd,e,f | 0.95 | % | 0.96 | % | 0.97 | % | 0.95 | % | 0.96 | % | ||||||||||
Portfolio turnover rate | 123 | % | 100 | % | 96 | % | 117 | % | 107 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | |
A-Class | — | — | — | — | |
C-Class | — | 0.00%g | — | — | |
P-Class | — | — | — | — | |
Institutional Class | — | — | — | — |
g | Less than 0.01% |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
C-Class | 1.95% | 1.96% | 1.96% | 1.95% | 1.95% | |
P-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
Institutional Class | 0.95% | 0.96% | 0.96% | 0.95% | 0.95% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 39 |
MANAGERS’ COMMENTARY (Unaudited) | September 30, 2021 |
To Our Shareholders
Guggenheim RBP® Large-Cap Market Fund (the “Fund”) is managed by a team of seasoned professionals led by Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Burak Hurmeydan, Ph.D., Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. The following paragraphs discuss the Fund for the fiscal year ended September 30, 2021.
For the one-year period ended September 30, 2021, Guggenheim RBP® Large-Cap Market Fund returned 27.82%1, compared with the 30.73% return of its benchmark, the Dow Jones U.S. Large-Cap Total Stock Market Index. In addition, the Guggenheim RBP® Large-Cap Market IndexSM (the “index”) returned 29.64%.
Strategy Overview
The Fund invests in U.S. large-capitalization companies believed to have a high Required Business Performance® (“RBP®”) Probability, while avoiding companies believed to have the most behavioral risk. The Fund uses a passive management strategy designed to track the total return performance (before fees and expenses) of the Index, which consists of common stocks of companies and units of beneficial ownership in real estate investment trusts from the Dow Jones U.S. Large-Cap Total Stock Market IndexSM. The selection and weighting of the components of the Guggenheim RBP® Large-Cap Defensive Index starts from the set of eligible securities and uses optimization combined with a proprietary risk model that includes eight fundamental style factors as well as custom industries. The objective is to maximize expected return. Optimization constraints are employed in terms of tracking error to the Universe, turnover, active exposures to fundamental factors and industries, and individual constituents’ weights and imposes a Beta target of 1.0 to the Market.
The Fund will generally invest in all of the securities comprising the Index in proportion to the weightings in the Index. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of borrowings for investment purposes, in securities that comprise the Index. The Fund also may invest up to 20% of its net assets in common stocks and REITS not included in the Index, but which the Investment Manager believes will help the Fund track the Index, as well as in ETFs, futures, put and call options, interest rate, index and total return swap contracts, cash and cash equivalents.
RBP® methodology quantifies the probability of whether a stock can perform according to market expectations by measuring the likelihood that the company’s management can achieve the RBP® to support its current valuation or if investors’ systematic behavioral biases might have caused misalignment between the stock price and management’s ability to deliver. RBP® cannot guarantee nor does it predict profit, performance, or future stock prices.
Performance Review
The Fund delivered solid results for the year, although it underperformed the benchmark, mostly due a shortcoming in security selection. The portfolio benefited from higher exposure to smaller cap companies and a bias toward value, but was hurt by lower exposure to more volatile and less profitable companies, which performed well last year.
The Fund’s leading sector contributors were Information Technology and Consumer Discretionary. Information Technology benefited from being both overweight relative to the benchmark, with strong selection, led by Zebra Technology and Jabil. The Consumer Discretionary sector in the Fund was the largest overweight relative to the benchmark, and outperformed the benchmark primarily by selection. The position in Amazon was significantly underweight relative to the benchmark, and provided the biggest single contributor to returns, as the company’s performance materially underperformed. Overweight positions in Williams Sonoma and Target Corp were large contributors to the sector’s outperformance.
Sectors detracting from performance included Industrials and Healthcare. The Fund’s Healthcare underperformance was most negatively impacted from its holdings in Vertex Pharmaceutical, while the largest impact of underperformance in the Industrials sector was from underweight exposure to Lockheed Martin.
At the end of the period the portfolio sector weightings were neutral to the benchmark, with slight overweights to Consumer Staples and Industrials, and minor underweights to Healthcare and Financials. The portfolio has higher quality characteristics relative to the benchmark, with higher exposures to more profitable and less leveraged and volatile companies.
Performance displayed represents past performance which is no guarantee of future results.
1 | Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fund performance will lag that of the RBP Index due to fund expenses. |
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
40 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | September 30, 2021 |
RBP® LARGE-CAP MARKET FUND
OBJECTIVE: Seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Guggenheim RBP® Large-Cap Market IndexSM (the “Market Index” or “Index”).
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: | |
A-Class | April 27, 2010 |
C-Class | April 18, 2011 |
P-Class | April 27, 2010 |
Institutional Class | February 15, 2011 |
Ten Largest Holdings (% of Total Net Assets) | |
Apple, Inc. | 6.5% |
Microsoft Corp. | 6.2% |
Amazon.com, Inc. | 4.5% |
Alphabet, Inc. — Class C | 3.0% |
Facebook, Inc. — Class A | 2.9% |
Tesla, Inc. | 2.6% |
JPMorgan Chase & Co. | 2.3% |
Visa, Inc. — Class A | 1.9% |
Mastercard, Inc. — Class A | 1.8% |
salesforce.com, Inc. | 1.7% |
Top Ten Total | 33.4% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 41 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | September 30, 2021 |
Average Annual Returns*
Periods Ended September 30, 2021
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 27.82% | 15.17% | 14.38% |
A-Class Shares with sales charge‡ | 21.78% | 14.05% | 13.71% |
C-Class Shares | 26.94% | 14.31% | 13.61% |
C-Class Shares with CDSC§ | 25.94% | 14.31% | 13.61% |
P-Class Shares** | 27.76% | 15.15% | 14.45% |
Institutional Class Shares | 28.15% | 15.47% | 14.76% |
Guggenheim RBP Large-Cap Market IndexSM | 29.64% | 16.77% | 16.07% |
Dow Jones U.S. Large-Cap Total Stock Market Index | 30.73% | 17.24% | 16.76% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Guggenheim RBP Large-Cap Market IndexSM and the Dow Jones U.S. Large-Cap Total Stock Market are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The first graph is based on A-Class shares only. The second graph is based on P-Class shares only. Performance for C-Class shares and Institutional Class shares will vary due to differences in fee structure. |
** | F-1 Class shares redesignated as P-Class shares effective May 9, 2016. |
‡ | Effective May 9, 2016, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the average annual return since inception based on subscriptions made prior to May 9, 2016, and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after May 9, 2016. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
42 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | September 30, 2021 |
RBP® LARGE-CAP MARKET FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.4% | ||||||||
Consumer, Non-cyclical - 21.5% | ||||||||
Procter & Gamble Co. | 1,721 | $ | 240,596 | |||||
PayPal Holdings, Inc.* | 907 | 236,010 | ||||||
Thermo Fisher Scientific, Inc. | 385 | 219,962 | ||||||
Pfizer, Inc. | 5,065 | 217,846 | ||||||
Abbott Laboratories | 1,720 | 203,183 | ||||||
Eli Lilly & Co. | 870 | 201,013 | ||||||
S&P Global, Inc. | 394 | 167,407 | ||||||
Corteva, Inc. | 3,557 | 149,679 | ||||||
Catalent, Inc.* | 1,098 | 146,111 | ||||||
PerkinElmer, Inc. | 803 | 139,152 | ||||||
West Pharmaceutical Services, Inc. | 326 | 138,400 | ||||||
McKesson Corp. | 678 | 135,180 | ||||||
Sysco Corp. | 1,583 | 124,265 | ||||||
Equifax, Inc. | 478 | 121,135 | ||||||
Philip Morris International, Inc. | 1,266 | 120,004 | ||||||
Estee Lauder Companies, Inc. — Class A | 381 | 114,273 | ||||||
HCA Healthcare, Inc. | 459 | 111,408 | ||||||
Constellation Brands, Inc. — Class A | 424 | 89,333 | ||||||
Charles River Laboratories International, Inc.* | 195 | 80,471 | ||||||
Dexcom, Inc.* | 94 | 51,405 | ||||||
Johnson & Johnson | 46 | 7,429 | ||||||
Total Consumer, Non-cyclical | 3,014,262 | |||||||
Technology - 20.9% | ||||||||
Apple, Inc. | 6,435 | 910,552 | ||||||
Microsoft Corp. | 3,104 | 875,080 | ||||||
salesforce.com, Inc.* | 890 | 241,386 | ||||||
Advanced Micro Devices, Inc.* | 1,777 | 182,853 | ||||||
NXP Semiconductor N.V. | 765 | 149,840 | ||||||
Adobe, Inc.* | 246 | 141,627 | ||||||
Qorvo, Inc.* | 836 | 139,771 | ||||||
Zebra Technologies Corp. — Class A* | 256 | 131,948 | ||||||
Skyworks Solutions, Inc. | 755 | 124,409 | ||||||
NVIDIA Corp. | 218 | 45,161 | ||||||
Total Technology | 2,942,627 | |||||||
Financial - 15.8% | ||||||||
JPMorgan Chase & Co. | 1,936 | 316,904 | ||||||
Visa, Inc. — Class A | 1,216 | 270,864 | ||||||
Mastercard, Inc. — Class A | 711 | 247,200 | ||||||
American International Group, Inc. | 2,923 | 160,443 | ||||||
Synchrony Financial | 3,221 | 157,443 | ||||||
First Republic Bank | 785 | 151,411 | ||||||
Prologis, Inc. REIT | 1,190 | 149,262 | ||||||
Equitable Holdings, Inc. | 4,967 | 147,222 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 759 | 145,022 | ||||||
Duke Realty Corp. REIT | 2,950 | 141,216 | ||||||
Goldman Sachs Group, Inc. | 335 | 126,640 | ||||||
Ameriprise Financial, Inc. | 460 | 121,495 | ||||||
Fidelity National Financial, Inc. | 1,048 | 47,516 | ||||||
Berkshire Hathaway, Inc. — Class B* | 120 | 32,753 | ||||||
Total Financial | 2,215,391 | |||||||
Communications - 15.5% | ||||||||
Amazon.com, Inc.* | 193 | 634,013 | ||||||
Alphabet, Inc. — Class C* | 159 | 423,784 | ||||||
Facebook, Inc. — Class A* | 1,196 | 405,911 | ||||||
Netflix, Inc.* | 391 | 238,643 | ||||||
T-Mobile US, Inc.* | 1,295 | 165,449 | ||||||
Twitter, Inc.* | 2,711 | 163,717 | ||||||
CDW Corp. | 770 | 140,155 | ||||||
Total Communications | 2,171,672 | |||||||
Industrial - 9.0% | ||||||||
United Parcel Service, Inc. — Class B | 990 | 180,279 | ||||||
3M Co. | 974 | 170,859 | ||||||
Northrop Grumman Corp. | 456 | 164,228 | ||||||
L3Harris Technologies, Inc. | 687 | 151,305 | ||||||
FedEx Corp. | 640 | 140,346 | ||||||
Garmin Ltd. | 881 | 136,960 | ||||||
Trex Company, Inc.* | 1,121 | 114,264 | ||||||
AGCO Corp. | 850 | 104,151 | ||||||
Republic Services, Inc. — Class A | 585 | 70,235 | ||||||
Johnson Controls International plc | 529 | 36,014 | ||||||
Total Industrial | 1,268,641 | |||||||
Consumer, Cyclical - 8.7% | ||||||||
Tesla, Inc.* | 473 | 366,802 | ||||||
Walmart, Inc. | 1,472 | 205,167 | ||||||
Target Corp. | 783 | 179,127 | ||||||
Home Depot, Inc. | 427 | 140,167 | ||||||
Advance Auto Parts, Inc. | 646 | 134,943 | ||||||
Dollar Tree, Inc.* | 1,165 | 111,514 | ||||||
Best Buy Company, Inc. | 822 | 86,894 | ||||||
Total Consumer, Cyclical | 1,224,614 | |||||||
Utilities - 2.6% | ||||||||
Exelon Corp. | 3,204 | 154,881 | ||||||
Vistra Corp. | 7,930 | 135,603 | ||||||
Sempra Energy | 619 | 78,304 | ||||||
Total Utilities | 368,788 | |||||||
Energy - 2.4% | ||||||||
Chevron Corp. | 2,154 | 218,523 | ||||||
Cheniere Energy, Inc.* | 1,208 | 117,986 | ||||||
Total Energy | 336,509 | |||||||
Basic Materials - 2.0% | ||||||||
DuPont de Nemours, Inc. | 2,210 | 150,258 | ||||||
FMC Corp. | 1,039 | 95,131 | ||||||
International Flavors & Fragrances, Inc. | 267 | 35,703 | ||||||
Total Basic Materials | 281,092 | |||||||
Total Common Stocks | ||||||||
(Cost $11,953,487) | 13,823,596 | |||||||
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 43 |
SCHEDULE OF INVESTMENTS (concluded) | September 30, 2021 |
RBP® LARGE-CAP MARKET FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 1.0% | ||||||||
SPDR S&P 500 ETF Trust | 207 | $ | 88,832 | |||||
Vanguard S&P 500 ETF | 148 | 58,371 | ||||||
Total Exchange-Traded Funds | ||||||||
(Cost $148,769) | 147,203 | |||||||
Total Investments - 99.4% | ||||||||
(Cost $12,102,256) | $ | 13,970,799 | ||||||
Other Assets & Liabilities, net - 0.6% | 82,884 | |||||||
Total Net Assets - 100.0% | $ | 14,053,683 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at September 30, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 13,823,596 | $ | — | $ | — | $ | 13,823,596 | ||||||||
Exchange-Traded Funds | 147,203 | — | — | 147,203 | ||||||||||||
Total Assets | $ | 13,970,799 | $ | — | $ | — | $ | 13,970,799 |
44 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
September 30, 2021 |
Assets: | ||||
Investments, at value (cost $12,102,256) | $ | 13,970,799 | ||
Cash | 76,755 | |||
Prepaid expenses | 31,105 | |||
Receivables: | ||||
Dividends | 9,877 | |||
Investment Adviser | 3,706 | |||
Total assets | 14,092,242 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 19,317 | |||
Fund accounting/administration fees | 5,810 | |||
Distribution and service fees | 4,784 | |||
Transfer agent/maintenance fees | 3,169 | |||
Trustees’ fees* | 2,259 | |||
Due to Investment Adviser | 13 | |||
Miscellaneous | 3,207 | |||
Total liabilities | 38,559 | |||
Net assets | $ | 14,053,683 | ||
Net assets consist of: | ||||
Paid in capital | $ | 9,156,910 | ||
Total distributable earnings (loss) | 4,896,773 | |||
Net assets | $ | 14,053,683 | ||
A-Class: | ||||
Net assets | $ | 6,973,489 | ||
Capital shares outstanding | 524,270 | |||
Net asset value per share | $ | 13.30 | ||
Maximum offering price per share (Net asset value divided by 95.25%) | $ | 13.96 | ||
C-Class: | ||||
Net assets | $ | 3,360,125 | ||
Capital shares outstanding | 274,721 | |||
Net asset value per share | $ | 12.23 | ||
P-Class: | ||||
Net assets | $ | 232,038 | ||
Capital shares outstanding | 16,835 | |||
Net asset value per share | $ | 13.78 | ||
Institutional Class: | ||||
Net assets | $ | 3,488,031 | ||
Capital shares outstanding | 242,949 | |||
Net asset value per share | $ | 14.36 |
STATEMENT OF OPERATIONS |
Year Ended September 30, 2021 |
Investment Income: | ||||
Dividends | $ | 141,171 | ||
Total investment income | 141,171 | |||
Expenses: | ||||
Management fees | 96,255 | |||
Distribution and service fees: | ||||
A-Class | 17,989 | |||
C-Class | 45,014 | |||
P-Class | 412 | |||
Transfer agent/maintenance fees: | ||||
A-Class | 11,376 | |||
C-Class | 8,770 | |||
P-Class | 665 | |||
Institutional Class | 4,832 | |||
Registration fees | 64,176 | |||
Fund accounting/administration fees | 33,338 | |||
Professional fees | 33,092 | |||
Trustees’ fees* | 18,404 | |||
Custodian fees | 4,449 | |||
Line of credit fees | 559 | |||
Miscellaneous | 4,416 | |||
Total expenses | 343,747 | |||
Less: | ||||
Expenses reimbursed by Adviser: | ||||
A-Class | (30,518 | ) | ||
C-Class | (23,093 | ) | ||
P-Class | (1,073 | ) | ||
Institutional Class | (10,734 | ) | ||
Expenses waived by Adviser | (96,183 | ) | ||
Total waived/reimbursed expenses | (161,601 | ) | ||
Net expenses | 182,146 | |||
Net investment loss | (40,975 | ) | ||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 3,241,410 | |||
Net realized gain | 3,241,410 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (267,497 | ) | ||
Net change in unrealized appreciation (depreciation) | (267,497 | ) | ||
Net realized and unrealized gain | 2,973,913 | |||
Net increase in net assets resulting from operations | $ | 2,932,938 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 45 |
RBP® LARGE-CAP MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment loss | $ | (40,975 | ) | $ | (9,796 | ) | ||
Net realized gain on investments | 3,241,410 | 622,585 | ||||||
Net change in unrealized appreciation (depreciation) on investments | (267,497 | ) | (129,068 | ) | ||||
Net increase in net assets resulting from operations | 2,932,938 | 483,721 | ||||||
Distributions to shareholders: | ||||||||
A-Class | (217,350 | ) | (309,791 | ) | ||||
C-Class | (255,473 | ) | (416,826 | ) | ||||
P-Class | (6,321 | ) | (8,841 | ) | ||||
Institutional Class | (71,108 | ) | (241,203 | ) | ||||
Total distributions to shareholders | (550,252 | ) | (976,661 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
A-Class | 2,334,646 | 1,202,491 | ||||||
C-Class | 41,746 | 19,853 | ||||||
P-Class | 96,307 | 18,988 | ||||||
Institutional Class | 1,835,045 | 161,831 | ||||||
Distributions reinvested | ||||||||
A-Class | 188,049 | 288,783 | ||||||
C-Class | 254,181 | 394,525 | ||||||
P-Class | 6,126 | 8,605 | ||||||
Institutional Class | 68,828 | 237,305 | ||||||
Cost of shares redeemed | ||||||||
A-Class | (943,317 | ) | (1,761,079 | ) | ||||
C-Class | (2,718,115 | ) | (1,725,330 | ) | ||||
P-Class | (28,453 | ) | (53,893 | ) | ||||
Institutional Class | (459,269 | ) | (2,079,112 | ) | ||||
Net increase (decrease) from capital share transactions | 675,774 | (3,287,033 | ) | |||||
Net increase (decrease) in net assets | 3,058,460 | (3,779,973 | ) | |||||
Net assets: | ||||||||
Beginning of year | 10,995,223 | 14,775,196 | ||||||
End of year | $ | 14,053,683 | $ | 10,995,223 | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
A-Class | 182,865 | 112,829 | ||||||
C-Class | 3,559 | 1,995 | ||||||
P-Class | 7,099 | 1,769 | ||||||
Institutional Class | 133,301 | 15,572 | ||||||
Shares issued from reinvestment of distributions | ||||||||
A-Class | 16,310 | 27,141 | ||||||
C-Class | 23,844 | 39,651 | ||||||
P-Class | 513 | 782 | ||||||
Institutional Class | 5,542 | 20,834 | ||||||
Shares redeemed | ||||||||
A-Class | (76,042 | ) | (172,990 | ) | ||||
C-Class | (232,133 | ) | (180,173 | ) | ||||
P-Class | (2,359 | ) | (4,906 | ) | ||||
Institutional Class | (35,568 | ) | (224,146 | ) | ||||
Net increase (decrease) in shares | 26,931 | (361,642 | ) |
46 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP MARKET FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.90 | $ | 10.71 | $ | 12.04 | $ | 11.36 | $ | 10.17 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.01 | ) | .02 | .03 | .01 | .01 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.96 | .88 | .25 | 1.84 | 1.84 | |||||||||||||||
Total from investment operations | 2.95 | .90 | .28 | 1.85 | 1.85 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.01 | ) | — | — | — | ||||||||||||||
Net realized gains | (.55 | ) | (.70 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Total distributions | (.55 | ) | (.71 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Net asset value, end of period | $ | 13.30 | $ | 10.90 | $ | 10.71 | $ | 12.04 | $ | 11.36 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 27.82 | % | 8.57 | % | 4.34 | % | 17.47 | % | 19.11 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,973 | $ | 4,372 | $ | 4,651 | $ | 4,280 | $ | 4,290 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.11 | %) | 0.17 | % | 0.32 | % | 0.09 | % | 0.09 | % | ||||||||||
Total expensesc | 2.48 | % | 2.64 | % | 2.29 | % | 1.86 | % | 1.91 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 105 | % | 76 | % | 81 | % | 93 | % | 98 | % |
C-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.13 | $ | 10.07 | $ | 11.50 | $ | 10.98 | $ | 9.92 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.10 | ) | (.06 | ) | (.04 | ) | (.07 | ) | (.07 | ) | ||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.75 | .82 | .22 | 1.76 | 1.79 | |||||||||||||||
Total from investment operations | 2.65 | .76 | .18 | 1.69 | 1.72 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net realized gains | (.55 | ) | (.70 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Total distributions | (.55 | ) | (.70 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Net asset value, end of period | $ | 12.23 | $ | 10.13 | $ | 10.07 | $ | 11.50 | $ | 10.98 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 26.94 | % | 7.69 | % | 3.59 | % | 16.55 | % | 18.24 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,360 | $ | 4,859 | $ | 6,223 | $ | 9,672 | $ | 9,309 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.83 | %) | (0.57 | %) | (0.42 | %) | (0.66 | %) | (0.65 | %) | ||||||||||
Total expensesc | 3.22 | % | 3.32 | % | 2.92 | % | 2.62 | % | 2.62 | % | ||||||||||
Net expensesd,e,f | 1.95 | % | 1.96 | % | 1.97 | % | 1.96 | % | 1.96 | % | ||||||||||
Portfolio turnover rate | 105 | % | 76 | % | 81 | % | 93 | % | 98 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 47 |
RBP® LARGE-CAP MARKET FUND |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 11.28 | $ | 11.06 | $ | 12.37 | $ | 11.64 | $ | 10.41 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | (.01 | ) | .02 | .04 | .01 | .01 | ||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.06 | .91 | .26 | 1.89 | 1.88 | |||||||||||||||
Total from investment operations | 3.05 | .93 | .30 | 1.90 | 1.89 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.01 | ) | — | — | — | ||||||||||||||
Net realized gains | (.55 | ) | (.70 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Total distributions | (.55 | ) | (.71 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Net asset value, end of period | $ | 13.78 | $ | 11.28 | $ | 11.06 | $ | 12.37 | $ | 11.64 | ||||||||||
| ||||||||||||||||||||
Total Return | 27.76 | % | 8.54 | % | 4.39 | % | 17.38 | % | 19.16 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 232 | $ | 131 | $ | 154 | $ | 200 | $ | 163 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | (0.10 | %) | 0.17 | % | 0.35 | % | 0.08 | % | 0.11 | % | ||||||||||
Total expensesc | 2.61 | % | 2.79 | % | 2.34 | % | 1.97 | % | 1.86 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.21 | % | ||||||||||
Portfolio turnover rate | 105 | % | 76 | % | 81 | % | 93 | % | 98 | % |
48 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP MARKET FUND |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 11.70 | $ | 11.44 | $ | 12.71 | $ | 11.91 | $ | 10.60 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .02 | .05 | .07 | .04 | .04 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 3.19 | .95 | .27 | 1.93 | 1.93 | |||||||||||||||
Total from investment operations | 3.21 | 1.00 | .34 | 1.97 | 1.97 | |||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | — | (.04 | ) | — | — | — | ||||||||||||||
Net realized gains | (.55 | ) | (.70 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Total distributions | (.55 | ) | (.74 | ) | (1.61 | ) | (1.17 | ) | (.66 | ) | ||||||||||
Net asset value, end of period | $ | 14.36 | $ | 11.70 | $ | 11.44 | $ | 12.71 | $ | 11.91 | ||||||||||
| ||||||||||||||||||||
Total Return | 28.15 | % | 8.90 | % | 4.62 | % | 17.69 | % | 19.49 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,488 | $ | 1,634 | $ | 3,747 | $ | 5,026 | $ | 6,498 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | % | 0.47 | % | 0.59 | % | 0.35 | % | 0.34 | % | ||||||||||
Total expensesc | 2.15 | % | 2.25 | % | 1.96 | % | 1.57 | % | 1.60 | % | ||||||||||
Net expensesd,e,f | 0.95 | % | 0.96 | % | 0.97 | % | 0.96 | % | 0.96 | % | ||||||||||
Portfolio turnover rate | 105 | % | 76 | % | 81 | % | 93 | % | 98 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | — | — | — | — | 0.18% | |
C-Class | — | 0.00%g | — | — | 0.14% | |
P-Class | — | — | — | — | 0.15% | |
Institutional Class | — | — | — | — | 0.14% |
g | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
C-Class | 1.95% | 1.96% | 1.96% | 1.95% | 1.95% | |
P-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
Institutional Class | 0.95% | 0.96% | 0.96% | 0.95% | 0.95% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 49 |
MANAGERS’ COMMENTARY (Unaudited) | September 30, 2021 |
To Our Shareholders
Guggenheim RBP® Large-Cap Value Fund (the “Fund”) is managed by a team of seasoned professionals led by Farhan Sharaff, Senior Managing Director and Assistant Chief Investment Officer, Equities; Burak Hurmeydan, Ph.D., Director and Portfolio Manager; and Douglas Makin, Director and Portfolio Manager. The following paragraphs discuss the Fund for the fiscal year ended September 30, 2021.
For the one-year period ended September 30, 2021, Guggenheim RBP® Large-Cap Value Fund returned 30.34%1, compared with the 32.07% return of its benchmark, the Dow Jones U.S. Large-Cap Value Total Stock Market Index. In addition, the Guggenheim RBP® Large-Cap Value IndexSM (the “Index”) returned 32.27%.
Strategy Overview
The Fund invests in U.S. large-capitalization companies believed to have a high Required Business Performance® (“RBP® ”) Probability, while avoiding companies believed to have the most behavioral risk. The Fund uses a passive management strategy designed to track the total return performance (before fees and expenses) of the Index, which consists of common stocks of companies and units of beneficial ownership in real estate investment trusts from the Dow Jones U.S. Large-Cap Value Total Stock Market IndexSM. The selection and weighting of the components of the Guggenheim RBP® Large-Cap Value Index starts from the set of eligible securities and uses optimization combined with a proprietary risk model that includes eight fundamental style factors as well as custom industries. The objective is to maximize expected return. Optimization constraints are employed in terms of tracking error to the Universe, turnover, active exposures to fundamental factors and industries, and individual constituents’ weights.
The Fund will generally invest in all of the securities comprising the Index in proportion to the weightings in the Index. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of borrowings for investment purposes, in securities that comprise the Index. The Fund also may invest up to 20% of its net assets in common stocks and REITS not included in the Index, but which the Investment Manager believes will help the Fund track the Index, as well as in ETFs, futures, put and call options, interest rate, index and total return swap contracts, cash and cash equivalents.
RBP® methodology quantifies the probability of whether a stock can perform according to market expectations by measuring the likelihood that the company’s management can achieve the RBP® to support its current valuation or if investors’ systematic behavioral biases might have caused misalignment between the stock price and management’s ability to deliver. RBP® cannot guarantee nor does it predict profit, performance, or future stock prices.
Performance Review
The Fund delivered solid results for the year, although just underperforming the benchmark, mostly due a shortfall in security selection. The Fund benefited from having higher exposure to smaller cap companies. However, having exposure to higher quality companies hurt performance, as more volatile and less profitable companies performed well last year.
The Fund’s leading positive sector contributors were Information Technology and Financials. The Information Technology sector weight was in line to the benchmark, but provided strong selection results, driven by its overweight position in Applied Materials. The Financial sector outperformed the benchmark primarily by allocation, being overweight to the benchmark, and selection by being underweight Berkshire Hathaway.
The sectors detracting the most from performance relative to the benchmark included Industrials and Consumer Staples. The Fund’s Industrials underperformance was most negatively impacted by higher holdings in Lockheed Martin and Booze Allen Hamilton. The Consumer Staples sector underperformance was led by overweight exposures to Clorox and Philip Morris International.
At the end of the period the portfolio sector weightings were not materially different than the benchmark, with slight overweights to the benchmark in Consumer Staples and Utilities. The largest portfolio sector underweights are in Information Technology and Health Care. The portfolio has a noticeable bias toward less volatile smaller cap companies, with higher value exposure than the benchmark.
Performance displayed represents past performance which is no guarantee of future results.
1 | Performance figures are based on A-Class shares and do not reflect deduction of the sales charges or taxes that a shareholder would pay on distributions or the redemption of shares. Fund performance will lag that of the RBP Index due to fund expenses. |
The opinions and forecast expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security or strategy.
50 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited) | September 30, 2021 |
RBP® LARGE-CAP VALUE FUND
OBJECTIVE: Seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Guggenheim RBP® Large-Cap Value IndexSM (the “Value Index” or “Index”).
Holdings Diversification (Market Exposure as % of Net Assets)
“Holdings Diversification (Market Exposure as % of Net Assets)” excludes any temporary cash investments.
Inception Dates: | |
A-Class | April 18, 2011 |
C-Class | April 18, 2011 |
P-Class | April 18, 2011 |
Institutional Class | February 10, 2011 |
Ten Largest Holdings (% of Total Net Assets) | |
JPMorgan Chase & Co. | 3.3% |
Home Depot, Inc. | 2.6% |
Procter & Gamble Co. | 2.5% |
Walt Disney Co. | 2.4% |
Pfizer, Inc. | 2.1% |
Walmart, Inc. | 2.0% |
Chevron Corp. | 2.0% |
Merck & Company, Inc. | 1.9% |
Abbott Laboratories | 1.9% |
Eli Lilly & Co. | 1.8% |
Top Ten Total | 22.5% |
“Ten Largest Holdings” excludes any temporary cash investments. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 51 |
PERFORMANCE REPORT AND FUND PROFILE (Unaudited)(concluded) | September 30, 2021 |
Average Annual Returns*
Periods Ended September 30, 2021
| 1 Year | 5 Year | 10 Year |
A-Class Shares | 30.34% | 10.07% | 12.51% |
A-Class Shares with sales charge‡ | 24.19% | 9.01% | 11.84% |
C-Class Shares | 29.41% | 9.24% | 11.71% |
C-Class Shares with CDSC§ | 28.41% | 9.24% | 11.71% |
P-Class Shares** | 30.31% | 10.05% | 12.56% |
Institutional Class Shares | 30.72% | 10.35% | 12.86% |
Guggenheim RBP Large-Cap Value IndexSM | 32.27% | 11.50% | 14.21% |
Dow Jones U.S. Large-Cap Value Total Stock Market Index | 32.07% | 11.38% | 13.39% |
* | The performance data above represents past performance that is not predictive of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Returns are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The Dow Jones U.S. Large-Cap Value Total Stock Market Index and Guggenheim RBP Large-Cap Value IndexSM are unmanaged indices and, unlike the Fund, have no management fees or operating expenses to reduce their reported returns. The first graph is based on A-Class shares only. The second graph is based on P-Class shares only. Performance for C-Class shares and Institutional Class shares will vary due to differences in fee structure. |
** | F-1 Class shares redesignated as P-Class shares effective May 9, 2016. |
‡ | Effective May 9, 2016, the maximum sales charge decreased from 5.75% to 4.75%. A 5.75% maximum sales charge is used in the calculation of the average annual return since inception based on subscriptions made prior to May 9, 2016, and a 4.75% maximum sales charge will be used to calculate performance for periods based on subscriptions made on or after May 9, 2016. |
§ | Fund returns include a CDSC of 1% if redeemed within 12 months of purchase. |
52 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
SCHEDULE OF INVESTMENTS | September 30, 2021 |
RBP® LARGE-CAP VALUE FUND |
| Shares | Value | ||||||
COMMON STOCKS† - 98.0% | ||||||||
Financial - 22.9% | ||||||||
JPMorgan Chase & Co. | 865 | $ | 141,592 | |||||
Prologis, Inc. REIT | 470 | 58,952 | ||||||
Berkshire Hathaway, Inc. — Class B* | 209 | 57,044 | ||||||
American International Group, Inc. | 965 | 52,969 | ||||||
Synchrony Financial | 1,029 | 50,298 | ||||||
First Republic Bank | 254 | 48,991 | ||||||
Huntington Bancshares, Inc. | 3,138 | 48,513 | ||||||
Alexandria Real Estate Equities, Inc. REIT | 248 | 47,386 | ||||||
Goldman Sachs Group, Inc. | 123 | 46,498 | ||||||
Ameriprise Financial, Inc. | 176 | 46,485 | ||||||
Equitable Holdings, Inc. | 1,541 | 45,675 | ||||||
Fidelity National Financial, Inc. | 990 | 44,887 | ||||||
Duke Realty Corp. REIT | 929 | 44,471 | ||||||
Everest Re Group Ltd. | 177 | 44,388 | ||||||
American Financial Group, Inc. | 342 | 43,034 | ||||||
Equity LifeStyle Properties, Inc. REIT | 550 | 42,955 | ||||||
Intercontinental Exchange, Inc. | 337 | 38,694 | ||||||
Lamar Advertising Co. — Class A REIT | 280 | 31,766 | ||||||
Santander Consumer USA Holdings, Inc. | 706 | 29,440 | ||||||
Bank of America Corp. | 382 | 16,216 | ||||||
Total Financial | 980,254 | |||||||
Consumer, Non-cyclical - 22.6% | ||||||||
Procter & Gamble Co. | 779 | 108,904 | ||||||
Pfizer, Inc. | 2,057 | 88,471 | ||||||
Merck & Company, Inc. | 1,090 | 81,870 | ||||||
Abbott Laboratories | 686 | 81,037 | ||||||
Eli Lilly & Co. | 337 | 77,864 | ||||||
Philip Morris International, Inc. | 726 | 68,818 | ||||||
HCA Healthcare, Inc. | 217 | 52,670 | ||||||
Medtronic plc | 420 | 52,647 | ||||||
Sysco Corp. | 667 | 52,359 | ||||||
Constellation Brands, Inc. — Class A | 236 | 49,723 | ||||||
Catalent, Inc.* | 348 | 46,309 | ||||||
Quanta Services, Inc. | 402 | 45,756 | ||||||
Corteva, Inc. | 1,064 | 44,773 | ||||||
Johnson & Johnson | 234 | 37,791 | ||||||
Church & Dwight Company, Inc. | 416 | 34,349 | ||||||
Laboratory Corporation of America Holdings* | 86 | 24,204 | ||||||
Tyson Foods, Inc. — Class A | 218 | 17,209 | ||||||
Total Consumer, Non-cyclical | 964,754 | |||||||
Industrial - 12.9% | ||||||||
United Parcel Service, Inc. — Class B | 368 | 67,013 | ||||||
Caterpillar, Inc. | 319 | 61,238 | ||||||
3M Co. | 349 | 61,221 | ||||||
Waste Management, Inc. | 373 | 55,711 | ||||||
Northrop Grumman Corp. | 152 | 54,743 | ||||||
Johnson Controls International plc | 718 | 48,882 | ||||||
FedEx Corp. | 217 | 47,586 | ||||||
Republic Services, Inc. — Class A | 390 | 46,824 | ||||||
Carrier Global Corp. | 778 | 40,269 | ||||||
Snap-on, Inc. | 130 | 27,163 | ||||||
AGCO Corp. | 198 | 24,261 | ||||||
Garmin Ltd. | 106 | 16,479 | ||||||
Total Industrial | 551,390 | |||||||
Consumer, Cyclical - 10.4% | ||||||||
Home Depot, Inc. | 340 | 111,608 | ||||||
Walmart, Inc. | 613 | 85,440 | ||||||
Target Corp. | 261 | 59,709 | ||||||
Dollar Tree, Inc.* | 526 | 50,349 | ||||||
Advance Auto Parts, Inc. | 229 | 47,836 | ||||||
Best Buy Company, Inc. | 434 | 45,878 | ||||||
CarMax, Inc.* | 354 | 45,298 | ||||||
Total Consumer, Cyclical | 446,118 | |||||||
Communications - 9.2% | ||||||||
Walt Disney Co.* | 595 | 100,656 | ||||||
Cisco Systems, Inc. | 1,021 | 55,573 | ||||||
AT&T, Inc. | 2,028 | 54,776 | ||||||
eBay, Inc. | 752 | 52,392 | ||||||
Motorola Solutions, Inc. | 214 | 49,717 | ||||||
CDW Corp. | 246 | 44,777 | ||||||
ViacomCBS, Inc. — Class B | 589 | 23,271 | ||||||
Comcast Corp. — Class A | 171 | 9,564 | ||||||
Verizon Communications, Inc. | 15 | 810 | ||||||
Total Communications | 391,536 | |||||||
Technology - 8.1% | ||||||||
QUALCOMM, Inc. | 526 | 67,844 | ||||||
Applied Materials, Inc. | 497 | 63,979 | ||||||
KLA Corp. | 153 | 51,180 | ||||||
Entegris, Inc. | 386 | 48,597 | ||||||
Broadridge Financial Solutions, Inc. | 278 | 46,326 | ||||||
Skyworks Solutions, Inc. | 277 | 45,644 | ||||||
Zynga, Inc. — Class A* | 3,052 | 22,981 | ||||||
Total Technology | 346,551 | |||||||
Utilities - 5.4% | ||||||||
Exelon Corp. | 1,062 | 51,337 | ||||||
Sempra Energy | 390 | 49,335 | ||||||
American Water Works Company, Inc. | 270 | 45,641 | ||||||
Vistra Corp. | 2,449 | 41,878 | ||||||
Dominion Energy, Inc. | 551 | 40,234 | ||||||
Total Utilities | 228,425 | |||||||
Energy - 3.8% | ||||||||
Chevron Corp. | 833 | 84,508 | ||||||
Hess Corp. | 631 | 49,287 | ||||||
Marathon Petroleum Corp. | 480 | 29,669 | ||||||
Total Energy | 163,464 | |||||||
Basic Materials - 2.7% | ||||||||
DuPont de Nemours, Inc. | 718 | 48,817 | ||||||
FMC Corp. | 467 | 42,759 | ||||||
Eastman Chemical Co. | 248 | 24,983 | ||||||
Total Basic Materials | 116,559 | |||||||
Total Common Stocks | ||||||||
(Cost $3,858,562) | 4,189,051 |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 53 |
SCHEDULE OF INVESTMENTS (concluded) | September 30, 2021 |
RBP® LARGE-CAP VALUE FUND |
| Shares | Value | ||||||
EXCHANGE-TRADED FUNDS† - 1.4% | ||||||||
iShares S&P 500 Value ETF | 421 | $ | 61,222 | |||||
Total Exchange-Traded Funds | ||||||||
(Cost $63,240) | 61,222 | |||||||
Total Investments - 99.4% | ||||||||
(Cost $3,921,802) | $ | 4,250,273 | ||||||
Other Assets & Liabilities, net - 0.6% | 26,618 | |||||||
Total Net Assets - 100.0% | $ | 4,276,891 |
* | Non-income producing security. |
† | Value determined based on Level 1 inputs — See Note 4. |
plc — Public Limited Company | |
REIT — Real Estate Investment Trust | |
See Sector Classification in Other Information section. |
The following table summarizes the inputs used to value the Fund’s investments at September 30, 2021 (See Note 4 in the Notes to Financial Statements):
Investments in Securities (Assets) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,189,051 | $ | — | $ | — | $ | 4,189,051 | ||||||||
Exchange-Traded Funds | 61,222 | — | — | 61,222 | ||||||||||||
Total Assets | $ | 4,250,273 | $ | — | $ | — | $ | 4,250,273 |
54 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP VALUE FUND |
STATEMENT OF ASSETS AND LIABILITIES |
September 30, 2021 |
Assets: | ||||
Investments, at value (cost $3,921,802) | $ | 4,250,273 | ||
Cash | 26,567 | |||
Prepaid expenses | 25,711 | |||
Receivables: | ||||
Investment Adviser | 10,370 | |||
Dividends | 6,672 | |||
Total assets | 4,319,593 | |||
Liabilities: | ||||
Payable for: | ||||
Professional fees | 27,736 | |||
Fund accounting/administration fees | 5,794 | |||
Trustees’ fees* | 3,288 | |||
Transfer agent/maintenance fees | 2,134 | |||
Securities purchased | 1,626 | |||
Distribution and service fees | 666 | |||
Due to Investment Adviser | 13 | |||
Miscellaneous | 1,445 | |||
Total liabilities | 42,702 | |||
Net assets | $ | 4,276,891 | ||
Net assets consist of: | ||||
Paid in capital | $ | 3,354,726 | ||
Total distributable earnings (loss) | 922,165 | |||
Net assets | $ | 4,276,891 | ||
A-Class: | ||||
Net assets | $ | 181,801 | ||
Capital shares outstanding | 15,551 | |||
Net asset value per share | $ | 11.69 | ||
Maximum offering price per share (Net asset value divided by 95.25%) | $ | 12.27 | ||
C-Class: | ||||
Net assets | $ | 579,972 | ||
Capital shares outstanding | 49,199 | |||
Net asset value per share | $ | 11.79 | ||
P-Class: | ||||
Net assets | $ | 308,250 | ||
Capital shares outstanding | 26,585 | |||
Net asset value per share | $ | 11.59 | ||
Institutional Class: | ||||
Net assets | $ | 3,206,868 | ||
Capital shares outstanding | 265,004 | |||
Net asset value per share | $ | 12.10 |
STATEMENT OF OPERATIONS |
Year Ended September 30, 2021 |
Investment Income: | ||||
Dividends | $ | 76,988 | ||
Total investment income | 76,988 | |||
Expenses: | ||||
Management fees | 28,980 | |||
Distribution and service fees: | ||||
A-Class | 386 | |||
C-Class | 5,515 | |||
P-Class | 505 | |||
Transfer agent/maintenance fees: | ||||
A-Class | 898 | |||
C-Class | 3,756 | |||
P-Class | 1,536 | |||
Institutional Class | 19,376 | |||
Registration fees | 64,568 | |||
Fund accounting/administration fees | 33,706 | |||
Professional fees | 33,671 | |||
Trustees’ fees* | 17,504 | |||
Custodian fees | 2,593 | |||
Line of credit fees | 167 | |||
Miscellaneous | 5,719 | |||
Total expenses | 218,880 | |||
Less: | ||||
Expenses reimbursed by Adviser: | ||||
A Class | (4,023 | ) | ||
C Class | (21,077 | ) | ||
P Class | (7,644 | ) | ||
Institutional Class | (114,036 | ) | ||
Expenses waived by Adviser | (28,964 | ) | ||
Total waived/reimbursed expenses | (175,744 | ) | ||
Net expenses | 43,136 | |||
Net investment income | 33,852 | |||
Net Realized and Unrealized Gain (Loss): | ||||
Net realized gain (loss) on: | ||||
Investments | 703,074 | |||
Net realized gain | 703,074 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 191,338 | |||
Net change in unrealized appreciation (depreciation) | 191,338 | |||
Net realized and unrealized gain | 894,412 | |||
Net increase in net assets resulting from operations | $ | 928,264 |
* | Relates to Trustees not deemed “interested persons” within the meaning of Section 2(a)(19) of the 1940 Act. |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 55 |
RBP® LARGE-CAP VALUE FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
| Year Ended | Year Ended | ||||||
Increase (Decrease) in Net Assets from Operations: | ||||||||
Net investment income | $ | 33,852 | $ | 51,781 | ||||
Net realized gain (loss) on investments | 703,074 | (121,874 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | 191,338 | (163,562 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 928,264 | (233,655 | ) | |||||
Distributions to shareholders: | ||||||||
A-Class | (2,072 | ) | (1,700 | ) | ||||
C-Class | (503 | ) | (4,693 | ) | ||||
P-Class | (5,432 | ) | (9,386 | ) | ||||
Institutional Class | (42,314 | ) | (56,328 | ) | ||||
Total distributions to shareholders | (50,321 | ) | (72,107 | ) | ||||
Capital share transactions: | ||||||||
Proceeds from sale of shares | ||||||||
A-Class | 141,673 | 51,928 | ||||||
C-Class | 59,000 | 150,749 | ||||||
P-Class | 166,440 | 16,818 | ||||||
Institutional Class | 31,094 | 4,414 | ||||||
Distributions reinvested | ||||||||
A-Class | 2,072 | 1,665 | ||||||
C-Class | 503 | 4,693 | ||||||
P-Class | 5,212 | 9,265 | ||||||
Institutional Class | 42,314 | 56,328 | ||||||
Cost of shares redeemed | ||||||||
A-Class | (26,212 | ) | (72,732 | ) | ||||
C-Class | (56,639 | ) | (9,672 | ) | ||||
P-Class | (10,290 | ) | (306,848 | ) | ||||
Institutional Class | (7,470 | ) | (57,767 | ) | ||||
Net increase (decrease) from capital share transactions | 347,697 | (151,159 | ) | |||||
Net increase (decrease) in net assets | 1,225,640 | (456,921 | ) | |||||
Net assets: | ||||||||
Beginning of year | 3,051,251 | 3,508,172 | ||||||
End of year | $ | 4,276,891 | $ | 3,051,251 | ||||
Capital share activity: | ||||||||
Shares sold | ||||||||
A-Class | 11,944 | 5,312 | ||||||
C-Class | 5,000 | 18,422 | ||||||
P-Class | 14,650 | 1,811 | ||||||
Institutional Class | 2,501 | 463 | ||||||
Shares issued from reinvestment of distributions | ||||||||
A-Class | 204 | 158 | ||||||
C-Class | 49 | 453 | ||||||
P-Class | 516 | 882 | ||||||
Institutional Class | 4,022 | 5,309 | ||||||
Shares redeemed | ||||||||
A-Class | (2,320 | ) | (8,110 | ) | ||||
C-Class | (4,865 | ) | (1,131 | ) | ||||
P-Class | (914 | ) | (29,513 | ) | ||||
Institutional Class | (604 | ) | (5,983 | ) | ||||
Net increase (decrease) in shares | 30,183 | (11,927 | ) |
56 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP VALUE FUND |
FINANCIAL HIGHLIGHTS |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
A-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 9.30 | $ | 10.28 | $ | 11.17 | $ | 11.12 | $ | 9.67 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .08 | .15 | .14 | .10 | .11 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.69 | (.96 | ) | .01 | 1.09 | 1.61 | ||||||||||||||
Total from investment operations | 2.77 | (.81 | ) | .15 | 1.19 | 1.72 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.38 | ) | (.11 | ) | (.06 | ) | (.20 | ) | (.22 | ) | ||||||||||
Net realized gains | — | (.06 | ) | (.98 | ) | (.94 | ) | (.05 | ) | |||||||||||
Total distributions | (.38 | ) | (.17 | ) | (1.04 | ) | (1.14 | ) | (.27 | ) | ||||||||||
Net asset value, end of period | $ | 11.69 | $ | 9.30 | $ | 10.28 | $ | 11.17 | $ | 11.12 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 30.34 | % | (8.05 | %) | 2.53 | % | 11.36 | % | 18.07 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 182 | $ | 53 | $ | 86 | $ | 106 | $ | 101 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.74 | % | 1.53 | % | 1.41 | % | 0.90 | % | 1.10 | % | ||||||||||
Total expensesc | 5.90 | % | 7.41 | % | 6.32 | % | 5.49 | % | 5.22 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.22 | % | ||||||||||
Portfolio turnover rate | 132 | % | 95 | % | 101 | % | 104 | % | 132 | % |
C-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 9.12 | $ | 10.14 | $ | 11.09 | $ | 10.98 | $ | 9.49 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | — | .07 | .06 | .01 | .03 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.68 | (.94 | ) | .02 | 1.09 | 1.59 | ||||||||||||||
Total from investment operations | 2.68 | (.87 | ) | .08 | 1.10 | 1.62 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.01 | ) | (.09 | ) | (.05 | ) | (.05 | ) | (.08 | ) | ||||||||||
Net realized gains | — | (.06 | ) | (.98 | ) | (.94 | ) | (.05 | ) | |||||||||||
Total distributions | (.01 | ) | (.15 | ) | (1.03 | ) | (.99 | ) | (.13 | ) | ||||||||||
Net asset value, end of period | $ | 11.79 | $ | 9.12 | $ | 10.14 | $ | 11.09 | $ | 10.98 | ||||||||||
| ||||||||||||||||||||
Total Returnb | 29.41 | % | (8.80 | %) | 1.81 | % | 10.54 | % | 17.14 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 580 | $ | 447 | $ | 317 | $ | 516 | $ | 542 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.04 | % | 0.79 | % | 0.65 | % | 0.14 | % | 0.34 | % | ||||||||||
Total expensesc | 6.52 | % | 7.99 | % | 6.75 | % | 6.14 | % | 5.89 | % | ||||||||||
Net expensesd,e,f | 1.95 | % | 1.96 | % | 1.97 | % | 1.96 | % | 1.97 | % | ||||||||||
Portfolio turnover rate | 132 | % | 95 | % | 101 | % | 104 | % | 132 | % |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 57 |
RBP® LARGE-CAP VALUE FUND |
FINANCIAL HIGHLIGHTS (continued) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
P-Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 9.28 | $ | 10.33 | $ | 11.25 | $ | 11.12 | $ | 9.46 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .08 | .15 | .14 | .10 | .11 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.67 | (.96 | ) | — | 1.10 | 1.60 | ||||||||||||||
Total from investment operations | 2.75 | (.81 | ) | .14 | 1.20 | 1.71 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.44 | ) | (.18 | ) | (.08 | ) | (.13 | ) | — | |||||||||||
Net realized gains | — | (.06 | ) | (.98 | ) | (.94 | ) | (.05 | ) | |||||||||||
Total distributions | (.44 | ) | (.24 | ) | (1.06 | ) | (1.07 | ) | (.05 | ) | ||||||||||
Net asset value, end of period | $ | 11.59 | $ | 9.28 | $ | 10.33 | $ | 11.25 | $ | 11.12 | ||||||||||
| ||||||||||||||||||||
Total Return | 30.31 | % | (8.10 | %) | 2.47 | % | 11.40 | % | 18.09 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 308 | $ | 114 | $ | 405 | $ | 577 | $ | 510 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 0.75 | % | 1.49 | % | 1.41 | % | 0.90 | % | 1.05 | % | ||||||||||
Total expensesc | 5.74 | % | 7.18 | % | 6.07 | % | 5.37 | % | 5.31 | % | ||||||||||
Net expensesd,e,f | 1.20 | % | 1.21 | % | 1.22 | % | 1.21 | % | 1.22 | % | ||||||||||
Portfolio turnover rate | 132 | % | 95 | % | 101 | % | 104 | % | 132 | % |
58 | THE GUGGENHEIM FUNDS ANNUAL REPORT | SEE NOTES TO FINANCIAL STATEMENTS. |
RBP® LARGE-CAP VALUE FUND |
FINANCIAL HIGHLIGHTS (concluded) |
This table is presented to show selected data for a share outstanding throughout each period and to assist shareholders in evaluating a Fund’s performance for the periods presented.
Institutional Class | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net asset value, beginning of period | $ | 9.40 | $ | 10.42 | $ | 11.35 | $ | 11.22 | $ | 9.61 | ||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income (loss)a | .12 | .17 | .17 | .13 | .14 | |||||||||||||||
Net gain (loss) on investments (realized and unrealized) | 2.74 | (.97 | ) | — | 1.11 | 1.62 | ||||||||||||||
Total from investment operations | 2.86 | (.80 | ) | .17 | 1.24 | 1.76 | ||||||||||||||
Less distributions from: | ||||||||||||||||||||
Net investment income | (.16 | ) | (.16 | ) | (.12 | ) | (.17 | ) | (.10 | ) | ||||||||||
Net realized gains | — | (.06 | ) | (.98 | ) | (.94 | ) | (.05 | ) | |||||||||||
Total distributions | (.16 | ) | (.22 | ) | (1.10 | ) | (1.11 | ) | (.15 | ) | ||||||||||
Net asset value, end of period | $ | 12.10 | $ | 9.40 | $ | 10.42 | $ | 11.35 | $ | 11.22 | ||||||||||
| ||||||||||||||||||||
Total Return | 30.72 | % | (7.92 | %) | 2.77 | % | 11.69 | % | 18.42 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,207 | $ | 2,437 | $ | 2,701 | $ | 2,915 | $ | 2,887 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Net investment income (loss) | 1.04 | % | 1.78 | % | 1.66 | % | 1.14 | % | 1.35 | % | ||||||||||
Total expensesc | 5.49 | % | 6.86 | % | 5.80 | % | 5.07 | % | 4.78 | % | ||||||||||
Net expensesd,e,f | 0.95 | % | 0.96 | % | 0.97 | % | 0.96 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 132 | % | 95 | % | 101 | % | 104 | % | 132 | % |
a | Net investment income (loss) per share was computed using average shares outstanding throughout the period. |
b | Total return does not reflect the impact of any applicable sales charges. |
c | Does not include expenses of the underlying funds in which the Fund invests. |
d | Net expense information reflects the expense ratios after expense waivers and reimbursements, as applicable. |
e | The portion of the ratios of net expenses to average net assets attributable to recoupments of prior fee reductions or expense reimbursements for the years presented was as follows: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | — | — | — | — | 1.10% | |
C-Class | — | 0.01% | — | — | 1.07% | |
P-Class | — | 0.00%g | — | — | 1.03% | |
Institutional Class | — | 0.01% | — | — | 0.99% |
g | Less than 0.01%. |
f | Net expenses may include expenses that are excluded from the expense limitation agreement. Excluding these expenses, the net expense ratios for the years presented would be: |
| 09/30/21 | 09/30/20 | 09/30/19 | 09/30/18 | 09/30/17 | |
A-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
C-Class | 1.95% | 1.96% | 1.96% | 1.95% | 1.95% | |
P-Class | 1.20% | 1.21% | 1.21% | 1.20% | 1.20% | |
Institutional Class | 0.95% | 0.96% | 0.96% | 0.95% | 0.95% |
SEE NOTES TO FINANCIAL STATEMENTS. | THE GUGGENHEIM FUNDS ANNUAL REPORT | 59 |
NOTES TO FINANCIAL STATEMENTS |
Note 1 – Organization and Significant Accounting Policies
Organization
Transparent Value Trust (the “Trust”), a Delaware statutory trust, is registered with the SEC under the Investment Company Act of 1940 (“1940 Act”), as an open-ended investment company of the series type. Each series, in effect, is representing a separate fund (each, a “Fund”). The Trust may issue an unlimited number of authorized shares. The Trust accounts for the assets of each fund separately.
The Trust offers a combination of four separate classes of shares: A-Class shares, C-Class shares, P-Class shares and Institutional Class shares. Sales of shares of each Class are made without a front-end sales charge at the net asset value per share (“NAV”), with the exception of A-Class shares. A-Class shares are sold at the NAV, plus the applicable front-end sales charge. The sales charge varies depending on the amount purchased, but will not exceed 4.75%. A-Class share purchases of $1 million or more are exempt from the front-end sales charge but have a 1.25% contingent deferred sales charge (“CDSC”), if shares are redeemed within 18 months of purchase. C-Class shares have a 1% CDSC if shares are redeemed within 12 months of purchase. C-Class shares of each Fund automatically convert to A-Class shares of the same Fund on or about the 10th day of the month following the 10-year anniversary of the purchase of the C-Class shares. This conversion will be executed without any sales charge, fee or other charge. After the conversion is completed, the shares will be subject to all features and expenses of A-Class shares. Institutional Class shares are offered primarily for direct investment by institutions such as pension and profit sharing plans, endowments, foundations and corporations. Institutional Class shares require a minimum initial investment of $2 million and a minimum account balance of $1 million. At September 30, 2021, the Trust consisted of five funds.
This report covers the following funds (collectively, the “Funds”):
Fund Name | Investment |
Directional Allocation Fund | Diversified |
RBP® Dividend Fund | Diversified |
RBP® Large-Cap Defensive Fund | Diversified |
RBP® Large-Cap Market Fund | Diversified |
RBP® Large-Cap Value Fund | Diversified |
The Funds’ investment objectives are to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Index as follows:
Fund | Index |
Directional Allocation Fund | Guggenheim Directional Allocation IndexSM |
RBP® Dividend Fund | Guggenheim RBP® Dividend IndexSM |
RBP® Large-Cap Defensive Fund | Guggenheim RBP® Large-Cap Defensive IndexSM |
RBP® Large-Cap Market Fund | Guggenheim RBP® Large-Cap Market IndexSM |
RBP® Large-Cap Value Fund | Guggenheim RBP® Large-Cap Value IndexSM |
Guggenheim Partners Investment Management, LLC (“GPIM”), which operates under the name Guggenheim Investments (“GI”), provides advisory services. Guggenheim Funds Distributors, LLC (“GFD”) acts as principal underwriter for the Trust. GI and GFD are affiliated entities.
Significant Accounting Policies
The Funds operate as investment companies and, accordingly, follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and are consistently followed by the Trust. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
The NAV of each Class of a fund is calculated by dividing the market value of a fund’s securities and other assets, less all liabilities, attributable to the Class by the number of outstanding shares of the Class.
60 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
(a) Valuation of Investments
The Board of Trustees of the Funds (the “Board”) has adopted policies and procedures for the valuation of the Funds’ investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Funds’ securities and/or other assets.
Valuations of the Funds’ securities and other assets are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed, to review the valuation of all assets which have been fair valued for reasonableness. The Funds’ officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used and valuations provided by the pricing services.
If the pricing service cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment is fair valued by the Valuation Committee.
Equity securities listed or traded on a recognized U.S. securities exchange or the National Association of Securities Dealers Automated Quotations (“NASDAQ”) National Market System shall generally be valued on the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however, that securities listed on NASDAQ will be valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there is no sale on the valuation date, exchange-traded U.S. equity securities will be valued on the basis of the last bid price.
Open-end investment companies are valued at their NAV as of the close of business, on the valuation date. Exchange-traded funds are valued at the last quoted sale price.
Investments for which market quotations are not readily available are fair-valued as determined in good faith by GI, subject to review and approval by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s or liability’s) “fair value”. Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to market prices; sale prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows or collateral, spread over U.S. Treasury securities, and other information analysis.
(b) Foreign Taxes
The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income and foreign taxes on capital gains from sales of investments are included with the net realized gain (loss) on investments. Foreign taxes payable or deferred as of September 30, 2021, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
(c) Security Transactions
Security transactions are recorded on the trade date for financial reporting purposes. Realized gains and losses from securities transactions are recorded using the identified cost basis. Proceeds from lawsuits related to investment holdings are recorded as a reduction to cost if the securities are still held and as realized gains if no longer held in the respective Fund. Dividend income is recorded on the ex-dividend date, net of applicable taxes withheld by foreign countries, if any. Taxable non-cash dividends are recorded as dividend income. Interest income, including amortization of premiums and accretion of discounts, is accrued on a daily basis. Dividend income from Real Estate Investment Trusts (“REITs”) is recorded based on the income included in the distributions received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified to realized gains. The actual amounts of income, return of capital, and realized gains are only determined by each REIT after its fiscal year-end, and may differ from the estimated amounts.
(d) Distributions
Distributions of net investment income and net realized gains, if any, are declared and paid at least annually. Dividends are reinvested in additional shares, unless shareholders request payment in cash. Distributions are recorded on the ex-dividend date and are determined in accordance with U.S. federal income tax regulations which may differ from U.S. GAAP.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 61 |
NOTES TO FINANCIAL STATEMENTS (continued) |
(e) Class Allocations
Interest and dividend income, most expenses, all realized gains and losses, and all unrealized appreciation and depreciation are allocated to the classes based upon the value of the outstanding shares in each Class. Certain costs, such as distribution and service fees are charged directly to specific classes. In addition, certain expenses have been allocated to the individual Funds in the Trust based on the respective net assets of each Fund included in the Trust.
(f) Earnings Credits
Under the fee arrangement with the custodian, the Fund may earn credits based on overnight custody cash balances. These credits are utilized to reduce related custodial expenses. The custodian fees disclosed in the Statements of Operations are before the reduction in expense from the related earnings credits, if any. Earnings credits for the year ended September 30, 2021 are disclosed in the Statements of Operations.
(g) Cash
The Funds may leave cash overnight in their cash account with the custodian. Periodically, a Fund may have cash due to the custodian bank as an overdraft balance. A fee is incurred on this overdraft, calculated by multiplying the overdraft by a rate based on the federal funds rate, which was 0.06% at September 30, 2021.
(h) Indemnifications
Under the Funds’ organizational documents, the Trustees and Officers are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, throughout the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds and/or their affiliates that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
Note 2 – Investment Advisory Agreement and Other Agreements
Under the terms of an investment advisory contract, the Funds pay GI investment advisory fees calculated at the annualized rates below, based on the average daily net assets of the Funds:
Fund | Management Fees |
Directional Allocation Fund | 0.95% |
RBP® Dividend Fund | 0.75% |
RBP® Large-Cap Defensive Fund | 0.75% |
RBP® Large-Cap Market Fund | 0.75% |
RBP® Large-Cap Value Fund | 0.75% |
GI pays operating expenses on behalf of the Trust, such as audit and accounting related services, legal services, custody, printing and mailing, among others, on a pass-through basis. Such expenses are allocated to various Funds within the complex based on relative net assets.
The Trust has adopted Distribution Plans related to the offering of A-Class, C-Class and P-Class shares pursuant to Rule 12b-1 under the 1940 Act. The plans provide for payments at an annual rate of 0.25% of the average daily net assets of each Fund’s A-Class and P-Class shares, and 1.00% of the average daily net assets of each Fund’s C-Class shares.
The Trust has adopted a shareholder servicing plan (the “Service Plan”) under which a shareholder and/or administration services fee equal to an annual rate of up to 0.15% of the average daily net assets of each Fund’s A-Class shares will be paid to certain service providers for performing certain shareholder and administrative services.
62 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
Contractual expense limitation agreements for the following Funds provide that the total expenses be limited to a percentage of average net assets for each class of shares, exclusive of brokerage costs, dividends or interest on securities sold short, expenses of other investment companies in which a Fund invests, interest, taxes, litigation, indemnification and extraordinary expenses. The limits are listed below:
Fund | Limit | Effective | Contract | |||||||||
Directional Allocation Fund – A-Class | 1.50 | % | 05/09/16 | 02/01/23 | ||||||||
Directional Allocation Fund – C-Class | 2.10 | % | 05/09/16 | 02/01/23 | ||||||||
Directional Allocation Fund – P-Class | 1.35 | % | 05/09/16 | 02/01/23 | ||||||||
Directional Allocation Fund – Institutional Class | 1.10 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Dividend Fund – A-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Dividend Fund – C-Class | 1.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Dividend Fund – P-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Dividend Fund – Institutional Class | 0.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Defensive Fund – A-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Defensive Fund – C-Class | 1.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Defensive Fund – P-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Defensive Fund – Institutional Class | 0.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Market Fund – A-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Market Fund – C-Class | 1.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Market Fund – P-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Market Fund – Institutional Class | 0.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Value Fund – A-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Value Fund – C-Class | 1.95 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Value Fund – P-Class | 1.20 | % | 05/09/16 | 02/01/23 | ||||||||
RBP® Large-Cap Value Fund – Institutional Class | 0.95 | % | 05/09/16 | 02/01/23 |
GPIM is entitled to reimbursement by the Fund for fees waived or expenses reimbursed during any of the previous 36 months, beginning on the date of the expense limitation agreement, if on any day the estimated operating expenses are less than the indicated percentages. For purposes of this arrangement, GPIM is entitled to recoupment of previously waived fees or reimbursed expenses for 36 months from the date of the waiver or reimbursement by GPIM. At September 30, 2021, the amount of fees waived or expenses reimbursed that are subject to recoupment and will expire during the years ended September 30, are presented in the following table:
Fund | 2022 | 2023 | 2024 | Fund | ||||||||||||
Directional Allocation Fund | ||||||||||||||||
A-Class | $ | 3,255 | $ | 23,559 | $ | 30,514 | $ | 57,328 | ||||||||
C-Class | 41,474 | 72,789 | 53,621 | 167,884 | ||||||||||||
P-Class | 6,075 | 5,669 | 3,842 | 15,586 | ||||||||||||
Institutional Class | 52,242 | 112,011 | 89,377 | 253,630 | ||||||||||||
RBP® Dividend Fund | ||||||||||||||||
A-Class | 40,734 | 48,107 | 63,294 | 152,135 | ||||||||||||
C-Class | 35,579 | 37,850 | 24,180 | 97,609 | ||||||||||||
P-Class | 13,612 | 12,886 | 11,082 | 37,580 | ||||||||||||
Institutional Class | 55,275 | 68,656 | 60,349 | 184,280 | ||||||||||||
RBP® Large-Cap Defensive Fund | ||||||||||||||||
A-Class | 41,746 | 52,084 | 61,062 | 154,892 | ||||||||||||
C-Class | 41,172 | 39,654 | 31,745 | 112,571 | ||||||||||||
P-Class | 4,531 | 5,095 | 5,214 | 14,840 | ||||||||||||
Institutional Class | 69,243 | 73,237 | 69,291 | 211,771 | ||||||||||||
RBP® Large-Cap Market Fund | ||||||||||||||||
A-Class | 42,778 | 62,997 | 73,546 | 179,321 | ||||||||||||
C-Class | 72,429 | 72,075 | 56,833 | 201,337 | ||||||||||||
P-Class | 1,910 | 2,008 | 2,307 | 6,225 | ||||||||||||
Institutional Class | 39,654 | 35,171 | 28,915 | 103,740 | ||||||||||||
RBP® Large-Cap Value Fund | ||||||||||||||||
A-Class | 4,803 | 5,303 | 4,788 | 14,894 | ||||||||||||
C-Class | 18,157 | 22,896 | 25,211 | 66,264 | ||||||||||||
P-Class | 22,311 | 12,618 | 9,157 | 44,086 | ||||||||||||
Institutional Class | 125,655 | 147,044 | 136,588 | 409,287 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 63 |
NOTES TO FINANCIAL STATEMENTS (continued) |
During the year ended September 30, 2021, no amounts were recouped by GPIM.
For the year ended September 30, 2021, GFD retained sales charges of $10,460 relating to sales of A-Class shares of the Trust.
Certain trustees and officers of the Trust are also officers of GPIM and/or GFD. The Trust does not compensate its officers or trustees who are officers, directors and/or employees of GPIM or GFD.
MUFG Investor Services (US), LLC (“MUIS”) acts as the Funds’ administrator, transfer agent and accounting agent. As administrator, transfer agent and accounting agent, MUIS maintains the books and records of the Funds’ securities and cash. The Bank of New York Mellon Corp. (“BNY”) acts as the Funds’ custodian. As custodian, BNY is responsible for the custody of the Funds’ assets. For providing the aforementioned administrative and accounting services, MUIS is entitled to receive a monthly fee equal to a percentage of the Funds’ average daily net assets and out of pocket expenses. For providing the aforementioned transfer agent and custodian services, MUIS and BNY are entitled to receive a monthly fee based on the number of transactions during the month and the number of accounts under management, subject to certain minimum monthly fees, and out of pocket expenses.
Note 3 – Federal Income Tax Information
The Funds intend to comply with the provisions of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Funds from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax or federal excise tax is required.
Tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns are evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds’ tax positions taken, or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required in the Funds’ financial statements. The Funds’ U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for a period of three years after they are filed.
The tax character of distributions paid during the year ended September 30, 2021 was as follows:
Fund | Ordinary | Long-Term | Total | |||||||||
Directional Allocation Fund | $ | 504,586 | $ | — | $ | 504,586 | ||||||
RBP® Dividend Fund | 644,645 | 52,011 | 696,656 | |||||||||
RBP® Large-Cap Defensive Fund | 95,493 | 175,531 | 271,024 | |||||||||
RBP® Large-Cap Market Fund | ��� | 550,252 | 550,252 | |||||||||
RBP® Large-Cap Value Fund | 50,321 | — | 50,321 |
The tax character of distributions paid during the year ended September 30, 2020 was as follows:
Fund | Ordinary | Long-Term | Return | Total | ||||||||||||
Directional Allocation Fund | $ | 7,885,534 | $ | 78,381,559 | $ | — | $ | 86,267,093 | ||||||||
RBP® Dividend Fund | 545,350 | 376,574 | 191,802 | 1,113,726 | ||||||||||||
RBP® Large-Cap Defensive Fund | 76,510 | 958,874 | — | 1,035,384 | ||||||||||||
RBP® Large-Cap Market Fund | 8,725 | 967,936 | — | 976,661 | ||||||||||||
RBP® Large-Cap Value Fund | 51,688 | 20,419 | — | 72,107 |
Note: For U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
64 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (continued) |
The tax components of distributable earnings/(loss) as of September 30, 2021 were as follows:
Fund | Undistributed | Undistributed | Net Unrealized | Accumulated | Other | Total | ||||||||||||||||||
Directional Allocation Fund | $ | 11,624,956 | $ | 38,335,045 | $ | 25,957,650 | $ | — | $ | — | $ | 75,917,651 | ||||||||||||
RBP® Dividend Fund | 2,738,212 | 1,223,205 | 318,062 | — | (183,565 | ) | 4,095,914 | |||||||||||||||||
RBP® Large-Cap Defensive Fund | 1,364,041 | 1,220,395 | 500,728 | — | — | 3,085,164 | ||||||||||||||||||
RBP® Large-Cap Market Fund | 874,500 | 2,154,863 | 1,867,410 | — | — | 4,896,773 | ||||||||||||||||||
RBP® Large-Cap Value Fund | 224,030 | 369,769 | 328,366 | — | — | 922,165 |
For U.S. federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward and applied against future capital gains. The Funds are permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards retain their character as either short-term or long-term capital losses. As of September 30, 2021, the Funds had no capital loss carryforwards.
For the year ended September 30, 2021, the following capital loss carryforward amounts were utilized:
Fund | Utilized | |||
RBP® Dividend Fund | $ | 998,018 | ||
RBP® Large-Cap Value Fund | 117,449 |
Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax differences. These differences are primarily due to investments in real estate investment trusts, losses deferred due to wash sales, distributions in connection with redemption of fund shares, and reclassification of distributions. Additional differences may result from the tax treatment of net operating losses and dividends payable. To the extent these differences are permanent and would require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following adjustments were made on the Statements of Assets and Liabilities as of September 30, 2021 for permanent book/tax differences:
Fund | Paid In | Total | ||||||
Directional Allocation Fund | $ | 1,246,877 | $ | (1,246,877 | ) | |||
RBP® Dividend Fund | 201,329 | (201,329 | ) | |||||
RBP® Large-Cap Defensive Fund | 240,856 | (240,856 | ) | |||||
RBP® Large-Cap Market Fund | 139,323 | (139,323 | ) | |||||
RBP® Large-Cap Value Fund | 3,497 | (3,497 | ) |
At September 30, 2021, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there was an excess of tax cost over value, were as follows:
Fund | Tax | Tax | Tax | Net Tax | ||||||||||||
Directional Allocation Fund | $ | 332,297,208 | $ | 30,795,414 | $ | (4,837,764 | ) | $ | 25,957,650 | |||||||
RBP® Dividend Fund | 24,726,466 | 957,886 | (639,824 | ) | 318,062 | |||||||||||
RBP® Large-Cap Defensive Fund | 10,467,335 | 769,649 | (268,921 | ) | 500,728 | |||||||||||
RBP® Large-Cap Market Fund | 12,103,389 | 2,027,088 | (159,678 | ) | 1,867,410 | |||||||||||
RBP® Large-Cap Value Fund | 3,921,907 | 427,426 | (99,060 | ) | 328,366 |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 65 |
NOTES TO FINANCIAL STATEMENTS (continued) |
Note 4 – Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S. GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:
Level 1 — | quoted prices in active markets for identical assets or liabilities. |
Level 2 — | significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.). |
Level 3 — | significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions. |
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.
Note 5 – Securities Transactions
For the year ended September 30, 2021, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term investments and derivatives, were as follows:
Fund | Purchases | Sales | ||||||
Directional Allocation Fund | $ | 475,975,602 | $ | 579,340,142 | ||||
RBP® Dividend Fund | 37,279,154 | 34,827,233 | ||||||
RBP® Large-Cap Defensive Fund | 13,819,765 | 16,923,292 | ||||||
RBP® Large-Cap Market Fund | 13,300,936 | 13,230,907 | ||||||
RBP® Large-Cap Value Fund | 5,315,114 | 4,983,494 |
The Funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by a Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction is effected at the current market price to save costs, where permissible. For the year ended September 30, 2021, the Funds did not engage in purchases and sales of securities, pursuant to Rule 17a-7 of the 1940 Act.
Note 6 – Line of Credit
The Trust, along with other affiliated trusts, secured a 364-day committed, $1,230,000,000 line of credit from Citibank, N.A., which was in place through October 1, 2021, at which time the line of credit was renewed. A Fund may draw (borrow) from the line of credit, with limits subject to applicable regulatory requirements around leverage, as a temporary measure for emergency purposes, to facilitate redemption requests, or for other short-term liquidity purposes consistent with the Fund’s investment objective and program. For example, it may be advantageous for the Fund to borrow money rather than sell existing portfolio positions to meet redemption requests. Fees related to borrowings, if any, vary under this arrangement between the greater of Citibank’s “base rate”, LIBOR plus 1%, or the federal funds rate plus ½ of 1%.
The commitment fee that may be paid by the Funds is at an annualized rate of 0.15% of the average daily amount of their allocated unused commitment amount. The commitment fee amount is allocated to the individual Funds based on the respective net assets of each participating Fund and is referenced in the Statement of Operations under “Line of credit fees” or included within “Miscellaneous”. The Funds did not have any borrowings under this agreement as of and for the period ended September 30, 2021.
66 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
NOTES TO FINANCIAL STATEMENTS (concluded) |
On October 1, 2021, the Trust, along with other affiliated trusts, renewed the $1,230,000,000 line of credit with Citibank, N.A.
Note 7 – COVID-19
The outbreak of COVID-19 and the current recovery underway has caused disruption to consumer demand, economic output, and supply chains. There are still travel restrictions, quarantines, and disparate global vaccine distributions. As with other serious economic disruptions, governmental authorities and regulators are responding to this crisis with significant fiscal and monetary policy changes. These include providing direct capital infusions into companies, introducing new monetary programs, and considerably lowering interest rates. In some cases, these responses resulted in negative interest rates and higher inflation. These actions, including their possible unexpected or sudden reversal or potential ineffectiveness, could further increase volatility in securities and other financial markets, reduce market liquidity, continue to cause higher inflation, heighten investor uncertainty, and adversely affect the value of the Funds’ investments and the performance of the Funds. The duration and extent of COVID-19 over the long term cannot be reasonably estimated at this time. The ultimate impact of COVID-19 and the extent to which COVID-19 impacts the Funds will depend on future developments, which are highly uncertain and difficult to predict. Management continues to monitor and evaluate this situation.
Note 8 – Subsequent Events
The Funds evaluated subsequent events through the date the financial statements were available for issue and determined there were no material events that would require adjustment to or disclosure in the Funds’ financial statements.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 67 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Shareholders and the Board of Trustees of Transparent Value Trust
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Transparent Value Trust (the “Trust”) (comprising Guggenheim Directional Allocation Fund, Guggenheim RBP® Dividend Fund, Guggenheim RBP® Large-Cap Defensive Fund, Guggenheim RBP® Large-Cap Market Fund and Guggenheim RBP® Large-Cap Value Fund (collectively referred to as the “Funds”)), including the schedules of investments, as of September 30, 2021, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds comprising Transparent Value Trust at September 30, 2021, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and their financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2021, by correspondence with the custodian, brokers, or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
November 29, 2021
68 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited) |
Federal Income Tax Information
This information is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January 2022, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received by shareholders in the calendar year 2021.
The Funds’ investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable ordinary income distributions paid during the fiscal year ending September 30, 2021, the following funds had the corresponding percentages qualify for the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally, of the taxable ordinary income distributions paid during the fiscal year ended September 30, 2021, the following Funds had the corresponding percentages qualify as qualified short-term capital gains as permitted by IRC Section 871(k)(2). See qualified short-term capital gain column in the table below.
Fund | Qualified | Dividend | Qualified | |||||||||
Directional Allocation Fund | 33.18 | % | 32.97 | % | 0.00 | % | ||||||
RBP® Dividend Fund | 24.42 | % | 22.98 | % | 0.00 | % | ||||||
RBP® Large-Cap Defensive Fund | 27.97 | % | 27.72 | % | 100.00 | % | ||||||
RBP® Large-Cap Value Fund | 80.18 | % | 80.11 | % | 0.00 | % |
With respect to the taxable year ended September 30, 2021, the Funds hereby designate as capital gain dividends the amounts listed below, or, if subsequently determined to be different, the net capital gain of such year:
Fund | From long-term | From long-term capital | ||||||
Directional Allocation Fund | $ | — | $ | 1,246,877 | ||||
RBP® Dividend Fund | 52,011 | 365,134 | ||||||
RBP® Large-Cap Defensive Fund | 175,531 | 240,856 | ||||||
RBP® Large-Cap Market Fund | 550,252 | 135,576 | ||||||
RBP® Large-Cap Value Fund | — | 3,497 |
Delivery of Shareholder Reports
Paper copies of the Fund’s annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the reports from a fund or from your financial intermediary. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future shareholder reports in paper free of charge. If you hold shares of a fund directly, you can inform the Fund that you wish to receive paper copies of reports by calling 800.820.0888. If you hold shares of a fund through a financial intermediary, please contact the financial intermediary to make this election. Your election to receive reports in paper may apply to all Guggenheim Funds in which you are invested and may apply to all Guggenheim funds held with your financial intermediary.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 69 |
OTHER INFORMATION (Unaudited)(continued) |
Proxy Voting Information
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800.820.0888. This information is also available from the EDGAR database on the SEC’s website at https://www.sec.gov.
Sector Classification
Information in the Schedule of Investments is categorized by sectors using sector-level Classifications defined by the Bloomberg Industry Classification System, a widely recognized industry classification system provider. The Fund’s registration statement has investment policies relating to concentration in specific sectors/industries. For purposes of these investment policies, the Fund usually classifies sectors/industries based on industry-level Classifications used by widely recognized industry classification system providers such as Bloomberg Industry Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
Quarterly Portfolio Schedules Information
The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Fund’s Forms N-PORT and N-Q are available on the SEC’s website at https://www.sec.gov. Copies of the portfolio holdings are also available to shareholders, without charge and upon request, by calling 800.820.0888.
Report of the Transparent Value Trust Contracts Review Committee
Transparent Value Trust (the “Trust”) was organized as a Delaware statutory trust on June 8, 2009, and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust includes the following series (each, a “Fund,” and collectively, the “Funds”):
● Guggenheim RBP® Large-Cap Defensive Fund
● Guggenheim RBP® Large-Cap Market Fund
● Guggenheim Directional Allocation Fund | ● Guggenheim RBP® Dividend Fund
● Guggenheim RBP® Large-Cap Value Fund
● Guggenheim SMID-Cap Directional Allocation Fund |
Guggenheim Partners Investment Management, LLC (“GPIM” or the “Adviser”), an indirect subsidiary of Guggenheim Partners, LLC, a privately-held, global investment and advisory firm (“Guggenheim Partners”), serves as the investment adviser to each of the Funds pursuant to an investment advisory agreement between the Trust, with respect to the Funds, and GPIM (the “Advisory Agreement”). (Guggenheim Partners, GPIM and their affiliates may be referred to herein collectively as “Guggenheim.” “Guggenheim Investments” refers to the global asset management and investment advisory division of Guggenheim Partners and includes GPIM, Guggenheim Funds Investment Advisors, LLC, Security Investors, LLC and other affiliated investment management businesses of Guggenheim Partners.)
Under the supervision of the Board of Trustees of the Trust (the “Board,” with the members of the Board referred to individually as the “Trustees”), the Adviser regularly provides investment research, advice and supervision, along with a continuous investment program for the Funds, and directs the purchase and sale of securities and other investments for each Fund’s portfolio.
1 | SMID-Cap Directional Allocation Fund (the “Non-Active Fund”) has been organized as a series of the Trust but has not commenced operations, and shares of the Non-Active Fund are not currently offered to investors. The investment advisory agreement for the Non-Active Fund was not considered for renewal. Consequently, all references to the “Funds” hereafter should be understood as excluding the Non-Active Fund. |
70 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(continued) |
The Advisory Agreement continues in effect from year to year provided that such continuance is specifically approved at least annually by (i) the Board or a majority of the outstanding voting securities (as defined in the 1940 Act) of each Fund, and, in either event, (ii) the vote of a majority of the Trustees who are not “interested person[s],” as defined by the 1940 Act, of the Trust (the “Independent Trustees”) casting votes in person at a meeting called for such purpose.2 At meetings held by videoconference on April 20, 2021 (the “April Meeting”) and on May 26, 2021 (the “May Meeting”), the members of the Contracts Review Committee of the Board (the “Committee”), consisting solely of the Independent Trustees, met separately from Guggenheim to consider the proposed renewal of the Advisory Agreement in connection with the Committee’s annual contract review schedule.
As part of its review process, the Committee was represented by independent legal counsel to the Independent Trustees (“Independent Legal Counsel”), from whom the Independent Trustees received separate legal advice and with whom they met separately. Independent Legal Counsel reviewed and discussed with the Committee various key aspects of the Trustees’ legal responsibilities relating to the proposed renewal of the Advisory Agreement and other principal contracts. The Committee took into account various materials received from Guggenheim and Independent Legal Counsel. The Committee also considered the variety of written materials, reports and oral presentations the Board received throughout the year regarding performance and operating results of the Funds, and other information relevant to its evaluation of the Advisory Agreement.
In connection with the contract review process, FUSE Research Network LLC (“FUSE”), an independent, third-party research provider, was engaged to prepare advisory contract renewal reports designed specifically to help the Board fulfill its advisory contract renewal responsibilities. The objective of the reports is to present the subject funds’ relative position regarding fees, expenses and total return performance, with peer group and universe comparisons. The Committee assessed the data provided in the FUSE reports as well as commentary presented by Guggenheim, including, among other things, a summary of notable distinctions between certain Funds and the applicable peer group identified in the FUSE reports and explanations for custom peer groups created for certain Funds that do not fit well into any particular category.
As part of its evaluation of the Adviser and the proposed renewal of the Advisory Agreement, the Committee took into account that each Fund seeks to track the performance (before fees and expenses) of an index that is constructed with a proprietary methodology. Specifically, the investment objective of each of RBP Large-Cap Defensive Fund, RBP Dividend Fund, RBP Large-Cap Market Fund and RBP Large-Cap Value Fund is to provide investment results that, before fees and expenses, correspond generally to the total return performance of the applicable Guggenheim RBP® Index—i.e., the Guggenheim RBP® Large-Cap Defensive IndexSM, the Guggenheim RBP® Dividend IndexSM, the Guggenheim RBP® Large-Cap Market IndexSM and the Guggenheim RBP® Large-Cap Value IndexSM, respectively (each, an “RBP Index” and collectively, the “RBP Indexes”). The investment objective of Directional Allocation Fund is to provide investment results that, before fees and expenses, correspond generally to the performance of the Guggenheim Directional Allocation IndexSM (the “Directional Allocation Index” and together with the RBP Indexes, the “Indexes” and individually, an “Index”). Each Index consists of securities currently selected for inclusion by the Adviser’s index calculation agent, based on Required Business Performance® (RBP®) Probability scores derived from Guggenheim Investments’ quantitative process. In this regard, the Committee noted that the Indexes and Index construction processes were previously owned and implemented by an affiliate of the Adviser, and that, in August 2018, such affiliate was reorganized into Guggenheim Investments, and the Indexes and Index construction processes were acquired by Guggenheim Investments. The Committee considered that Guggenheim regularly reviews the RBP® process and, as reported to the Board at the May Meeting, had determined to make certain changes to the process to improve Fund performance. The Committee noted that the FUSE reports for the Funds included performance relative to the applicable Index and tracking error data.
In addition, Guggenheim provided materials and data in response to formal requests for information sent by Independent Legal Counsel on behalf of the Independent Trustees. Guggenheim also made a presentation at the April Meeting. Throughout the process, the Committee asked questions of management and requested certain additional information, which Guggenheim provided (collectively with the foregoing reports and materials, the “Contract Review Materials”). The Committee considered the Contract Review Materials in the context of its accumulated experience governing the Trust and other Guggenheim funds and weighed the factors and standards discussed with Independent Legal Counsel.
2 | On March 13, 2020, the Securities and Exchange Commission issued an exemptive order providing relief to registered management investment companies from certain provisions of the 1940 Act in light of the outbreak of coronavirus disease 2019 (COVID-19), including the in-person voting requirements under Section 15(c) of the 1940 Act with respect to approving or renewing an investment advisory agreement, subject to certain conditions. The relief, initially provided for a limited period of time, has been extended multiple times and was in effect as of May 26, 2021. The Board, including the Independent Trustees, relied on this relief in voting to renew the Advisory Agreement at a meeting of the Board held by videoconference on May 26, 2021. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 71 |
OTHER INFORMATION (Unaudited)(continued) |
Following an analysis and discussion of relevant factors, including those identified below, and in the exercise of its business judgment, the Committee concluded that it was in the best interest of each Fund to recommend that the Board approve the renewal of the Advisory Agreement for an additional annual term.
Nature, Extent and Quality of Services Provided by the Adviser: With respect to the nature, extent and quality of services currently provided by the Adviser, the Committee considered the qualifications, experience and skills of key personnel performing services for the Funds, including those personnel providing compliance and risk oversight, as well as the supervisors and reporting lines for such personnel. The Committee also considered other information, including Guggenheim’s resources and related efforts to retain, attract and motivate capable personnel to serve the Funds. In evaluating Guggenheim’s resources and capabilities, the Committee considered Guggenheim’s commitment to focusing on, and investing resources in support of, funds in the Guggenheim fund complex, including the Funds.
The Committee’s review of the services provided by Guggenheim to the Funds included consideration of Guggenheim’s investment and Index construction processes and resulting performance, portfolio oversight and risk management, and the related regular quarterly reports and presentations received by the Board. The Committee took into account the risks borne by Guggenheim in sponsoring and providing services to the Funds, including entrepreneurial, legal, regulatory and operational risks. The Committee considered the resources dedicated by Guggenheim to compliance functions and the reporting made to the Board by Guggenheim compliance personnel regarding Guggenheim’s adherence to regulatory requirements. The Committee also considered the regular reports the Board receives from the Trust’s Chief Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act.
In connection with the Committee’s evaluation of the overall package of services provided by Guggenheim, the Committee considered Guggenheim’s administrative services, including its role in supervising, monitoring, coordinating and evaluating the various services provided by the fund administrator, transfer agent, distributor, custodian and other service providers to the Funds. The Committee evaluated the Office of Chief Financial Officer (the “OCFO”), established to oversee the fund administration, accounting and transfer agency services provided to the Funds and other Guggenheim funds, including the OCFO’s resources, personnel and services provided.
With respect to Guggenheim’s resources and the ability of the Adviser to carry out its responsibilities under the Advisory Agreement, the Chief Financial Officer of Guggenheim Investments reviewed with the Committee financial information concerning the holding company for Guggenheim Investments, Guggenheim Partners Investment Management Holdings, LLC (“GPIMH”), and the various entities comprising Guggenheim Investments, and provided the audited consolidated financial statements of GPIMH. (Thereafter, the Committee received the audited consolidated financial statements of GPIM.)
The Committee also considered the acceptability of the terms of the Advisory Agreement, including the scope of services required to be performed by the Adviser.
Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meeting, as well as other considerations, including the Committee’s knowledge of how the Adviser performs its duties obtained through Board meetings, discussions and reports throughout the year, the Committee concluded that the Adviser and its personnel were qualified to serve the Funds in such capacity and may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the Funds.
Investment Performance: The Committee received, for each Fund, investment returns for the since-inception, five-year, three-year, one-year and three-month periods ended December 31, 2020. In addition, the Committee received a comparison of each Fund’s performance to the performance of a universe of funds and a narrower peer group of similar funds based on asset levels as identified by FUSE, in each case for the same periods. The Committee also received from FUSE a description of the methodology for identifying each Fund’s peer group and universe for performance and expense comparisons. The Committee also received certain updated performance information as of March 31, 2021. In light of Directional Allocation Fund’s unique strategy, FUSE identified a peer group categorized as “U.S. equity long/cash funds” with risk management and/or rotational/timing strategies similar to that of the Fund, but did not identify a broader universe of comparable funds. In addition, as noted above, the FUSE reports included each Fund’s total return over various time periods compared to the results of the Index that the Fund tracks, as well as tracking error results.
72 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
OTHER INFORMATION (Unaudited)(continued) |
In seeking to evaluate Fund performance over a full market cycle, the Committee focused its attention on five-year and three-year performance rankings as compared to the relevant universe or, as applicable, peer group of funds. Except as to the individual Fund discussed below, the Committee observed that the returns of each Fund’s Institutional Class shares ranked in the third quartile or better of such Fund’s performance universe or peer group, as applicable, for each of the relevant periods considered. The Committee also determined that each Fund tracked its Index within an acceptable range for each of the relevant periods considered.
In addition, the Committee made the following observations:
RBP Large-Cap Defensive Fund: The returns of the Fund’s Institutional Class shares ranked in the 75th and 78th percentiles of its performance universe for the five-year and three-year periods ended December 31, 2020, respectively. The Committee noted management’s explanation that the Fund’s relative underperformance over these time periods can be attributed to the method by which the RBP® process weights stocks in the Fund during the stock selection process, which results in an implicit underweight to the largest stocks, especially mega-cap stocks that performed well over the past few years, and an overweight to relatively less large cap stocks within the Fund’s investment universe. The Committee considered management’s further explanation that the Fund’s defensive strategy has led it to be underweight high volatility stocks, detracting from relative performance as volatility as a factor has performed well over the last few years. The Committee noted that the Fund’s five-year and three-year performance rankings had not improved as of March 31, 2021, and that management had determined to make certain changes to the RBP® process to improve performance.
Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meeting, as well as other considerations, the Committee concluded that: (i) each Fund’s performance was acceptable; or (ii) it was satisfied with Guggenheim’s responses and efforts to improve investment performance.
Comparative Fees, Costs of Services Provided and the Benefits Realized by the Adviser from Its Relationship with the Funds: The Committee compared each Fund’s contractual advisory fee, net effective management fee3 and total net expense ratio to the applicable peer group. The Committee also reviewed the median advisory fees and expense ratios, including expense ratio components (e.g., transfer agency fees, administration fees, other operating expenses, distribution fees and fee waivers/reimbursements), of the peer group of funds. In addition, the Committee considered information regarding Guggenheim’s process for evaluating the competitiveness of each Fund’s fees and expenses, noting Guggenheim’s statement that evaluations seek to incorporate a variety of factors with a general focus on ensuring fees and expenses: (i) are competitive; (ii) give consideration to resource support requirements; and (iii) ensure Funds are able to deliver on shareholder return expectations.
The Committee also noted Guggenheim’s statement that it does not provide advisory services to other clients that have investment strategies similar to those of the Funds and, as a result, the Committee did not consider it relevant to compare the Funds’ advisory fees to the advisory fees charged to other clients of Guggenheim.
In further considering the comparative fee and expense data presented in the Contract Review Materials and addressed by Guggenheim, the Committee took into account those Funds with currently effective expense limitation agreements with the Adviser. Except as to the individual Fund discussed below, the Committee observed that the contractual advisory fee, net effective management fee and total net expense ratio for each Fund’s Institutional Class shares each rank in the third quartile or better of such Fund’s peer group.
In addition, the Committee made the following observations:
Directional Allocation Fund: The contractual advisory fee for the Fund’s Institutional Class shares ranks in the second quartile (30th percentile) of its peer group. Although the net effective management fee for the Fund’s Institutional Class shares ranks in the fourth quartile (80th percentile) of its peer group, the Committee considered that the total net expense ratio for the Fund’s Institutional Class shares ranks in the second quartile (30th percentile). The Committee took into account the Fund’s currently effective expense limitation agreement with the Adviser.
With respect to the costs of services provided and benefits realized by Guggenheim Investments from its relationship with the Funds, the Committee reviewed a profitability analysis and data from management for each Fund setting forth the average assets under management for the twelve months ended December 31, 2020, gross revenues received by Guggenheim Investments, expenses allocated to the Fund, expense
3 | The “net effective management fee” for each Fund represents the combined effective advisory fee and administration fee as a percentage of average net assets for the latest fiscal year, after any waivers and/or reimbursements. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 73 |
OTHER INFORMATION (Unaudited)(concluded) |
waivers, earnings and the operating margin/profitability rate, including variance information relative to the foregoing amounts as of December 31, 2019. In addition, the Chief Financial Officer of Guggenheim Investments reviewed with, and addressed questions from, the Committee concerning the expense allocation methodology employed in producing the profitability analysis.
In the course of its review of Guggenheim Investments’ profitability, the Committee took into account the methods used by Guggenheim Investments to determine expenses and profit. The Committee considered all of the foregoing, among other things, in evaluating the costs of services provided, the profitability to Guggenheim Investments and the profitability rates presented.
The Committee also considered other benefits available to the Adviser because of its relationship with the Funds and noted Guggenheim’s statement that it does not believe the Adviser derives any such “fall-out” benefits. In this regard, the Committee noted Guggenheim’s statement that, although it does not consider such benefits to be fall-out benefits, the Adviser may benefit from certain economies of scale and synergies, such as enhanced visibility of the Adviser, enhanced leverage in fee negotiations and other synergies arising from offering a broad spectrum of products, including the Funds.
Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meeting, as well as other considerations, the Committee concluded that the comparative fees and the benefits realized by the Adviser from its relationship with the Funds were appropriate and that the Adviser’s profitability from its relationship with the Funds was not unreasonable.
Economies of Scale: The Committee received and considered information regarding whether there have been economies of scale with respect to the management of the Funds as Fund assets grow, whether the Funds have appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale in the provision of services to the Funds were being passed along to and shared with the shareholders. In evaluating economies of scale, the Committee considered that all of the Funds, other than the Directional Allocation Fund, had very small average net assets. The Committee considered that Guggenheim believes it is appropriately sharing potential economies of scale and that, although Guggenheim’s overall expenses declined in 2020, generally, costs are anticipated to increase in many key areas, including compensation of portfolio managers, key analysts and support staff, as well as for infrastructure needs, with respect to risk management oversight, valuation processes and disaster recovery systems, among other things.
The Committee also noted the process employed by the Adviser to evaluate whether it would be appropriate to institute a new breakpoint for a Fund, with consideration given to, among other things: (i) the Fund’s size and trends in asset levels over recent years; (ii) the competitiveness of the expense levels; (iii) whether expense waivers are in place; (iv) changes and trends in revenue and expenses; (v) whether there are any anticipated expenditures that may benefit the Fund in the future; (vi) Fund profit level margins; (vii) relative Fund performance; (viii) the nature, extent and quality of services management provides to the Fund; and (ix) the complexity of the Fund’s investment strategy and the resources required to support the Fund.
As part of its assessment of economies of scale, the Committee considered Guggenheim’s view that it seeks to share economies of scale through a number of means, including breakpoints, advisory fees set at competitive rates pre-assuming future asset growth, expense waivers and limitations, and investments in personnel, operations and infrastructure to support the Fund business. The Committee also received information regarding amounts that had been shared with shareholders through such expense waivers and limitations. Thus, the Committee considered the competitiveness of and/or other determinations made regarding the current advisory fee for each Fund, as well as whether a Fund is subject to an expense limitation.
Based on the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meeting, as well as other considerations, the Committee concluded that the advisory fee for each Fund was reasonable.
Overall Conclusions
The Committee concluded that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other benefits received and that the continuation of the Advisory Agreement is in the best interest of each Fund. In reaching this conclusion, no single factor was determinative or conclusive and each Committee member, in the exercise of his or her well-informed business judgment, may afford different weights to different factors. At the May Meeting, the Committee, constituting all of the Independent Trustees, recommended the renewal of the Advisory Agreement for an additional annual term.
74 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited) |
A Board of Trustees oversees the Trust, as well as other trusts of GI, in which its members have no stated term of service, and continue to serve after election until resignation. The Statement of Additional Information includes further information about Fund Trustees and Officers, and can be obtained without charge by visiting guggenheiminvestments.com or by calling 800.820.0888.
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES | |||||
Randall C. Barnes (1951) | Trustee and Chair of the Valuation Oversight Committee | Since 2015 (Trustee)
Since 2020 (Chair of the Valuation Oversight Committee) | Current: Private Investor (2001-present). | 158 | Current: Purpose Investments Funds (2013-present). |
Angela Brock-Kyle (1959) | Trustee | Since 2019 | Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (2013-present). | 157 | Current: Bowhead Insurance GP, LLC (2020-present); Hunt Companies, Inc. (2019-present). |
Thomas F. Lydon, Jr. (1960) | Trustee and Chair of the Contracts Review Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Contracts Review Committee) | Current: President, Global Trends Investments (1996-present); Co-Chief Executive Officer, ETF Flows, LLC (2019-present); Chief Executive Officer, Lydon Media (2016-present). | 157 | Current: US Global Investors (GROW) (1995-present). |
Ronald A. Nyberg (1953) | Trustee and Chair of the Nominating and Governance Committee | Since 2015 | Current: Of Counsel, Momkus LLP (2016-present). | 158 | Current: PPM Funds (2) (2018-present); Edward-Elmhurst Healthcare System (2012-present). |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 75 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INDEPENDENT TRUSTEES - concluded | |||||
Sandra G. Sponem (1958) | Trustee and Chair of the Audit Committee | Since 2019 (Trustee)
Since 2020 (Chair of the Audit Committee) | Current: Retired. | 157 | Current: SPDR Series Trust (81) (2018-present); SPDR Index Shares Funds (30) (2018-present); SSGA Active Trust (14) (2018-present).
Former: SSGA Master Trust (1) (2018-2020). |
Ronald E. Toupin, Jr. (1958) | Trustee, Chair of the Board and Chair of the Executive Committee | Since 2015 | Current: Portfolio Consultant (2010-present); Member, Governing Council, Independent Directors Council (2013-present); Governor, Board of Governors, Investment Company Institute (2018-present). | 157 | Former: Western Asset Inflation-Linked Opportunities & Income Fund (2004-2020); Western Asset Inflation-Linked Income Fund (2003-2020); Managed Duration Investment Grade Municipal Fund (2003-2016). |
76 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) | Number of | Other |
INTERESTED TRUSTEE |
|
|
|
| |
Amy J. Lee**** (1961) | Trustee, Vice President and Chief Legal Officer | Since 2018 (Trustee)
Since 2014 (Chief Legal Officer)
Since 2015 (Vice President) | Current: Interested Trustee, certain other funds in the Fund Complex (2018-present); Chief Legal Officer, certain other funds in the Fund Complex (2014-present); Vice President, certain other funds in the Fund Complex (2007-present); Senior Managing Director, Guggenheim Investments (2012-present). | 157 | None. |
* | The business address of each Trustee is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each Trustee serves an indefinite term, until his or her successor is elected and qualified. Time served includes time served in the respective position for the Predecessor Corporation. |
*** | Each Trustee also serves on the Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Fiduciary/Claymore Energy Infrastructure Fund, Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Energy & Income Fund, Guggenheim Credit Allocation Fund, Guggenheim Active Allocation Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible & Income Fund. |
**** | This Trustee is deemed to be an “interested person” of the Funds under the 1940 Act by reason of her position with the Funds’ Investment Manager and/or the parent of the Investment Manager. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 77 |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(continued) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS | |||
Brian E. Binder (1972) | President and Chief Executive Officer | Since 2018 | Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President, Chief Executive Officer and Chairman of the Board of Managers, Guggenheim Funds Investment Advisors, LLC (2018-present); President and Chief Executive Officer, Security Investors, LLC (2018-present); Board Member of Guggenheim Partners Fund Management (Europe) Limited (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present). |
James M. Howley (1972) | Assistant Treasurer | Since 2015 | Current: Managing Director, Guggenheim Investments (2004-present); Assistant Treasurer, certain other funds in the Fund Complex (2006-present). |
Mark E. Mathiasen (1978) | Secretary | Since 2015 | Current: Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
Glenn McWhinnie (1969) | Assistant Treasurer | Since 2016 | Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
Michael P. Megaris (1984) | Assistant Secretary | Since 2015 | Current: Assistant Secretary, certain other funds in the Fund Complex (2014-present); Director, Guggenheim Investments (2012-present). |
Elisabeth Miller (1968) | Chief Compliance | Since 2016 | Current: Chief Compliance Officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim Investments (Vice President, Guggenheim Funds Distributors, LLC (2014-present).
Former: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2012-2018); Chief Compliance Officer, Guggenheim |
Margaux Misantone (1978) | AML Officer | Since 2017 | Current: Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investment Advisors, LLC (2018-present); AML Officer, Security Investors, LLC Former: Assistant Chief Compliance Officer, Security Investors, LLC and Guggenheim Funds Investments Advisors, LLC (2015-2018). |
78 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
INFORMATION ON BOARD OF TRUSTEES AND OFFICERS (Unaudited)(concluded) |
Name, Address* | Position(s) | Term of Office | Principal Occupation(s) |
OFFICERS - concluded | |||
Kimberly J. Scott (1974) | Assistant Treasurer | Since 2015 | Current: Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). |
Bryan Stone (1979) | Vice President | Since 2015 | Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present). |
John L. Sullivan (1955) | Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2015 | Current: Chief Financial Officer, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present). |
Jon Szafran (1989) | Assistant Treasurer | Since 2017 | Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). |
* | The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | Each officer serves an indefinite term, until his or her successor is duly elected and qualified. |
THE GUGGENHEIM FUNDS ANNUAL REPORT | 79 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited) |
Who We Are
This Privacy Notice describes the data protection practices of Guggenheim Investments. Guggenheim Investments as used herein refers to the affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC, Security Investors, LLC, Guggenheim Investment Advisors (Europe) Limited, Guggenheim Real Estate, LLC, GS Gamma Advisors, LLC, Guggenheim Partners India Management, LLC, Guggenheim Partners Europe Limited, as well as the funds in the Guggenheim Funds complex (the “Funds”) (“Guggenheim Investments,” “we,” “us,” or “our”).
Guggenheim Partners Investment Management Holdings, LLC, located at 330 Madison Avenue, New York, New York 10017 is the data controller for your information. The affiliates who are also controllers of certain of your information are: Guggenheim Investment Advisors (Europe) Limited, Guggenheim Partners Europe Limited, Guggenheim Partners, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Investment Management, LLC, Guggenheim Funds Distributors, LLC and Security Investors, LLC, as well as the Funds.
Our Commitment to You
Guggenheim Investments considers your privacy our utmost concern. When you become our client or investor, you entrust us with not only your hard-earned money but also with your personal and financial information. Because we have access to your private information, we hold ourselves to the highest standards in its safekeeping and use. We strictly limit how we share your information with others, whether you are a current or former Guggenheim Investments client or investor.
The Information We Collect About You
We collect certain nonpublic personal information about you from information you provide on applications, other forms, our website, and/or from third parties including investment advisors. This information includes Social Security or other tax identification number, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, bank account information, marital status, family relationships, information that we collect on our website through the use of “cookies,” and other personal information that you or others provide to us. We may also collect such information through your inquiries by mail, e-mail or telephone. We may also collect customer due diligence information, as required by applicable law and regulation, through third party service providers.
How We Handle Your Personal Information
The legal basis for using your information as set out in this Privacy Notice is as follows: (a) use of your personal data is necessary to perform our obligations under any contract with you (such as a contract for us to provide financial services to you); or (b) where use of your personal data is not necessary for performance of a contract, use of your personal data is necessary for our legitimate interests or the legitimate interests of others (for example, to enforce the legal terms governing our services, operate and market our website and other services we offer, ensure safe environments for our personnel and others, make and receive payments, prevent fraud and to know the customer to whom we are providing the services). Some processing is done to comply with applicable law.
In addition to the specific uses described above, we also use your information in the following manner:
● | We use your information in connection with servicing your accounts. |
● | We use information to respond to your requests or questions. For example, we might use your information to respond to your customer feedback. |
● | We use information to improve our products and services. We may use your information to make our website and products better. We may use your information to customize your experience with us. |
● | We use information for security purposes. We may use your information to protect our company and our customers. |
● | We use information to communicate with you. For example, we will communicate with you about your account or our relationship. We may contact you about your feedback. We might also contact you about this Privacy Notice. We may also enroll you in our email newsletter. |
80 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(continued) |
● | We use information as otherwise permitted by law, as we may notify you. |
● | Aggregate/Anonymous Data. We may aggregate and/or anonymize any information collected through the website so that such information can no longer be linked to you or your device (“Aggregate/Anonymous Information”). We may use Aggregate/Anonymous Information for any purpose, including without limitation for research and marketing purposes, and may also share such data with any third parties, including advertisers, promotional partners, and sponsors. |
We do not sell information about current or former clients or their accounts to third parties. Nor do we share this information, except when necessary to complete transactions at your request, to make you aware of investment products and services that we or our affiliates offer, or as permitted or required by law.
We provide information about you to companies and individuals not affiliated with Guggenheim Investments to complete certain transactions or account changes, or to perform services for us related to your account. For example, if you ask to transfer assets from another financial institution to Guggenheim Investments, we must provide certain information about you to that company to complete the transaction. We provide the third party with only the information necessary to carry out its responsibilities and only for that purpose. And we require these third parties to treat your private information with the same high degree of confidentiality that we do. To alert you to other Guggenheim Investments products and services, we share your information within our family of affiliated companies. You may limit our sharing with affiliated companies as set out below. We may also share information with any successor to all or part of our business, or in connection with steps leading up to a merger or acquisition. For example, if part of our business was sold we may give customer information as part of that transaction. We may also share information about you with your consent.
We will release information about you if you direct us to do so, if we are compelled by law to do so, or in other circumstances as permitted by law (for example, to protect your account from fraud).
If you close your account(s) or become an inactive client or investor, we will continue to adhere to the privacy policies and practices described in this notice.
Opt-Out Provisions and Your Data Choices
The law allows you to “opt out” of certain kinds of information sharing with third parties. We do not share personal information about you with any third parties that triggers this opt-out right. This means YOU ARE ALREADY OPTED OUT.
When you are no longer our client or investor, we continue to share your information as described in this notice, and you may contact us at any time to limit our sharing by sending an email to CorporateDataPrivacy@GuggenheimPartners.com.
European Union Data Subjects and certain others: In addition to the choices set forth above, residents of the European Union and certain other jurisdictions have certain rights to (1) request access to or rectification or deletion of information we collect about them, (2) request a restriction on the processing of their information, (3) object to the processing of their information, or (4) request the portability of certain information. To exercise these or other rights, please contact us using the contact information below. We will consider all requests and provide our response within the time period stated by applicable law. Please note, however, that certain information may be exempt from such requests in some circumstances, which may include if we need to keep processing your information for our legitimate interests or to comply with a legal obligation. We may request you provide us with information necessary to confirm your identity before responding to your request.
Residents of France and certain other jurisdictions may also provide us with instructions regarding the manner in which we may continue to store, erase and share your information after your death, and where applicable, the person you have designated to exercise these rights after your death.
How We Protect Privacy Online
We take steps to protect your privacy when you use our web site – www.guggenheiminvestments.com – by using secure forms of online communication, including encryption technology, Secure Socket Layer (SSL) protocol, firewalls and user names and passwords. These safeguards vary based on the sensitivity of the information that we collect and store. However, we cannot and do not guarantee that these measures will prevent every unauthorized attempt to access, use, or disclose your information since despite our efforts, no Internet and/or other
THE GUGGENHEIM FUNDS ANNUAL REPORT | 81 |
GUGGENHEIM INVESTMENTS PRIVACY NOTICE (Unaudited)(concluded) |
electronic transmissions can be completely secure. Our web site uses “http cookies”—tiny pieces of information that we ask your browser to store. We use cookies for session management and security features on the Guggenheim Investments web site. We do not use them to pull data from your hard drive, to learn your e-mail address, or to view data in cookies created by other web sites. We will not share the information in our cookies or give others access to it. See the legal information area on our web site for more details about web site security and privacy features.
How We Safeguard Your Personal Information and Data Retention
We restrict access to nonpublic personal information about you to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law. We maintain strict physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
We keep your information for no longer than necessary for the purposes for which it is processed. The length of time for which we retain information depends on the purposes for which we collected and use it and/or as required to comply with applicable laws. Information may persist in copies made for backup and business continuity purposes for additional time.
International Visitors
If you are not a resident of the United States, please be aware that your information may be transferred to, stored and processed in the United States where our servers are located and our databases are operated. The data protection and other laws of the United States and other countries might not be as comprehensive as those in your country.
In such cases, we ensure that a legal basis for such a transfer exists and that adequate protection is provided as required by applicable law, for example, by using standard contractual clauses or by transferring your data to a jurisdiction that has obtained an adequacy finding. Individuals whose data may be transferred on the basis of standard contractual clauses may contact us as described below.
We’ll Keep You Informed
If you have any questions or concerns about how we treat your personal data, we encourage you to consult with us first. You may also contact the relevant supervisory authority.
We reserve the right to modify this policy at any time and will inform you promptly of material changes. You may access our privacy policy from our web site at www.guggenheiminvestments.com. Should you have any questions regarding our privacy policy, contact us by email at CorporateDataPrivacy@GuggenheimPartners.com.
82 | THE GUGGENHEIM FUNDS ANNUAL REPORT |
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited) |
In compliance with SEC Rule 22e-4 under the U.S. Investment Company Act of 1940 (the “Liquidity Rule”), Transparent Value Trust (the “Trust”) has adopted and implemented a written liquidity risk management program (the “Program”) for each series of the Trust (each, a “Fund” and, collectively, the “Funds”). The Trust’s Board of Trustees (the “Board”) has also designated a Program administrator (the “Administrator”).
The Liquidity Rule requires that the Program be reasonably designed to assess and manage each Fund’s liquidity risk. A Fund’s “liquidity risk” is the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of the remaining investors’ interests in the Fund. The Program includes a number of elements that support the assessment, management and review of liquidity risk. In accordance with the Program, each Fund’s liquidity risk is assessed no less frequently than annually taking into consideration a variety of factors, including, as applicable, the Fund’s investment strategy and liquidity of portfolio investments, cash flow projections, and holdings of cash and cash equivalents, as well as borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions. There is no guarantee that the Program will achieve its objective under all circumstances.
Under the Program, each Fund portfolio investment is classified into one of four liquidity categories based on a determination of the number of days it is reasonably expected to take to convert the investment to cash, or sell or dispose of the investment, in current market conditions without significantly changing the investment’s market value. The Program is reasonably designed to meet Liquidity Rule requirements relating to “highly liquid investment minimums” (i.e., the minimum amount of Fund net assets to be invested in highly liquid investments that are assets) and to monitor compliance with the Liquidity Rule’s limitations on a Fund’s investments in illiquid investments. Under the Liquidity Rule, a Fund is prohibited from acquiring any illiquid investment if, immediately after the acquisition, the Fund would have invested more than 15% of its net assets in illiquid investments that are assets.
During the period covered by this shareholder report, the Board received a written report (the “Report”) prepared by the Administrator addressing the Program’s operation and assessing the adequacy and effectiveness of its implementation for the period from March 31, 2020, to March 31, 2021. The Report concluded that the Program operated effectively, the Program had been and continued to be reasonably designed to assess and manage each Fund’s liquidity risk, and the Program has been adequately and effectively implemented to monitor and respond to the Funds’ liquidity developments, as applicable. The Report further concluded that the Program operated effectively during recent market conditions arising from COVID-19.
Please refer to your Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which an investment in the Fund may be subject.
THE GUGGENHEIM FUNDS ANNUAL REPORT | 83 |
|
This page intentionally left blank.
|
This page intentionally left blank.
Item 2. | Code of Ethics. |
The registrant’s Board of Trustees has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. No substantive amendments were approved or waivers were granted to the Code during the period covered by this report. The Code is filed as an exhibit to this Form N-CSR.
Item 3. | Audit Committee Financial Expert. |
The registrant's Board of Trustees has determined that it has at least one audit committee financial expert serving on its audit committee (the “Audit Committee”), Sandra G. Sponem. Ms. Sponem is “independent,” meaning that she is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and she does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in her capacity as a Board or committee member).
(Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the Audit Committee and Board of Trustees in the absence of such designation or identification. The designation or identification 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 Trustees.)
Item 4. | Principal Accountant Fees and Services. |
(a) | Audit Fees: the aggregate Audit Fees billed by the registrant’s principal accountant for professional services rendered for the audit of the annual financial statements, or services that are normally provided by the accountant in connection with the statutory and regulatory filings or engagements were $96,226 and $96,226 for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. |
(b) | Audit-Related Fees: the aggregate Audit-Related Fees billed by the registrant’s principal accountant for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item 4 were $0 and $0 for fiscal years ended September 30, 2021 and September 30, 2020, respectively. |
(c) | Tax Fees: the aggregate Tax Fees billed by the registrant’s principal accountant for professional services rendered for tax compliance, tax advice and tax planning including preparation of tax returns and distribution assistance were $45,672 and $46,439 for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. These services consisted of (i) preparation of U.S. federal, state and excise tax returns; (ii) U.S. federal and state tax planning, advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired and (iv) review of U.S. federal excise distribution calculations |
(d) | All Other Fees: the aggregate All Other Fees billed by the registrant’s principal accountant for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item 4, were $0 and $0 for the fiscal years ended September 30, 2021 and September 30, 2020, respectively. |
(e) | Audit Committee Pre-Approval Policies and Procedures. |
(1) | Audit Committee pre-approval policies and procedures: |
To fulfill its responsibilities and duties the Audit Committee (the “Committee”) shall:
1. | Pre-Approval Policy (Trusts). Pre-approve any engagement of the independent auditors to provide any services, other than “prohibited non-audit services,” to the Trust, including the fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X). |
(a) | The categories of services to be reviewed and considered for pre-approval include those services set forth under Section II.A.1. of the Background and Definitions for Audit Committee Charter (collectively, “Identified Services”). |
(b) | The Committee has pre-approved Identified Services for which the estimated fees are less than $25,000. |
(c) | For Identified Services with estimated fees of $25,000 or more, but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such Identified Services on behalf of the Committee. |
(d) | For Identified Services with estimated fees of $50,000 or more, such Identified Services require pre-approval by the Committee. |
(e) | All requests for Identified Services to be provided by the independent auditor that were pre-approved by the Committee shall be submitted to the Principal/Chief Accounting Officer (“CAO”) of the Trust by the independent auditor using the pre-approval request form. The Trust’s CAO will determine whether such services are included within the list of services that have received the general pre-approval of the Committee. |
(f) | The independent auditors or the CAO of the Trust (or an officer of the Trust who reports to the CAO) shall report to the Committee at each of its regular scheduled meetings all audit, audit-related and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan, as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under which pre-approval was obtained). |
2. | Pre-Approval Policy (Adviser or Any Control Affiliate). Pre-approve any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust), if the engagement relates directly to the operations or financial reporting of the Trust (unless an exception is available under Rule 2-01 of Regulation S-X). |
(a) | The Chair or any member of the Committee designated by the Chair may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are less than $25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting. |
(b) | For non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee. |
a. | Pre-Approval Requirements |
i. | Categories of Services to be Reviewed and Considered for Pre-Approval |
1. | Audit Services |
a. | Annual financial statement audits |
b. | Seed audits (related to new product filings, as required) |
c. | SEC and regulatory filings and consents |
2. | Audit-Related Services |
a. | Accounting consultations |
b. | Fund merger/reorganization support services |
c. | Other accounting related matters |
d. | Agreed upon procedures reports |
e. | Attestation reports |
f. | Other internal control reports |
3. | Tax Services |
a. | Recurring tax services: |
i. | Preparation of Federal and state income tax returns, including extensions |
ii. | Preparation of calculations of taxable income, including fiscal year tax designations |
iii. | Preparation of annual Federal excise tax returns (if applicable) |
iv. | Preparation of calendar year excise distribution calculations |
v. | Calculation of tax equalization on an as-needed basis |
vi. | Preparation of monthly/quarterly estimates of tax undistributed position for closed-end funds |
vii. | Preparation of the estimated excise distribution calculations on an as-needed basis |
viii. | Preparation of calendar year shareholder reporting designations on Form 1099 |
ix. | Preparation of quarterly Federal, state and local and franchise tax estimated tax payments on an as-needed basis |
x. | Preparation of state apportionment calculations to properly allocate Fund taxable income among the states for state tax filing purposes |
xi. | Assistance with management’s identification of passive foreign investment companies (PFICs) for tax purposes |
b. | Permissible non-recurring tax services upon request: |
i. | Assistance with determining ownership changes which impact a Fund’s utilization of loss carryforwards |
ii. | Assistance with corporate actions and tax treatment of complex securities and structured products |
iii. | Assistance with IRS ruling requests and calculation of deficiency dividends |
iv. | Conduct training sessions for the Adviser’s internal tax resources |
v. | Assistance with Federal, state, local and international tax planning and advice regarding the tax consequences of proposed or actual transactions |
vi. | Tax services related to amendments to Federal, state and local returns and sales and use tax compliance |
vii. | RIC qualification reviews |
viii. | Tax distribution analysis and planning |
ix. | Tax authority examination services |
x. | Tax appeals support services |
xi. | Tax accounting methods studies |
xii. | Fund merger, reorganization and liquidation support services |
xiii. | Tax compliance, planning and advice services and related projects |
xiv. | Assistance with out of state residency status |
xv. | Provision of tax compliance services in India for Funds with direct investments in India |
(2) | None of the services described in each of Items 4(b) through (d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | Non-Audit Fees. The aggregate non-audit fees billed by the registrant's accountant for the most recent fiscal year and the preceding years for services rendered to the registrant, the investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were $45,672 and $46,439, respectively. These aggregate fees were less than the aggregate fees billed for the same periods by the registrant’s principal accountant for audit services rendered to the registrant, the investment advisor, and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant. |
(h) | Auditor Independence. The registrant’s Audit Committee was provided with information relating to the provision of non-audit services by Ernst & Young, LLP to the registrant’s investment adviser (not including any sub adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved by the Audit Committee so that a determination could be made whether the provision of such services is compatible with maintaining Ernst & Young, LLP’s independence. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
The Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Mangers of Closed-end Management Investment Companies |
Not applicable
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
The registrant does not currently have in place procedures by which shareholders may recommend nominees to the registrant’s board.
Item 11. | Controls and Procedures. |
(a) | The registrant’s President (principal executive officer) and Treasurer (principal financial officer) have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) as of a date within 90 days of this filing and have concluded that based on such evaluation as required by Rule 30a-3(b) under the Investment Company Act, that the registrant’s disclosure controls and procedures were effective as of that date in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. |
(b) | The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
.
(a)(3) Not applicable.
(a)(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.
(Registrant) | Transparent Value Trust | |
By (Signature and Title)* | /s/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | December 9, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Brian E. Binder | |
Brian E. Binder, President and Chief Executive Officer | ||
Date | December 9, 2021 | |
By (Signature and Title)* | /s/ John L. Sullivan | |
John L. Sullivan, Chief Financial Officer, Chief Accounting Officer and Treasurer | ||
Date | December 9, 2021 |
* | Print the name and title of each signing officer under his or her signature. |